NEW DELHI: Finance Minister Nirmala Sitharaman tabled the new Income Tax Bill in the Lok Sabha at 2:00 PM on Thursday, February 13. She also requested the Lok Sabha Speaker to nominate members for a Parliamentary Standing Committee, which will review the proposed legislation before its final passage.
Congress MP Manish Tewari criticized the bill in the Lok Sabha, stating, “The Finance Minister had promised a simpler tax bill, but this version is actually more complicated.”
The new tax law is expected to take effect on April 1, 2026.
The Budget session of Parliament, which began on January 31, is being conducted in two phases. The first leg concludes today, while the second phase will run from March 10 to April 4.
The 622-page draft Bill has attracted considerable attention, particularly for introducing a new concept of ‘tax year,’ which will replace the existing ‘assessment year’ system. Despite no major structural changes, the language has been simplified, and several redundant provisions have been removed.
Major Changes Introduced in the Bill
- Simplified Structure: The Bill comprises 23 chapters, 536 sections, and 16 schedules. While the number of sections has increased, the overall legislation is shorter and more reader-friendly due to the elimination of unnecessary provisions.
- Tax Regimes Unchanged: The old tax regime will continue, but the new tax regime will be the default option for taxpayers.
- Introduction of ‘Tax Year’: The term ‘assessment year’ has been removed and replaced with ‘tax year’ for better clarity.
- Revised Limits for Businesses and Professionals: The 44AD limit for businesses has been increased from ₹2 crore to ₹3 crore, while for professionals, it has been raised from ₹50 lakh to ₹75 lakh.
- Simplification of Legal Language: The Bill has removed complex terms like ‘notwithstanding,’ replacing it with ‘irrespective,’ and omitted redundant provisions, such as those related to Fringe Benefit Tax.
- Improved Readability: The legislation now features shorter sentences, tables, and formulae to make tax compliance easier for taxpayers. A ‘Taxpayer’s Charter’ has also been introduced, outlining the rights and obligations of taxpayers.
- Revised Tax Slabs and Higher Exemption Limits: Under the new tax framework, income up to ₹12 lakh is now exempt from taxation, with a standard deduction of ₹75,000, effectively making income up to ₹12.75 lakh tax-free for salaried individuals.
- Extended Time Frame for Filing Updated Returns: Taxpayers will now have four years instead of two to rectify omissions.
Once passed in Parliament, the Bill will be sent to the Parliamentary Standing Committee on Finance for further scrutiny.
The introduction of the Bill comes 12 days after the presentation of the Union Budget 2025.