Income tax

Parliament Passes New Income Tax Bill, Replacing Six-Decade-Old Law

 New Delhi, Aug 12 (PTI) – Parliament on Tuesday passed the Income Tax Bill, 2025, replacing the six-decade-old Income Tax Act, 1961. The new law will come into effect from April 1, 2026.

 

Presenting the Bill in the Rajya Sabha, Finance Minister Nirmala Sitharaman said that no new tax rates have been introduced — the focus is purely on simplifying the language to make India’s complex income tax laws easier to understand.

 

The new Bill removes unused provisions and outdated terms, cutting the number of sections from 819 to 536 and chapters from 47 to 23. The total word count has been reduced from 5.12 lakh to 2.6 lakh. 

For the first time, it introduces 39 new tables and 40 new formulas to make the previously dense text of the 1961 law clearer.

 “These changes are not cosmetic — they represent a new, simplified approach to tax administration,” Sitharaman said, responding to a brief debate in the Rajya Sabha, which took place in the absence of the Opposition.

 “This leaner, more focused law is designed to make reading, understanding, and implementation much easier.”

 

Along with the Income Tax Bill, 2025, the House also returned the Taxation Laws (Amendment) Bill, 2025, to the Lok Sabha, which had passed both Money Bills on Monday.

 

Sitharaman further stressed that Prime Minister Narendra Modi has given clear instructions — pandemic or not — that the tax burden on people must not increase.

“We have not increased any taxes,” she said.

She described the taxpayer-friendly Income Tax Act, 2025 — which will replace the 1961 Act — as a milestone for the country’s financial system.

 

“I’m surprised the Opposition doesn’t want to participate. They had agreed in the Business Advisory Committee to debate this Bill in both the Lok Sabha and the Rajya Sabha,” she said.

 

Often, the Opposition accuses the government of avoiding discussions, she pointed out. “We were ready for discussion — we agreed to 16 hours of debate in the Lok Sabha and 16 hours here in the Rajya Sabha. Where are they today?”

 

Earlier, the Opposition had walked out of the Rajya Sabha, demanding a special intensive revision of the electoral rolls in Bihar.

Drafting the new Bill took around 75,000 person-hours, with a dedicated team of Income Tax Department officers working tirelessly on it.

 

The minister informed the House that the Finance Ministry will soon issue a set of Frequently Asked Questions (FAQs) and an information memorandum to help people understand the new legislation better.

 

She added that ministry officials are now busy framing the rules, which will be kept as simple as the Bill itself.

 

Since the new law will come into effect from April 1, 2026, the Income Tax Department’s computer systems will need to be reconfigured to implement it.

 

Earlier, the Opposition had walked out of the Rajya Sabha, demanding a special intensive revision of the electoral rolls in Bihar.