Economy
Cabinet okays bill to replace Income Tax Act, may be tabled in parliament soon
Summary
- The new Income Tax Bill is a key element of the regulatory reforms announced by finance minister Nirmala Sitharaman in her budget speech on 1 February, which outlined the reforms meant to add momentum to India’s economic development. There was, however, no official word on this decision.
The Union cabinet on Friday approved a bill to replace the more than six-decade-old Income Tax Act,1961 with a new, simpler and easy-to-understand law, as part of the government's regulatory reforms.
The Income Tax Bill is likely to be tabled in parliament shortly, and may be referred to a parliamentary committee for further discussions, according to two persons aware of the development.
The new Income Tax Bill is a key element of the regulatory reforms announced by finance minister Nirmala Sitharaman in her budget speech on 1 February, which outlined the reforms meant to add momentum to India’s economic development. There was, however, no official word on this decision.
Also Read: New Income Tax Bill 2025: What’s new, what may change, and what we can expect?
The cabinet also decided to restructure the central government's Skill India programme and continue it till 2026 with an outlay of ₹8,800 crore, railway, IT, and Information & Broadcasting minister Ashwini Vaishnaw said while briefing reporters about the cabinet decisions.
The new tax bill will be clear and direct in text, with close to half of the present law, in terms of both chapters and words, the minister had said in her speech, assuring that it will be simple to understand for taxpayers and the tax administration, leading to tax certainty and reduced litigation.
Queries emailed to the finance ministry and to the Central Board of Direct Taxes seeking comments remained unanswered till press time.
Experts weigh in on tax reform
Experts said they are looking forward to a more concise income tax law bereft of redundant provisions. Based on Sitharaman’s budget speech and explanations from officials, it is likely that the new Income Tax Bill will not have substantial changes in tax rates and charging provisions, but is meant to make the law simpler and easy to understand and comply, reinforcing certainty, said Amit Maheshwari, tax partner at AKM Global, a tax and consulting firm.
“Changes such as deletion of outdated sections, lack of cross-referencing of the Act and rules, lesser number of provisos and clauses are highly expected. Also, compliance and assessment procedures are expected to be technology-driven," said Maheshwari. The penalty mechanism is also expected to be overhauled to make it exclusively for stringent defaults, he added.
Also Read: Personal income tax buoyancy helped to offer relief; states may have deregulations as conditions for capex loans'
The revised income tax law is expected to be clear, concise, consistent and supplemented with illustrative examples to aid understanding and interpretation by various stakeholders, said Sandeep Chaufla, partner - Price Waterhouse & Co. LLP. It will also eliminate obsolete and redundant provisions, said Chaufla.
The proposed law will foster a transparent and efficient tax system that attracts investments and advances the government's vision of a ‘Viksit Bharat’, said Chaufla. A law that is more direct and less prone to differences in interpretation could reduce litigation, improve tax administration and make compliance easier.
Skill India overhaul, other decisions
Vaishnaw told reporters that the continuation and the rejigging of the Skill India programme underscores the government’s commitment to building a skilled, future-ready workforce by integrating demand-driven, technology-enabled, and industry-aligned training across the country.
Three schemes for skilling--Pradhan Mantri Kaushal Vikas Yojana 4.0, the Pradhan Mantri National Apprenticeship Promotion Scheme and the Jan Shikshan Sansthan Scheme are now combined under the composite central sector scheme of “Skill India Programme, the minister added.
The cabinet also approved the extension of the tenure of the National Commission for Safai Karamcharis (NCSK) for three years beyond March 2025 up to end of March 2028. This will cost the exchequer ₹50.91 crore. It would help in facilitating socio-economic upliftment of sanitation workers, improving the working conditions in the sanitation sector and aiming to achieve zero fatalities while performing hazardous cleaning.
Also Read: Budgeting for skills: Govt raises FY26 allocation by 27 times for PM internship scheme
The government also approved revision of divisional jurisdiction under the proposed South Coast Railway zone at Visakhapatnam by retention of truncated Waltair division.
