Amid criticism from Opposition MPs on the need for the introduction of the new bill, the Centre shared a list of reasons.
What were the issues?
The previous Income Tax Act was passed in 1961 and enacted in 1962. It had 47 chapters and 819 sections and was amended 65 times. Explaining why the Income Tax Act 1961 became “bulky”, the Income Tax Department said it had traditional drafting and numerous amendments. It said that the new act was needed to keep pace with judicial pronouncements.
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The old act had multiple amendments as the I-T Act is “dynamic and adaptable” and were made to reflect changing political and socio-economic realities.
“The old act had become intricate over time with amendments, had intricate language, had elaborate structure and was voluminous,” the department added.
Objectives for the change
The government said that the new law is being introduced to make the existing law concise, lucid and easy to read and comprehend. The second reason the government stated was to “remove ambiguities with a view to reducing disputes and litigations”.
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Reviewing tax-related procedures, making them simpler for stakeholders, and providing certainty to taxpayers were other reasons that the government stated.
Aims of the new bill
The government aims to remove redundant provisions, simplify language, improve structure, rationalise provisions and improve readability with the new bill.
Finance Minister Nirmala Sitharaman had announced a comprehensive review of Income Tax Act 1961 on July 23, 2024 and had set a time limit of six months for the same.
How was the new bill drafted?
The planning for drafting the new bill started with the formation of the core committee and six sub-committees in the first week of August 2024. In September 2024, 14 more sub-committees were constituted.
The total numebr of sub-committees further rose to 26 in November 2024. All committees then submitted their drafts to the tax policy and legislation section of the Central Board of Direct Taxes in December 2024.
The draft committee researched on changes in tax changes brought about by the government of UK and Australia, which had done so to make the language clearer and simpler. The committee also consulted stakeholders like industry professionals, associations, taxpayers and officers.
It collected a total of nearly 21,000 sector-wise responses during stakeholder consultations and received over 1,800 suggestions for simplifications.
The bill and act in numbers
The Income Tax Act 1961 had 5.12 lakh words across 17 chapters and 819 sections. It features a total of 18 tables and also had priviso’s and explanations. The new Income Tax Bill 2025, on the other hand, has 2.6 lakh words, 23 chapters, 536 sections and 57 tables. It does not feature priviso’s and explanations.
