Transitioning to a New, Updated Income Tax Act

The work of rewriting the law will not end with the enactment of the new Bill. Delegated legislation in the form of rules, forms and circulars needs reviewing to align with the new provisions

- AKHILESH RANJAN

The Income Tax Bill, 2025, was introduced in parliament on February 13 to fulfill the finance minister's promise during her Budget speech of July 2024 of a comprehensive review of the income tax law.

The media release of the Central Board of Direct Taxes on the same day states that the new Bill aims at a textual and structural simplification of the existing income tax law for greater clarity and coherence.

It says that in the interest of continuity and certainty in tax policy and preserving predictability for taxpayers, no major policy changes or changes in tax rates were made in the new Bill.

It stated that the government undertook a wide-ranging consultation exercise and examined simplification models adopted by Australia and the UK while drafting the new law.

However, it would be worthwhile to note earlier efforts made in India to reform, modernize, and simplify the income tax law.

A Direct Taxes Code Bill, drafted in 2009, proposed substantial policy changes and a simplified structure.

This Bill went to the Standing Committee of the Lok Sabha, which examined the draft provisions in detail and made voluminous recommendations.

The Bill was redrafted in the light of the recommendations, but then the Lok Sabha was re-constituted in 2014, and the Bill could not be taken up.

Subsequently, another task force was set up in 2017 to draft a simplified income tax law aligned with current economic realities and the country's needs.

This task force submitted its report in August 2019 and the draft of a new and simplified income tax bill.

The report was not made public, but several of its recommendations are said to have been implemented.

The media release now issued does not say whether these earlier drafts were also referred to in any way.

Commendable effort