Income Tax Act will change after 65 years

Union Finance Minister Nirmala Sitharaman introduced the Income Tax Bill, 2025, in the Lok Sabha on Thursday and urged Speaker Om Birla to refer it to a select committee of the House.

Opposition members opposed the Bill at the introduction stage but the House passed a motion by voice vote for its introduction.

While moving the Bill for introduction, Sitharaman urged Birla to refer the draft law to a select committee of the House, which will submit its report by the first day of the next session.

She urged the Speaker to take a call on the proposed panel's composition and rules.

The much-anticipated Bill will replace terminologies such as "assessment year" and "previous year" with the easier-to-understand "tax year" as part of a move to simplify language while removing provisos and explanations.

Responding to the objections raised by some opposition members at the introduction stage of the bill, the finance minister said Manish Tewari of the Congress and N K Premchandran of the Revolutionary Socialist Party (RSP) were incorrect in stating that the new bill has more sections in comparison with the existing income tax law.

Sitharaman said that while in 1961 the present law had fewer sections, after a series of changes over the years it now has 819 sections. The proposed Act only has 536 sections.

She also rejected Trinamool Congress MP Saugata Roy's contention and asserted that the bill does not have mechanical but substantial changes.

This is the first time in 65 years (the law is likely to come into effect in 2026) that such sweeping changes will be made to India's direct tax rules.

India's tax system has been following the Income Tax Act, 1961 till date, with amendments being made at regular intervals. This is the first time when the Government of India is planning to overhaul the income tax rules altogether.

With PTI inputs