Govt Set to Introduce New Income Tax Bill on February 6 with Major Reforms
The Indian government is set to unveil a new Income Tax Bill on February 6, 2025, introducing major reforms including higher exemption limits and tax rebates. Learn about the key changes and their impact on taxpayers.
The Indian government is gearing up to introduce a new Income Tax Bill on February 6, 2025, following the recent changes to tax slabs outlined in the Union Budget 2025-26.
The proposed bill is expected to bring sweeping reforms to the current Income Tax Act and could drastically reduce the word count of the existing law.
Table of Contents
Reports indicate that the new bill may cut up to 3 lakh words from the current 6 lakh words, making it more streamlined and efficient.
New Income Tax Bill Aims for Reforms and Simplification
The highly anticipated new Income Tax Bill is expected to simplify the tax system and widen the tax net, especially in light of the changes made to the tax exemption limits in the recent budget. This move comes as the government aims to leave “enough money in the hands” of taxpayers by reducing their overall tax liabilities.
Sources suggest that the draft bill will focus on making the tax structure more inclusive by expanding the base of taxpayers, following the contraction of the tax base due to the new exemption limits introduced in the 2025-26 Budget.
Benefits of the New Tax Slabs
One of the key highlights of the Budget 2025-26 is the increase in the income tax exemption limit, which will directly benefit approximately one crore taxpayers. The Finance Minister, Nirmala Sitharaman, during her post-Budget press conference, emphasized that the new tax structure would result in significant savings for taxpayers.
The income tax exemption limit has been raised from Rs 7 lakh to Rs 12 lakh, meaning that individuals with annual incomes up to Rs 12 lakh will not be required to pay any income tax.
This move marks a significant shift in the tax structure and is expected to provide financial relief to a large number of middle-income earners. Under the new regime, individuals with an annual income of up to Rs 12 lakh will be tax-free, a decisive change that could benefit salaried individuals as well as others.
Key Changes in the Tax Structure
The revision in tax slabs is expected to result in substantial savings for many taxpayers. For example, individuals earning Rs 8 lakh annually will see a reduction of Rs 30,000 in their tax liability, effectively bringing their total tax liability to zero.
The change is designed to provide more disposable income to taxpayers and encourage consumption, which could further stimulate economic growth.
Under the new system, individuals with a monthly income of Rs 1 lakh (total annual income of Rs 12 lakh) will not have to pay income tax. Additionally, salaried taxpayers will benefit from a slightly higher exemption limit, set at Rs 12.75 lakh, due to a standard deduction of Rs 75,000.
- Also Read | 10.23% Capex Hike in Budget 2025-26 Reinforces India’s Infrastructure Growth Focus: FM Sitharaman
Tax Rebate and Slab Rate Reductions
The new tax regime also introduces additional tax rebates for taxpayers. The maximum rebate of Rs 60,000 will be available for individuals earning up to Rs 12 lakh. The rebate is designed to reduce the overall tax burden on middle-income earners and further streamline the tax system.
The government has also reduced the tax slabs in a manner that ensures no tax is payable by individuals within this income bracket, offering relief to those who previously struggled with higher tax liabilities.
The extended rebates and exemptions introduced under the new regime will directly benefit taxpayers who were previously required to pay income tax at lower income levels. Sitharaman mentioned that around one crore taxpayers will see direct benefits from these reforms.
Wider Impact of the Proposed Income Tax Bill
The introduction of the new Income Tax Bill is expected to have far-reaching effects on the economy. By reducing tax liabilities for middle-income earners, the government hopes to increase disposable income, which in turn could boost consumption and economic activity.
Additionally, the broadening of the tax base is expected to contribute to enhanced revenue collection, providing the government with more resources to invest in key sectors.
As the new tax bill is set to be unveiled on February 6, 2025, taxpayers and experts will be closely watching its contents.
The bill is expected to simplify the existing tax laws, making it easier for individuals and businesses to comply with tax regulations while ensuring that the government can continue to raise the funds needed for developmental activities.
