New Income Tax Bill simplifies compliance rules
The New Income Tax Bill promises a major shift for Indian taxpayers by halving the word count of the 1961 Act and reducing compliance burdens. According to BJP MP Baijayant Jay Panda, this structural overhaul aims to make tax law more understandable and enforceable for all stakeholders—especially small businesses, professionals, and individual taxpayers.
Let’s break down what this actually means, and how it affects you.
Why the New Income Tax Bill Matters
India’s existing Income-tax Act, 1961 spans over 3 lakh words and has over 700+ amendments. Its complexity leads to:
- High compliance costs
- Frequent litigation due to interpretation issues
- Dependence on tax professionals even for basic filings
- Difficulty in digital and AI-based rule enforcement
The New Income Tax Bill, expected to replace the 1961 law, claims to cut down the Act’s size by more than 50%, as per the recent statement by Shri Panda. This means less jargon, more clarity.
Key Highlights of the New Income Tax Bill
| Feature | Income-tax Act, 1961 | New Income Tax Bill (proposed) |
|---|---|---|
| Word count | Over 3 lakh words | Under 1.5 lakh words (proposed) |
| Number of sections | 298+ sections | Condensed and reorganised |
| Language | Legal, complex | Simple, structured |
| Tax Regimes | Dual regime with optionality | Presumed push toward one regime |
| Compliance burden | High | Reduced via digital alignment |
| Litigation rate | High (70,000+ tax disputes p.a.) | Expected to reduce |
How the New Income Tax Bill simplifies compliance
Here’s how the new Bill is designed to make life easier for Indian taxpayers:
1. Shorter, simpler law
- Half the word count = faster reading and easier interpretation
- Suitable for AI-based scrutiny and automation tools
- Reduces ambiguity in key terms and thresholds
2. Restructured provisions
- Similar provisions grouped together
- Elimination of outdated clauses
- Better alignment with GST and Companies Act formats
3. Compliance-friendly tone
- Fewer procedural loopholes
- Easier TDS/TCS reconciliation and return filing
- Reduces over-reliance on manual clarifications and CBDT circulars
Legal & Policy Background
The Bill was first mentioned in the 2017 Budget speech. Post GST rollout, the government indicated the need to modernise the Direct Tax law. Draft versions have been internally circulated and consulted by expert panels such as:
- Task Force led by Akhilesh Ranjan (2019)
- Reports reviewed by CBDT, Department of Revenue
- Expected to be tabled after stakeholder feedback
While the full draft is not yet public, Baijayant Panda’s recent statement confirms that a simplified structure is ready, and codification is near completion.
Expert View: What Professionals Should Expect
“For CA firms, this is both a challenge and an opportunity. Fewer pages mean faster onboarding for juniors and less training time. But advisory depth and litigation strategies will need to evolve to suit the new format.”
— CA Abhinav Jain, Direct Tax Litigator, Delhi
Impact on Small Businesses and Individuals
- New regime likely to become default
- Filing process could become more app-based and self-reliant
- Startups and MSMEs may benefit from standardised deductions and fewer grey areas
- Older taxpayers may need guidance on switching to simplified provisions
What You Should Do Now
While the new law is not yet enacted, you can start preparing:
- Review your filing under both old and new tax regimes
- Keep documentation digital and structured
- Follow updates from CBDT and Finance Ministry
- Consult your tax advisor to adapt early
FAQs
Q1. Will the old Income-tax Act be completely scrapped?
Yes, once enacted, the New Income Tax Bill will replace the 1961 Act entirely.
Q2. Will deductions under Section 80C still be available?
Depends on whether the government retains dual regimes or not. Official draft yet to clarify.
Q3. Is this Bill applicable from AY 2025–26?
No announcement yet. Likely to apply from AY 2026–27 onwards after stakeholder feedback.
Summary
The New Income Tax Bill aims to halve the length of the 1961 Act and simplify compliance for Indian taxpayers. Backed by MP Baijayant Panda, the law will reduce legal jargon, align better with digital enforcement, and ease return filing burdens—especially for small businesses and professionals.