Parliament Passes New Income Tax Bill to Replace 1961 Act
Parliament has passed the new Income Tax Bill, 2025, which will replace the six-decade-old Income Tax Act of 1961. Finance Minister Nirmala Sitharaman stated the new legislation aims to simplify the language of tax law and remove outdated provisions, without introducing any new tax rates. The bill, a money bill, was passed by the Rajya Sabha with a voice vote and returned to the Lok Sabha after Opposition parties staged a walkout, declining to participate in the debate.
Unpacked:
Opposition parties walked out to protest what they perceived as insufficient time and opportunity to debate the bill’s provisions, expressing concerns that important issues might not be adequately addressed. Walkouts are a common parliamentary tactic to signal dissent and draw public attention to their objections.
Key changes include simplifying language, nearly halving the law’s length, unifying the ‘previous year’ and ‘assessment year’ into a single ‘tax year’, clarifying refund eligibility for late returns, updating house property deduction rules, and increasing reliance on digital, faceless assessments for faster dispute resolution.
No, the new Income Tax Bill does not alter existing tax rates or regimes for individuals or corporations. The legislation focuses on simplification and removing outdated provisions, retaining most definitions and administrative structures.
The new Income Tax Bill will come into force on April 1, 2026. Until then, the current Income Tax Act, 1961 remains in effect, governing all income tax matters for assessment years prior to the new law’s commencement.