New Income Tax Bill introduced: Here's how it can make a taxpayer's life simple and hassle-free

The new Income Tax Bill (ITB), presented in Parliament, aims to replace the 65-year-old Income Tax Act of 1961 (ITA) and will take effect from April 1, 2026.

The new law is nearly 50% shorter, with 2.56 lakh words compared to the ITA’s half a million words. Despite its reduced size, the core principles remain intact.

Naveen Wadhwa, Vice President, Taxmann, says, "The ITB provides interesting comparisons to the ITA. The 911 sections and 11 schedules of the ITA have been restructured into 536 clauses (sections) and 16 schedules in the ITB. The ITB eliminates more than 300 provisions of the ITA that had become redundant or were omitted over time."

The provisions included within 1,200+ provisos and 550+ explanations of the ITA are now presented as sub-sections, clauses, or sub-clauses in the ITB. The entire ITB does not contain a single proviso or explanation. Section 2 of the ITB includes 112 clauses that consolidate all important definitions in one place, which were previously scattered across relevant provisions of the ITA. The terms “Previous Year” and “Assessment Year” have now been replaced by “Tax Year,” Wadhwa added.

The ITB preserves the ITA’s legacy while streamlining its structure. Provisions for charitable trusts, which had been amended over 20 times since 1961, now have a dedicated Chapter XVII-B. This chapter consolidates rules on registration, computation, and accreted tax, ensuring clarity and consistency in the taxation of non-profit organizations.

Sumit Singhania, Partner, Deloitte India, says, "The overall architecture of the proposed new legislation is underpinned by three important principles: modernization of tax policy to keep pace with evolving business dynamics, clarity in taxation principles to minimize litigation, and simplification of tax compliance processes to encourage wider voluntary compliance across the board."

The draft legislation has deftly carved out detailed mechanisms to ensure a smooth transition for taxpayers into the new legislative framework without requiring them to forfeit any existing concessions—an encouraging aspect of this overhaul. That said, taxpayers will still need to adapt to the new framework in a more structured manner over the next 9 to 12 months.

"The move sends a strong signal to trade and industry, both domestic and global inbound, that the government is willing to go the extra mile to ensure ease of doing business through legislative reforms in tax matters," says Singhania.

The new Income Tax Bill does not introduce any additional tax burden on taxpayers. Munjal Almoula, Head of Tax at BDO India, added, "What the bill attempts to do is simplify the language of the Income Tax Act of 1961, provide greater clarity through explanations, and enhance transparency for taxpayers. Another important aspect introduced through the new tax bill is guidance on the taxability of income streams emerging from new-age businesses such as digital assets."