Big tax shake-up: New income tax bill to be tabled in Lok Sabha next week, FM Sitharaman confirms

Finance Minister Nirmala Sitharaman today said the Cabinet has approved the new income tax proposals, which will be tabled in the Parliament next week. In the Budget 2025-26, the government announced a new income tax bill to overhaul the Income Tax Act, 1961 and make it more simple and easy to understand.

“The Cabinet has approved the new income tax proposal. I hope to introduce it in the Lok Sabha next week,” said Sitharaman, adding that the bill will then be referred to the standing committee. The minister underlined that the exact date of the roll out cannot be informed as of now as the bill first needs to be reviewed by the committee and come back to the parliament for consideration and passing.

“As you know the processes, the committee gives its recommendations. Then the government, through the Cabinet takes a call on whether the amendments are to be taken in or more need to be added. It is only after that, it again goes to the parliament. So once after that the parliament passes it, is when we will roll it out. So I still have three critical stages to pass through,” said Sitharaman in a joint press conference with RBI Governor Sanjay Malhotra after customary post budget meeting with RBI.

On the likely improvement in private investment post major tax cut announced in the budget, FM said, “I expect recovery in private investment with budget announcement. Industry is clearly seeing signs of possible recovery of consumption. As a result, they are reviewing their capacity utilization.”

The finance minister underlined the coordination with which the government and the RBI are moving ahead for sake of economic growth. One may have by now noticed that the budget provisions are non inflationary, providing the RBI ample elbow room for monetary policy moves.

"The RBI and the government will work together in a well-coordinated manner, keeping our growth impulses in mind. Coordinated monetary and fiscal policy initiatives provide greater benefits to the economy and citizens. Whether it’s inflation or growth, close cooperation between the government and RBI is essential," said Sitharaman.

Watchful on domestic liquidity: RBI

One depreciation of rupee against the dollar, RBI governor Sanjay Malhotra said exchange rate is decided by the market forces and the role of the RBI is only to intervene in case of high volatility. He also said the banking regulator is watchful of the imported inflation on account of tariff concerns. “Currency level is determined by market forces. We have a number of instruments to control and manage liquidity, which we will deploy to ensure sufficient liquidity. There is no need to worry about it. We have provided transient and durable liquidity. Going forward, RBI will remain watchful and alert on requirements of the banking system to provide liquidity,” said Malhotra.      

“5% Rupee depreciation leads to inflation of 30-35 basis points. We are watchful. Rupee depreciation largely due to tariff uncertainties. Hopefully it will settle and help lowering inflation,” Malhotra added.  It may be noted that depreciation of currency jacks up the import prices, leading to higher domestic inflation.