FM Sitharaman introduces new Income Tax bill in Lok Sabha; Bill sent to Select Committee for review

Union finance minister Nirmala Sitharaman

Union Finance Minister Nirmala Sitharaman on February 13 tabled the new Income Tax Bill in the Lok Sabha, proposing significant reforms aimed at simplifying and modernising the existing tax law. The bill, which will come into effect from April 1, 2026, has been referred to a Select Committee that will submit its report on the first day of the next session of Parliament.

Introducing the bill amid objections from some opposition members, Sitharaman highlighted that the bill brings substantial changes to the tax framework, reducing the number of chapters and simplifying legal language to make it more user-friendly. The finance minister informed the House that the new bill will reduce the number of income tax sections to 536.

"Substantial changes are being made in the income tax bill, chapters are being reduced. Its not a mechanical change. The number of words in the earlier Income Tax Act were at 5.5 lakh, which will reduce by half. Its a substantial change," Sitharaman said while presenting the bill.

"A Select Committee shall be constituted on the income tax bill, which will submit its report on the first day of the next session of Parliament. We are bringing down the income tax sections to 536," she added.

The bill proposes replacing technical terms like "assessment year" and "previous year" with "tax year" to simplify understanding for taxpayers. The new Bill would reduce complexities in compliance while also eliminating multiple provisos and explanations.

The bill has the objective to overhaul and update the Income Tax Act, 1961, to align it with the evolving needs of the economy and make it easier for taxpayers to navigate.

The Select Committee will now examine the provisions in detail before submitting its recommendations to Parliament.