Budget 2025: New Income Tax Law and Expectations

The upcoming Budget 2025 session of Parliament is set to witness the introduction of a brand-new Income Tax Bill, aimed at simplifying the decades-old Income Tax Act of 1961. According to a report, the proposed law will reduce the number of provisions and chapters by around 60%, making it concise, easy to understand and more taxpayer-friendly. The draft is currently being reviewed by the law ministry and is expected to be presented in the second half of the Budget session.

Key Highlights of the New Income Tax Law

1. Simplification of Language: Efforts are being made to simplify the language and make the Act easier to comprehend for taxpayers and professionals alike.
2. Reduction in Size: The draft seeks to cut down the Act's current 298 sections and 23 chapters, reducing redundancy and obsolete provisions.
3. Minimizing Disputes: By providing clarity, the new law aims to lower litigation and ensure greater tax certainty for individuals and businesses.
4. Stakeholder Inputs: The Income Tax Department received over 6,500 suggestions from stakeholders on areas like compliance reduction, simplification, and dispute resolution.

What to Expect in Budget 2025 on Income Tax

Budget 2025 is expected to bring significant relief for taxpayers, particularly the middle class. Here are the key expectations:

• Higher Standard Deduction Limit: Reports suggest the standard deduction limit could be increased to ₹75,000, providing relief to salaried taxpayers.
• Basic Exemption Limit Hike: The government may raise the basic exemption limit from ₹3 lakh to ₹5 lakh, benefiting individuals in lower income brackets.
• New Tax Slabs: A new tax slab for individuals earning above ₹25 lakh annually might be introduced to make the system more equitable.
• Enhanced 80C Deduction: The deduction limit under Section 80C may be increased to encourage savings and investments.

Budget Session Timeline

The Budget session of Parliament will begin on January 31, 2025, with President Droupadi Murmu's address to the joint sitting of the Lok Sabha and Rajya Sabha. The Economic Survey 2024-25 will follow, setting the stage for the Union Budget 2025-26, which will be presented by Finance Minister Nirmala Sitharaman on February 1, 2025.

The session will reconvene after a break, from March 10 to April 4, during which the government is expected to present and debate the new Income Tax law.

Why the Change Is Needed

The Income Tax Act, 1961, has grown increasingly complex over the years, with frequent amendments adding to its length and difficulty. The new law will ensure:

• Clarity and simplicity in tax regulations.
• Fewer compliance burdens for individuals and businesses.
• A significant reduction in tax-related disputes and litigation.

Final Thoughts

The introduction of a simplified Income Tax law in Budget 2025 marks a crucial step towards modernizing India's tax regime. If implemented effectively, it will bring much-needed relief to taxpayers, foster a transparent tax environment, and contribute to economic growth.