Tax Reliefs Could Be Adjusted Year-Round Under New Income Tax Bill

The Income Tax Bill 2025 is poised for approval by the Union Cabinet on Friday, marking a significant shift in how tax reliefs are handled. One of its key features is the ability for the government to adjust income tax provisions through executive orders without waiting for the annual budget.

Changes Through Executive Orders

A major element of the bill is its provision allowing the government to modify tax deductions and rebates through executive orders. A source explained, “Some provisions have been proposed that will allow the government to modify the limits or amounts of deductions/rebates through executive orders only.” Another source noted that changes to the standard deduction could be part of these adjustments.

Cabinet Approval and Legislative Process

Following the expected Cabinet approval, the bill will be presented in the Lok Sabha, likely on Monday. It may then be sent to the Parliamentary Standing Committee on Finance for further deliberation.

Purpose Behind the New Bill

The Direct Tax Code, as the new legislation is called, aims to overhaul the outdated Income Tax Act of 1961. Its goal is to simplify the income tax structure and provide greater clarity.

Simplification of Tax Laws for Better Understanding

Finance Minister Nirmala Sitharaman highlighted that the bill is designed to make tax laws clearer and more direct. She stated, “The new bill will be clear and direct in text with close to half of the present law, in terms of both chapters and words.” This simplification aims to reduce legal complexities, encourage tax certainty, and minimize litigation.

Benefits of the New Tax Bill

The bill is also expected to simplify residency rules for taxpayers, making it easier to determine their tax status. Overall, the new law seeks to streamline tax compliance, benefiting both taxpayers and tax authorities alike.