New & simplified Income Tax Bill replaces 1961 Income Tax Act; what’s changed

The Union Budget 2025 has introduced a new Income Tax Bill. The bill, cleared by the Union Cabinet, aims to replace the 1961 Income Tax Act. The government’s primary objective with this new bill is to simplify tax laws and eliminate any existing confusion. By cutting the new bill’s length by half and using simpler language, the government intends to make it easier for taxpayers to understand their tax duties. This move is expected to lead to fewer legal disputes and a reduction in contested tax demands.

The new Income Tax Bill is expected to be tabled in the Lok Sabha. The Union Budget 2025 revealed that the Ministry of Finance will present the new Income Tax Bill to the Union Cabinet. Union Finance Minister Nirmala Sitharaman expressed hopes for the bill to pass smoothly. The government has also announced that the new bill will be 50% shorter and clearer than the previous version.

The new bill aims to replace the 1961 Income Tax Act, which has been a source of confusion for many taxpayers. The government’s intention is to simplify tax laws and make them more understandable for the average citizen. This is expected to lead to fewer legal disputes and a reduction in contested tax demands.

The new tax regime is expected to provide relief to individuals, particularly those in the lower-income bracket. Under the new tax regime, in addition to the existing rebate cover, an additional rebate cover is also available for individuals having total income just above Rs. 7 lakhs.

The new tax regime also introduces changes in the slab rates proposed in Budget 2025. The Direct Tax Code 2025 aims to simplify the tax structure by minimizing the number of deductions and exemptions available to taxpayers. The government is following a collaborative approach to revamp the code, creating tax processes simpler like never before.

The new tax regime also introduces changes in the tax slabs and rates for FY 2025-26. Section 10(10D) provides exemption for any sum received under a life insurance policy, including bonuses subject to certain conditions. If these conditions are not fulfilled, the sum received under insurance policy may be charged to tax as capital gains or income from other sources.

The Union Budget 2025-26 identifies four key pillars to drive the nation’s economic momentum—agriculture, MSMEs, investment, and exports. These sectors will act as growth engines, fueled by targeted reforms and strategic government interventions. The government has introduced several schemes and programs to enhance productivity, crop diversification, post-harvest storage, and irrigation infrastructure.

The Senior Citizens Savings Scheme (SCSS) is a government-backed retirement benefits program. Senior citizens who are resident in India can invest a lump sum in the scheme, individually or jointly, and get access to regular income along with tax benefits. It is a Post Office savings scheme. Senior citizens can open an SCSS account to get the benefits of the SCSS. They can open an account in a Post Office branch or an authorized bank.