FinMin unlikely to introduce new Income-Tax Bill in Budget session

Review panel may submit report before FY26 Budget

The finance ministry is unlikely to introduce the new Income-Tax Bill in the upcoming Budget session of Parliament, though the internal committee formed under Chief Income-Tax Commissioner V K Gupta for the review of the Income-Tax Act is likely to submit its report before the presentation of the FY26 Budget.

 

“The Bill is unlikely to be enacted immediately during the Budget session. Based on the V K Gupta committee report, the legislation will be drafted with the help of the law ministry. After the draft Bill is ready, it will be referred to the Standing Committee on Finance for further scrutiny and feedback,” an official familiar with the matter said. Currently, the Gupta Committee is reviewing various recommendations from experts and bodies.

 

Announcing the comprehensive review of the Income-Tax Act, Finance Minister Nirmala Sitharaman in her FY25 Budget speech said the purpose was to make the Act concise, lucid, and easy to read and comprehend.

 

“This will reduce disputes and litigation, thereby providing tax certainty to taxpayers. It will also bring down the demand embroiled in litigation. It is proposed to be completed in six months,” she said. 

 

The current Tax Deduction at Source (TDS) and Tax Collection at Source (TCS) systems have become increasingly complex, with more than 71 different sections governing intricate procedures.

 

To address this complexity, the committee is considering proposing a radical simplification approach.

 

According to sources, similar to the Customs Tariff Act, the committee is considering creating a single comprehensive Schedule of Rates that would replace the existing 71 sections. This would reduce legal complications and litigation, making the tax deduction process transparent.

 

In addition, the requirement of issuing TDS certificates has become redundant with the introduction of Form 26AS, which provides a comprehensive digital record. Eliminating these outdated procedures is expected to significantly reduce compliance burdens for tax deductors. 

 

Another critical area of reform involves consolidating penalty provisions. Currently, scattered across 45 different sections, the panel may recommend merging these into just two or three sections. This consolidation would help reduce confusion and minimize potential legal disputes. 

 

Last month, Sitharaman held a review meeting with the then Revenue Secretary Sanjay Malhotra and other top finance ministry officials.

 

During the meeting, Malhotra informed the finance minister that 6,500 suggestions have been received through the portal since it was opened on October 6, 2024, reflecting active public participation towards further simplification of the I-T Act, according to the finance ministry's post on X. 

 

"The revenue secretary informed the Union Finance Minister that 22 specialised sub-committees have been established to review the various aspects of the Income-Tax Act,” the post added. 

 

Akhilesh Ranjan, adviser with PwC and former member of the Central Board of Direct Taxes, said that before presenting the tax legislation in Parliament, it is crucial to implement a comprehensive public consultation process.

 

“This approach will allow citizens, tax professionals, and stakeholders to provide valuable insights and feedback on the proposed changes. Bypassing this crucial scrutiny and rushing the Bill directly through Parliamentary proceedings could lead to unintended complications and challenges for individuals and businesses navigating the new tax landscape,” he added. 

In the pipeline 

 

> New I-T Bill’s draft will follow the V K Gupta committee’s report, which will be submitted before FY26 Budget 

> The committee will focus on simplifying TDS and TCS, consolidating 71 sections into a single Schedule of Rates, and eliminating outdated TDS certificates

> Proposal to reduce 45 penalty provisions to just 2-3 for clarity and efficiency

> 6,500 public suggestions received, with 22 sub-committees reviewing the Income-Tax Act