New Income Tax Bill Set for Cabinet Approval: What Key Changes You Need to Know?

The Union Cabinet is expected to approve the new Income Tax Bill on February 7, 2025, with its Lok Sabha introduction likely on February 10. The bill aims to simplify the Income Tax Act of 1961 by reducing legal complexity and eliminating obsolete provisions. No new taxes will be introduced, and tax slabs remain largely unchanged. The Finance Minister emphasized clarity and accessibility, ensuring better taxpayer comprehension. With a 50% shorter text, the bill aims to enhance transparency and efficiency. If passed, it could streamline compliance and make tax filing easier for millions

Feb 7, 2025, 12:02 IST

New Income Tax Bill set for Cabinet Approval

The Union Cabinet is expected to approve the new Income Tax Bill on February 7, 2025, potentially leading to its introduction in the Lok Sabha on February 10 during the ongoing Budget Session. This bill aims to simplify the existing Income Tax Act, of 1961, making it clearer, more concise, and taxpayer-friendly.

Key Highlights

Cabinet Approval: Expected on February 7, 2025.
Introduction in Lok Sabha: Tentatively scheduled for February 10, 2025.
Objective: To streamline the tax system, reduce complexity, and enhance transparency.
Reduction in Text: The bill is 50% shorter than the existing Income Tax Act, 1961.
No New Taxes: The new law will not introduce additional tax burdens.
Expected Implementation: Subject to parliamentary approval.

Why was the New Income Tax Bill proposed?

Here is the current issues with their proposed solutions:

Current Issues	Proposed Solutions
Lengthy and complex legal language	Simpler and more concise text
Several outdated provisions	Removal of obsolete clauses
It is difficult for common taxpayers to understand	Clearer language for better taxpayer comprehension
Frequent amendments leading to confusion	Comprehensive restructuring for long-term clarity

Statements from Union Finance Minister Nirmala Sitharaman

“The new bill aims to be direct, clear, and easier for taxpayers to understand.”
“It has been drafted within six months, focusing on simplification and clarity.”

According to Finance Secretary Tuhin Kanta Pandey

"The new bill is not meant only for legal professionals but for all citizens."
"There will be no new tax burden, and the policy remains largely unchanged."
"The way laws are written is changing—expect shorter, clearer sentences."

Proposed Income Tax Slabs (New Regime)

Income Bracket (₹)	Tax Rate (%)
0 - 4 lakh	Nil
4 - 8 lakh	5%
8 - 12 lakh	10%
12 - 16 lakh	15%
16 - 20 lakh	20%
20 - 24 lakh	25%
Above 24 lakh	30%

Tax Rebate Under Section 87A

Individuals earning up to ₹12 lakh will effectively pay zero tax due to rebates.
Breakdown:

₹0-4 lakh: No tax
₹4-8 lakh: 5% tax (max ₹20,000)
₹8-12 lakh: 10% tax (max ₹40,000)
Total Rebate: ₹60,000, making net tax liability zero.

Tax Rebate vs. Tax Exemption

Tax Rebate	Tax Exemption
Deduction from total tax liability	Exemption on specific income sources
Applicable for individuals earning below a certain limit	Applies to income from investments, allowances, etc.
Example: ₹60,000 rebate for incomes up to ₹12 lakh	Example: Agricultural income is exempt from tax

Parliamentary Process & Next Steps

Budget Session Dates:

First Session: January 31 – February 13
Second Session: March 10 – April 4

Expected Timeline:

February 7 – Cabinet Approval
February 10 – Introduction in Lok Sabha
Mid-February – Discussion & Amendments
April 2025 – Expected Final Approval

Conclusion

The new Income Tax Bill 2025 aims to bring simplicity, clarity, and efficiency to India's tax system. The government is working towards a more taxpayer-friendly approach by making the law less complicated and ensuring no additional tax burden. If passed, this bill could significantly improve compliance and ease of tax filing for millions of taxpayers.

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