We have completely shaken up the Income Tax Act, says FM Sitharaman in post-Budget address

Finance Minister Nirmala Sitharaman, speaking to the industry stakeholders in the first post-Budget interaction, said that the government has completely changed and simplified the Income Tax Act with the Bill being reviewed by a select committee of 31 members.

“We have completely shaken up the Income Tax Act. And the 1961 IT Act will now be replaced with a new Act which is in the form of a bill introduced in the parliament. There is a select committee which is appointed. 31 members of the Lok Sabha will be sitting and looking at it in all details,” Sitharaman said.

The Finance Minister also stated that the government received over 60,000 inputs for the Income Tax Bill which has been tabled in the Parliament. “As it is we have over 60,000 inputs coming online towards the making of this bill. Active engagement (of the people) as the PM would say, Jan-Bhagidari, involves people in everything that you do,” FM said, adding that the income tax act review has had a very big component of Jan-Bhagidari. “We have taken inputs from people. And now the select committee would, of course, go through it and invite various stakeholders to come and give their comments on it,” she added.

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Speaking on the income tax reforms proposed under Budget 2025, the Finance Minister called for a need for simplification in language and the sections in the bill. “The IT Act is essentially looking at simplification. When it was brought in 1961-62 it had only about 200 odd sections. As time went by, it touched over 800 sections, and now those 800 are being brought down to slightly over 500 sections,” Sitharaman remarked. She said that a user-friendly and meaningful manner is being adopted to regroup the sections and clauses which affect and are inter-related to each other.  “Very meaningful, user-friendly ways of regrouping sections and clauses which affect particular sections will all be found in one particular place rather than spread around the act…,” she stated.

The other significant part of the new reforms in the Income Tax Bill is the simplification of language of the Act. The finance minister said that she has particularly taken keen interest in this matter as it would make for people to easily interpret it. “…And the language simplification, where I put a lot of interest in, so that a person reading it should be able to interpret it for himself or herself. It should not yield itself to too many interpretations that everybody goes to the court. The court interprets in its wisdom the way it would interpret. And at the end of the day, you are spending on explaining the law that you created for yourself,” she concluded, realising the need for streamlining of the Act so that it remains free from ambiguity and too many interpretations.