In the upcoming 2025 Budget Session, Finance Minister Nirmala Sitharaman is likely to introduce a new Direct Tax Law, aimed at simplifying the Income Tax Act. The key objective is to make tax provisions more understandable and accessible to the general public by eliminating outdated and complex rules that have made the current law difficult to navigate.

Key Highlights:

• Simplification Effort: The new law will focus on making the language simpler, with an emphasis on clarity so that it is easily comprehensible, especially for common citizens. This would address the ongoing criticism of the Income Tax Act, which has long been seen as complicated.
• Committee’s Work: A committee was formed to draft the new law, replacing the existing 63-year-old Income Tax Act. The government had initially planned to release the draft law for public feedback, but now it has opted to directly present the bill in Parliament.
• Bill Structure: The proposed Direct Tax Bill might be divided into two or three parts. The government aims to remove obsolete provisions and those that are no longer relevant, thus streamlining the tax framework.
• Timing of Introduction: Finance Minister Sitharaman will mention the new law in her Budget Speech on February 1, 2025. However, it is still undecided whether the bill will be introduced during the first or second session of the Budget Session.
• Past Attempts: This is the third attempt to overhaul the Income Tax Act. Previous efforts in 2010 and later by the Modi government faced challenges, with recommended changes either not being implemented or rejected. This time, however, the government is determined to simplify and modernize the law.
• Challenges and Expectations: While the government aims for a simplified tax system, officials have warned that the change in language might lead to increased litigation, as taxpayers may seek new interpretations of the law. However, the current focus is on making the tax system more efficient and user-friendly, without introducing new cases in the immediate future.

This effort reflects the government's ongoing focus on improving the tax system and aligning it with the needs of modern-day India.