New Income Tax Bill: 10 Key Points Every Taxpayer Should Know
New Income Tax Bill: The much-anticipated New Income Tax Law is set to become a reality soon, with Union Finance Minister Nirmala Sitharaman tabling the new legislation in Parliament this Thursday. The new bill aims to simplify tax provisions, reduce ambiguities, and enhance the ease of compliance for taxpayers.
Upon analyzing the first draft, it is evident that the new legislation aligns with expectations—shorter, clearer, and more concise than its predecessor. According to CA Chirag Chauhan, a Mumbai-based chartered accountant, the updated law removes unnecessary jargon, making it easier for taxpayers to understand and file returns without errors. Moreover, the new tax regime is now the default, meaning those who wish to continue with the old regime must actively opt out.
Here are 10 crucial points every taxpayer should be aware of:
1. A Shorter and More Streamlined Law
The Income Tax Act of 1961 was 823 pages long (as amended in 2024). However, the new Income Tax Bill has only 622 pages, making it 201 pages shorter while still covering all essential tax provisions.
| Tax Law | Sections | Pages |
|---|---|---|
| New Income Tax | 536 | 622 |
| Old Income Tax | 298 | 823 |
Despite the increase in the number of sections, the new law is more concise because of fewer explanations and provisos.
2. Standing Committee Review
Once passed in Parliament, the bill will be referred to the Parliamentary Standing Committee on Finance, which will initiate public and expert consultations before the final enactment.
3. Old Tax Regime Still Available
Even though the new tax regime is now the default, the old tax regime is still an option for those who prefer it. Taxpayers must opt out if they wish to continue under the older system.
4. Higher Limits for Business and Professionals
The new bill has increased limits under Section 44AD:
- For businesses: The limit has been raised from ₹2 crore to ₹3 crore.
- For professionals: The limit has increased from ₹50 lakh to ₹75 lakh.
This move is expected to benefit small businesses and professionals by reducing tax compliance burdens.
5. Cryptocurrencies Now Classified as Assets
Virtual Digital Assets (VDAs), including cryptocurrencies, have now been classified as assets, along with property, jewelry, paintings, drawings, and shares. This move provides more clarity on taxation for crypto investors.
6. No Expansion in Audit Scope
There were speculations that the scope of tax audits might be expanded to include Company Secretaries (CS) and Cost & Management Accountants (CMA). However, Section 515 (3)(b) of the bill clarifies that only Chartered Accountants (CAs) will continue to handle tax audits. This decision has provided relief to the CA community.
7. Change in Terminology: ‘Tax Year’ Instead of ‘Assessment Year’
The new bill replaces the term Assessment Year (AY) with Tax Year, while Previous Year will now be officially termed as Financial Year.
8. No Changes in Capital Gains Tax
The long-term capital gains (LTCG) and short-term capital gains (STCG) tax structure remains unchanged, consistent with last year’s provisions. Investors can expect stability in capital gains taxation.
9. Clarity on Presumptive Taxation
A significant clarification has been made regarding Sections 44AD, 44AE, and 44ADA, which deal with presumptive taxation for businesses and professionals. The new bill introduces the term ‘Profit claimed to have been actually earned’, ensuring better transparency in profit computation under these sections.
10. Simplified and Error-Free Tax Filing
The removal of complex jargon and unnecessary explanations is expected to make tax filing easier and error-free. With fewer ambiguities, taxpayers will have a smoother experience, reducing compliance costs and disputes with tax authorities.
Why This Matters for Taxpayers
The New Income Tax Bill brings much-needed clarity and simplification to tax laws in India. The reduction in complexity, along with increased presumptive taxation limits, is expected to benefit small businesses, professionals, and salaried individuals.
By classifying cryptocurrencies as assets, the government has provided a clear taxation framework for digital asset holders. Additionally, the continuation of the old tax regime ensures that taxpayers still have the option to choose the system that best suits their financial planning.
Key Financial Ratios for Taxpayers
Here’s a summary of important financial changes introduced in the new bill:
| Category | Previous Limit | New Limit |
|---|---|---|
| Business Income (44AD) | ₹2 crore | ₹3 crore |
| Professional Income (44ADA) | ₹50 lakh | ₹75 lakh |
| Audit Requirement for CAs Only | Yes | Yes |
| Virtual Digital Assets Taxation | Unclear | Classified as Asset |
With a shorter, more precise, and easier-to-understand tax law, taxpayers can expect a more efficient and hassle-free compliance process.
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Disclaimer: This blog post is for informational purposes only and should not be considered financial advice. Investors should conduct thorough research and consult with a qualified financial advisor before making any investment decisions.