New Income Tax Bill is through, will replace six-decade-old Income Tax Act

Time of India

2 days ago

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Parliament on Tuesday passed the new income tax bill , to replace the six-decade-old Income Tax Act, 1961, which seeks to make direct tax law easier to read, understand and implement.The Rajya Sabha returned the legislation to the Lok Sabha with a voice vote as part of the parliamentary procedure.The new bill introduces the concept of a "tax year", replacing the financial year and assessment year to reduce confusion. It also broadens the definition of 'virtual digital assets' to include crypto-assets, non-fungible tokens and other digital assets as specified by the government.The bill also makes it mandatory for taxpayers to provide access to virtual spaces such as social media accounts, email servers and cloud storage during a search operation.Finance minister Nirmala Sitharaman said that the Central Board of Direct Taxes (CBDT) will issue standard operating procedures on handling digital data during searches to protect taxpayer privacy. She also said that the computer systems need to be "rebooted" for the new law by April 1, 2026."These changes are not superficial, they reflect a new simplified approach to tax administration and the leaner and more focused law is designed to make it easy to read, understand and implement," she said, responding to the discussion in the upper house.She slammed the opposition for not participating in the discussion on such an important legislation after agreeing to 16 hours of debate on the bill in both houses in the Business Advisory Committee."I am shocked that the opposition doesn't want to participate," Sitharaman said.Opposition parties staged a walkout in the Rajya Sabha on Tuesday, as they had done in the Lok Sabha on the previous day.The bill had already been passed by the Lok Sabha.Sitharaman said that it is important to pass the bill on time as the income tax department has to upgrade its computer system and there is very less time as the government has to implement the new law from April 1 next year.The finance minister also introduced the Taxation Laws (Amendment) Bill, 2025, which was passed by the Rajya Sabha, to provide tax exemption to public investment funds of the Kingdom of Saudi Arabia and its subsidiaries, tax exemption for partial withdrawal of subscribers of the Unified Pension Scheme to make it more attractive and change the definition of 'income' in block assessments during search and seizure cases.These changes are included in the new income tax bill. "Normally taxation amendments are done with finance bills, we could wait for the finance bill (next year), but because of the economy everybody wants to have it very quickly... Look at how things are developing," Sitharaman said.