Income Tax Act 1961 to be replaced by a new law
The Income Tax Bill 2025 approved by the Rajya Sabha on Tuesday August 12, 2025 is set to replace more than six decades old Income Tax Act 1961
New Delhi: The Income Tax Bill 2025 approved by the Rajya Sabha on Tuesday August 12, 2025 is set to replace more than six decades old Income Tax Act 1961.
The Income Tax Bill 2025 was on Monday passed by the Lok Sabha after some 285 recommendations from the Parliamentary Select Committee was incorporated.
A day after the modified Income Tax bill was passed by the lower house of the Indian Parliament, it was tabled by Union Finance Minister Nirmala Sitharaman in the upper house. The Rajya Sabha passed it by a voice vote and sent it to the Lok Sabha.
Rajya Sabha is required to return a Money Bill passed and sent by Lok Sabha within a period of 14 days from the date of its receipt.
Along with the new Income Tax Bill, Sitharaman also introduced The Taxation Laws (Amendment) Bill 2025. It has also been passed by the Parliament.
The new IT bill passed by the Parliament will become an Act and replace the Income Tax Act 1961 once it is signed by the President of India.
Why New Income Tax Act?
Speaking in the Parliament, Sitharaman said some provisions of the Income Tax Act 1961 were “outdated” and hence a new law was necessary.
The Narendra Modi government had in the last week formally withdrew the Income Tax Bill 2025, which was initially introduced in the Lok Sabha on February 13 to replace the existing Income Tax Act, 1961.
The current Income Tax Act, enacted in 1961, has undergone over 4,000 amendments and now contains over five lakh words, making it highly complex.
BJP leader Baijayant Panda, who headed the Parliamentary Select Committee, said the new act will simplify the country's tax structure, reduce legal confusion, and help individual taxpayers and MSMEs avoid unnecessary litigation.
Other highlights are tax slabs and rates that have been adjusted across the board to benefit all taxpayers.
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