New Income Tax Bill Likely To be Implemented From April 2026 with No STCG Changes – Here’s What You Should Know
India’s taxation landscape is set for a significant overhaul with the proposed ‘Income Tax Bill 2025’, which is slated to come into effect from April 1, 2026. This new bill, comprising 600 pages, 23 chapters, 16 schedules, and 536 clauses, aims to replace the existing Income Tax Act of 1961, which has become increasingly complex over the years.
Key Highlights of the New Bill:
- Simplified Terminology: The terms ‘assessment year’ and ‘previous year’ are being replaced with ‘tax year’, defining the financial period from April 1, 2026.
- No Alterations in STCG: The bill retains the current short-term capital gains (STCG) tax structure, keeping the duration at 12 months and the rate at 20%.
- Clarity and Structure: The number of sections jumps from 298 in the old act to 536 in the new, aiming for better language clarity and a more structured approach to tax administration.
- Digital and Compliance Enhancements: The Central Board of Direct Taxes (CBDT) gains more autonomy to introduce tax schemes, compliance measures, and digital monitoring without needing frequent legislative changes.
- Reduced Legal Disputes: By incorporating judicial pronouncements and clearer tax treatments for employee stock options (ESOPs), the bill seeks to reduce litigation and disputes.
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Why the Change?
The existing Income Tax Act has seen numerous amendments, leading to a convoluted structure that’s hard for both taxpayers and tax administrators to navigate. The new bill’s objectives include:
- Simplifying tax laws for better understanding.
- Reducing legal ambiguities, thereby decreasing the number of tax disputes.
- Making tax compliance more straightforward for individuals and businesses.
- Fostering a trust-based system where detailed scrutiny is not the immediate approach.
The Legislative Journey:
The bill is scheduled to be introduced in the Indian Parliament this Thursday, where it will undergo scrutiny by a standing committee. This committee will suggest modifications after public and expert consultations, ensuring the legislation is well-rounded and effective.
What Finance Minister Said:
During the Budget Speech 2025, Finance Minister Nirmala Sitharaman emphasized that the new bill would follow the principle of “Nyaya” (justice), much like the Bharatiya Nyaya Sanhita, which replaced the Indian Penal Code. She highlighted that the new law would be concise, clear, and aimed at reducing litigation while providing tax certainty.
The Income Tax Bill 2025 is poised to bring about a more user-friendly, efficient, and transparent tax regime in India. While there are no immediate changes to STCG, the broader implications of this bill could lead to significant shifts in how taxes are managed and complied with in the country. Stay tuned for updates as this new chapter in Indian tax law unfolds.
