The New Income Tax Act replacing the old will be introduced soon, declared FM on the celebration of the 165th year of income tax on 21st August 2024. The Union Finance Minister Nirmala Sitharaman, in the Budget 2024 has announced the scope of a new income tax act or code making it simple.
CBDT Chairman Ravi Agrawal stated on Wednesday that the review and finalisation of the new Income Tax Act will be completed within six months. The reform is intended to make the tax code more comprehensive, reduce compliance burdens, and improve clarity for taxpayers.
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While the Finance Minister did not specify whether a completely new code or a revised act will be introduced, she indicated that significant progress is expected within six months. This may include a new or updated Income Tax Act or a portion of it, presented in simpler and more accessible language.
Income tax was first introduced in India in 1860 by Sir James Wilson, who was the finance minister of pre-independent India to address the financial losses incurred by the government due to the 1857 Military Mutiny. Since then, the tax system has undergone numerous changes.
In 1886, a separate Income Tax Act was enacted, which was amended several times until 1918. A new Income Tax Act was introduced in 1918, followed by another in 1922, which remained in effect until the 1961-62 assessment year.
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The Income Tax Act of 1961 came into force on April 1, 1962, and continues to apply across India. Since its implementation, the Act has been subject to significant amendments annually through the Union Budget, reflecting ongoing adjustments to meet evolving fiscal and economic needs.
In 2020, the government introduced a new tax regime. For the fiscal year 2023-24 (assessment year 2024-25), 72% of taxpayers chose to file their returns under this new tax regime. When we celebrated the 165th anniversary of income tax, a lot of economic, social, political and technological changes had happened in India which positively impacted the income tax of the country. Initially it was introduced to cover financial losses due to the 1857 Military Mutiny, now it is used for the purpose of development of the country.
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