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Parliament Clears Overhauled Income-Tax Code, Sends Bill for Presidential Assent

Incorporating 285 panel recommendations to streamline sections, bolster taxpayer protections, pave the way for detailed administrative rules, the bill now moves to presidential assent ahead of its April 1, 2026 launch

Lok Sabha passes new Income Tax Bill with major simplifications. Here's a look at major changes
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Overview

  • The Income-Tax (No.2) Bill, 2025 was approved by the Lok Sabha on August 11 and cleared by the Rajya Sabha on August 12 via voice votes, and it now awaits the President’s signature to become law.
  • The consolidated code reduces sections from 819 to 536 and chapters from 47 to 23, replaces the dual ‘previous year’ and ‘assessment year’ framework with a single ‘tax year,’ and cuts overall wordage by nearly half.
  • About 285 recommendations from the Parliamentary Select Committee chaired by Baijayant Panda have been adopted, including provisions for late-filed return refunds, nil-TDS certificates and a two-year window for TDS corrections.
  • The bill retains the definition of ‘virtual digital space,’ granting tax authorities access to digital records during surveys, searches and seizures under forthcoming standard operating procedures to protect personal data.
  • The Central Board of Direct Taxes has begun drafting detailed rules, digital and faceless procedures and administrative manuals to ensure the new code is fully operational by April 1, 2026.