New income tax bill to be presented in parliament next week, no new taxes included
The much-anticipated new direct tax code, set to be introduced in the forthcoming Budget session of Parliament, will not include any new taxes, Finance Secretary Tuhin Kanta Pandey has confirmed in an interview with Moneycontrol. The proposed legislation, part of the Union Budget 2025-26, was initially announced by Finance Minister Nirmala Sitharaman and is expected to mark a significant overhaul of the existing tax structure.
“It is an entirely new bill. It has been rewritten… It will not change tax rates,” Pandey stated, clarifying that the government’s approach is focused on simplification rather than imposing additional financial burdens on taxpayers.
Emphasis on growth without inflationary pressure
Speaking at a FICCI conference on the union budget 2025-26, Pandey underscored that the government’s budgetary strategy prioritises economic growth without exacerbating inflationary concerns.
“When we show the numbers, there is nothing hidden elsewhere. Our entire borrowings are going into capital expenditure (CAPEX) – nothing could be better than this. It is a non-inflationary budget,” he remarked.
The government’s ambitious CAPEX programme for the fiscal year 2025-26 amounts to Rs 15.48 lakh crore, comprising Rs 11.21 lakh crore in direct central government spending and Rs 4.27 lakh crore in grants to states for capital projects. This signals a shift from traditional borrowing patterns that previously funded revenue expenditure, representing a significant realignment in fiscal policy.
Fiscal deficit reduction and middle-class relief
The Finance Secretary further highlighted that the government has surpassed its fiscal consolidation targets, achieving a deficit of 4.8 per cent against the projected 4.9 per cent for the current year. Looking ahead, the government aims to bring this down to 4.4 per cent in the next financial year.
The budget seeks to balance economic challenges while addressing both demand and supply-side imperatives. Pandey noted that stimulus measures included in the budget are designed to drive growth while maintaining macroeconomic stability.
Additionally, the government has allocated Rs 1 lakh crore in relief to the middle class, which will be distributed via market mechanisms rather than direct government spending.
“Whether citizens save or consume these funds, both outcomes benefit the economy – savings strengthen bank liquidity, while consumption boosts industry,” Pandey explained.
Overall, he described the budget’s theme as one of “growth with fairness, trust first, stimulating the economy, and fostering entrepreneurship.”
A modernised and transparent tax regime
During the conference, Central Board of Direct Taxes (CBDT) Chairman Ravi Agrawal outlined a fundamental transformation in the approach to tax administration. He introduced a new ‘PRUDENT’ framework, embodying the principles of being:
- Proactive and professional
- Rule-based
- User-friendly
- Data-driven
- Creating an enabling environment
- Non-intrusive administration
- Leveraging technology with transparency
“It is no longer an adversarial tax department. It is a participative approach aimed at economic growth and improved governance,” Agrawal remarked.
Among the key initiatives is the extension of the updated returns window from two to four years, a move that has resulted in the filing of nine million updated returns over the past two years, generating an additional tax revenue of Rs 8,500 crore. Furthermore, the government has announced the rationalisation of Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) provisions, optimising thresholds and rates while decriminalising certain offences.
The upcoming direct tax code will represent the first comprehensive revision of the tax framework in decades.
Rationalisation of customs duties
Sanjay Kumar Agarwal, Chairman of the Central Board of Indirect Taxes and Customs (CBIC), highlighted the government’s extensive rationalisation of customs duties, which spans 8,500 tariff lines. This reform has resulted in a reduction of India’s average customs duty rate from 11.65 per cent to 10.66 per cent, aligning it more closely with ASEAN standards.
“This exercise was conducted to simplify structures while ensuring that Indian industries remain competitive,” Agarwal stated.
The reforms include the elimination of seven duty rate slabs and the removal of surcharges on 82 tariff lines, contributing to a more streamlined tax structure. Notable measures include:
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- Duty reductions on critical minerals essential for semiconductors and clean energy projects.
- Extension of the export period for handicrafts from six months to one year.
- Customs duty cuts on frozen fish paste, reduced from 30 per cent to 5 per cent, aimed at enhancing marine exports.
- Duty exemptions on components for mobile manufacturing, a sector already witnessing significant export success.
Industry welcomes budget provisions
Industry leaders have expressed strong support for the budget’s balanced and forward-looking approach. Harsha Vardhan Agarwal, President of FICCI, described it as “a blueprint for resilience, innovation, and long-term economic transformation.”
The decision to provide tax relief for individuals earning up to Rs 12.75 lakh per annum is expected to enhance disposable income, leading to increased consumer spending and overall economic growth.
As the government prepares to table the new income tax bill in Parliament next week, all eyes will be on how the proposed changes shape India’s tax landscape and economic trajectory in the coming years.
