In an effort to simplify the direct tax laws, the government is set to invite suggestions from the private sector and tax experts regarding the Income Tax Act, 1961, starting in October. Sources have confirmed that this initiative is part of the government’s broader plan to make the tax laws more user-friendly and reduce litigation.
During a meeting with industry bodies earlier this month, the government revealed plans to introduce a feature on the Income Tax Portal where stakeholders can provide feedback on various sections of the law. The goal is to simplify the language and streamline the process for both taxpayers and authorities.
Background: Simplification of Six-Decade-Old Tax Law
Following the 2024-25 Budget announcement, the Central Board of Direct Taxes (CBDT) established an internal committee to conduct a comprehensive review of the Income Tax Act, which has been in place for six decades. The committee’s mandate is to make the law more concise, easier to read, and less prone to legal disputes.
A government source stated, “In a meeting with industry associations, the Revenue Department proposed that by the first week of October, the Income Tax Portal will have a feature for stakeholders to provide suggestions for revising the Income Tax Act.”
Not a New Tax Code, but Streamlining Existing Provisions
This review is not aimed at drafting an entirely new tax code but rather at eliminating outdated provisions and making the existing law easier to understand. Sources indicated that removing redundant sections could reduce the number of pages by about 100. The primary focus is on simplifying the language and minimizing litigation.
Timelines and Expectations
In the 2024-25 Budget, presented in July, Finance Minister Nirmala Sitharaman announced that the review of the Income Tax Act would be completed within six months, which places the deadline around January 2025. This timeline suggests that the revised Income Tax Act could be tabled during the Budget Session of Parliament. Since no significant new changes are expected, there is speculation that the revised act might be included as part of the Finance Bill, 2025.
Key Objectives of the Income Tax Review:
- Simplifying Language: Making the legal language more accessible to taxpayers and professionals.
- Reducing Litigation: Streamlining provisions to lower the scope for disputes and court cases.
- Removing Outdated Sections: Eliminating obsolete provisions to reduce the complexity of the law.
Expected Outcomes:
| Aspect | Current Status | Proposed Changes |
|---|---|---|
| Legal Language | Complex and technical | Simplified and user-friendly |
| Number of Pages | Lengthy, with many outdated provisions | Reduction by approximately 100 pages |
| Scope for Litigation | High due to ambiguities | Lowered through clearer provisions |
| Review Completion | Expected by January 2025 | Revised act could be tabled in Budget Session 2025 |
The government’s move to open up the Income Tax Act for public feedback is part of a broader agenda to create a more efficient and accessible tax system, aligning with its goal of ease of doing business in India
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