The Indian government recently announced that, in an attempt to reform direct taxation policy, it will soon seek public suggestions for modifications of the Income Tax Act, 1961 from the private sector and tax professionals. From October, such feedback will be possible through functionality developed on the Income Tax portal for businesses and professionals. This comes after the Union Budget 2024-25 proposal to review and modernize the six decades-old direct tax law to reduce complexities and litigations.
Review of the Income Tax Act by the Government
Subsequent to the recommendations made by FM Sitharaman in the Union Budget of July 2024, CBDT has constituted a committee to undertake the exercise of reviewing the provisions of the Income Tax Act. The goal is not to rewrite the law entirely but to simplify the language, remove outdated provisions, and ultimately reduce the length of the Act by up to 100 pages.
Integrating Industry Input
While discussing the directions of work during a recent meeting with industry chambers, the government suggested that the functionality for setting up sections of the Income Tax Act for simplification by the industry experts and businesses would be added to the Income Tax portal by October. It is believed that such input would assist in pointing out the problems, clarify the perceived uncertainties and reduce the current tax burden on certain categories of taxpayers.
Expected Timeline and Implementation
The six-month timeline for completing the review of the Income Tax Act is expected to conclude in January 2025. The revised law could be presented during the Budget session of Parliament and incorporated into the Finance Bill, 2025. According to sources, the government plans to incorporate the suggestions from the private sector into the first draft of the amended law before making it publicly available for further input.
Impact on Taxpayers
By simplifying the Income Tax Act, the government aims to make the law easier to understand for both businesses and individuals, reduce the number of disputes, and create a more efficient tax system. The proposed changes, which focus on language clarity rather than significant policy shifts, will likely contribute to a more transparent and taxpayer-friendly regime.
Conclusion
As the government moves forward with its commitment to simplifying the direct tax law, the involvement of industry stakeholders and tax professionals will play a crucial role in shaping the future of income tax regulation in India. The anticipated amendments to the Income Tax Act, 1961, will mark a significant step toward reducing litigation and improving the overall tax administration process.
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