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During the Budget 2024 speech, Union Finance Minister Nirmala Sitharaman announced that the income tax law will undergo a comprehensive review.
The finance minister asserted that a comprehensive review of the Act will be done to make it concise, lucid, easy to read and understand. “This will reduce disputes and litigation, thereby providing tax certainty to the taxpayers,” she said during the speech.
The review—announced on July 23—was supposed to be completed in six months, and this time line ended on January 23, 2025.
So, can we now expect revamped legislation with newer provisions when Sitharaman presents the Budget 2025 on February 1?
She also mentioned then that a beginning was made in the Finance Bill by simplifying the tax regime for charities, tax deducted at source (TDS) rate structure, provisions for reassessment, search provisions and capital gains taxation.
The Income Tax (I-T) department is inviting suggestions for a comprehensive review on its portal, eportal.incometax.gov.in. The suggestions that are to be made should relate to a particular provision that you have suggestions for.
Under each section, one can give recommendations along four different criteria. These criteria are simplification of language, litigation reduction, compliance reduction and redundant provision.
We spoke to a few experts to get a sense of what the new provisions could likely be.
Two key goals of revamping the income tax law are low tax rates, which can stem from higher compliance, and lower litigation, besides the goals to make the legislation easy, concise and simple to understand.
Most experts we spoke to seem quite optimistic about the current review and believe that it will foster compliance and cut down on litigation. When compliance is higher, there is scope to bring down tax rates.
“The taxpayers are clamouring for substantial relief in the revamped Income Tax Act, especially the individual taxpayers in the lower tax brackets. It’s time to increase the horizon of the tax revenue so that the increased tax burden on the salaried taxpayer’s shoulders could be reduced,” said Dipesh Jain, Partner at Economic Laws Practice.
“Simplifying tax rules, eliminating ambiguity, and minimising scope for disputes is crucial. A clear and transparent tax regime will foster compliance, reduce litigation, and promote economic growth. It's time for a cohesive and thoughtful approach to tax reform. The frequent and complicated tweaks to personal tax and capital gains tax provisions have created complexity and confusion,” said Rajul Kothari, Partner at Capital League, a financial services firm.
“With multiple asset classes and product categories, the constant changes have made it challenging for taxpayers to navigate,” Kothari added.
Another key goal of revamp is to bring down the litigation in courts. The tax law should be simplified so that there is less tax litigation in the courts.
“Currently, it is complex, and taxpayers have, for example, to choose between the old and new tax regime and within the old regime there are certain allowances which have not been changed for a long time. So, what is required is a complete overhaul,” said Chirag Chauhan, a Mumbai-based chartered accountant who runs CA Chauhan & Company.
Aside from different provisions of tax law to make the provisions simpler to follow, there is an urgent need to introduce changes in the tax administration as well, believes an expert.
“It is necessary to address the challenges faced from a tax administration perspective, especially from tax litigation management. Therefore, directionally, towards revamping the Income Tax Act, it is important that the Union Budget 2025 lays down definitive timelines for concluding (a) appeals filed before appellate and higher forums; (b) applications filed before the Board for Advance Rulings and APAs from tax certainty perspective; and (c) applications filed for rectification, order giving effect, etc,” said Bhavin Shah, Partner, Tax and Regulatory Services, MSKB & Associates LLP.
Experts believe that the Budget 2025 will bring major changes, thus paving the way for the new Income Tax law.
“Budget 2025 is expected to bring some major changes to pave the way for the New Income Tax. Some of the revolutionary expectations are rationalising TDS provisions by reducing the number of TDS rates, making the New Tax Regime more lucrative by increasing the basic exempting limit to ₹5 lakh and increasing rebate on income of up to ₹10 lakh and simplification in income tax return filing rules,” said CA Pratibha Goyal, partner PD Gupta & Company, a Delhi-based firm.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie
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