Government announces comprehensive review of Income Tax Act
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Income Tax Act: The government has announced a comprehensive review of the Income Tax Act to address several key issues. The Act is extremely complex and lengthy, making it difficult for taxpayers to understand their obligations. The review aims to simplify the language and structure of the Act to enhance clarity. Announcing the decision during her Budget 2024 speech, Finance Minister Nirmala Sitharaman announced that she will undertake a comprehensive review of the Income Tax Act to make it easier to read. “I am now announcing a comprehensive review of the Income Tax Act, 1961. It aims to make the Act concise, comprehensible, easy to read and understand. This will reduce disputes and litigation, thereby providing tax certainty to taxpayers. It will also reduce the demand embroiled in litigation. It is proposed to complete it in six months,” she said. The review aims to address several key issues, including; Litigation and disputes: Complexity often leads to disputes and lengthy legal battles. By simplifying the Act, the government hopes to reduce litigation and provide greater tax certainty to taxpayers. Ease of compliance: The review aims to make the tax filing process more simple and efficient for taxpayers. Global best practices: The government intends to incorporate global best practices in taxation to modernise the Indian tax system. By making the Income Tax Act more user-friendly and efficient, the government hopes to improve tax compliance, increase tax revenues and promote a more favourable business environment. Sitharaman also said that the government will come out with SOPs (standard operating procedures) for TDS defaults and simplify and rationalise the compounding of such offences. Direct tax code Jigar Saiya, partner, MSKA & Associates, a member firm of BDO International, said, “As the finance ministry proposes to undertake a comprehensive review of the Income Tax Act, leveraging the Direct Tax Code (DTC) presents a strategic opportunity.” Saiya said, “Critical evaluation of the provisions of DTC, with consultation with stakeholders, can pave the way for a modern and efficient direct tax regime,
which will focus on simplification of tax law, automating compliance, reducing litigation and enhancing ease of doing business in India.” What is the Income Tax Act of 1961? The Income Tax Act of 1961 is the primary legislation of India that governs the levy, administration, collection and recovery of income tax. Some key points about the Act are as follows: The Act is divided into various chapters, each of which deals with different aspects of income tax. It contains several sections, each of which addresses specific provisions. The Act contains schedules that provide detailed information on various aspects. The Act provides various deductions and exemptions under Sections 80C, 80D etc. to encourage individuals and businesses to save and invest in certain sectors such as housing, insurance, education and infrastructure. The Act lays down rules for the taxation of corporate entities, ensuring that businesses contribute a fair share of their profits to the national exchequer. It also contains provisions for tax audits, transfer pricing and international taxation. The Act provides a legal framework for tax administration, including filing of returns, assessment procedures, tax collection and penalties for non-compliance. It ensures that taxpayers comply with tax laws and contribute their fair share to the economy.