The new Income Tax Bill aims to replace the 1961 Act, which is considered controversial having regard to sheer amount of pending litigations.
FinTech BizNews Service
Mumbai, February 10, 2025: The Indian government is set to introduce a new Income Tax Bill in Parliament, as announced by Finance Minister Nirmala Sitharaman during the Union Budget 2025-26 presentation. The new Income Tax Bill aims to replace the 1961 Act, which is considered controversial having regard to sheer amount of pending litigations. The new simplified direct tax laws aims to reduce ambiguities, and curb litigation. It is expected to be concise, user-friendly, and free of complex provisions.
Mr. Sandeep Bhalla, Partner, Dhruva Advisors, enlists his expectations from the new Income Tax Bill to be tabled in Parliament:
· Simplification as an Ongoing Process: The new bill is expected to simplify existing tax laws, making them more concise and accessible for taxpayers. It is however important to mention that tax simplification should not be seen as a one-time effort but as a continuous process that evolves with changes in the economy, technology, and global practices on one hand and the interpretation issues arising thereform periodically.
· Proactive Stakeholder Engagement: The Income Tax Department must actively seek feedback from taxpayers, industry players, and other stakeholders to identify controversial points and address them effectively. Regular dialogue ensures that the reforms remain relevant and practical.
· Timely Issuance of Clarifications: Ambiguities in tax laws often lead to disputes and litigation many a time arising out of aggressive interpretation both from the tax administration and the tax payers. The department should issue prompt clarifications and circulars to address concerns raised by stakeholders, fostering trust and transparency. At the same time a more business-like approach for interpretation should be adopted by the administration.
· Technology-Driven Reforms: The bill should encourage the integration of advanced technologies, such as artificial intelligence and data analytics, for better tax compliance and administration. This can help reduce human intervention, minimize errors, and enhance taxpayer convenience. The use of algorithms by the tax department for data analytics toneeds more to be more robust.
· Predictability and Stability: A simplified tax code should provide taxpayers with clarity on their liabilities and exemptions. Ensuring minimal frequent changes in provisions will allow businesses to plan their finances more effectively.
· Ease of Compliance: With simplified rules, the compliance process should also be streamlined. Reducing paperwork, integrating digital platforms, and simplifying return filing mechanisms should be priorities. Here again the number of forms/ returns to be filed by the tax payers need to be reduced significantly. Several tax information could be built into the same form instead of multiplicity of forms to be filed before the tax administration.
· Focus on Reducing Litigation: The government must aim to address contentious areas in the current law to reduce litigation. A clear and concise tax code will provide certainty and reduce disputes.
By ensuring simplification remains dynamic and responsive, the government can create a tax ecosystem that is efficient, equitable, and taxpayer-friendly.
