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Published: September 26, 2024
Updated: September 26, 2024

Government Set to Invite Industry Feedback for Income Tax Act Review in October

Streamlining the Income Tax Act: Invitation for Suggestions

The Indian government is preparing to invite suggestions from private sector stakeholders and tax experts starting in October as part of its initiative to simplify the Income Tax Act of 1961. According to sources, a new functionality will be introduced on the Income Tax portal, allowing users to provide input on specific sections of the law. The objective of this exercise is to simplify the language of the Act and reduce the volume of litigation.

Objective of the Income Tax Law Review

This review stems from a Budget 2024-25 proposal by Finance Minister Nirmala Sitharaman, in which she committed to completing a comprehensive review of the Income Tax Act within six months. The Central Board of Direct Taxes (CBDT) has since formed an internal committee tasked with examining the six-decade-old law. The goal is to make the Act more concise, easier to read, and more understandable by removing outdated clauses and streamlining the legal language.

Functionality for Industry Feedback

During a recent meeting with industry chambers, the government emphasized the importance of industry participation in this review. A new feature will be launched on the Income Tax portal in early October to allow suggestions from the public and private sector on simplifying the Act. This feedback is expected to help in reworking sections of the law and addressing common issues that lead to disputes and litigation.

Amendments Expected in 2025 Finance Bill

Although the exercise does not aim to create a completely new tax code, sources indicate that removing outdated provisions could significantly reduce the length of the Act by over 100 pages. The amended version of the Income Tax Act could be presented during the Budget session of Parliament in early 2025, with the revised draft potentially forming part of the Finance Bill, 2025.

A Move Towards Simplification

The government's efforts to review and streamline the Income Tax Act are focused on reducing complexity and making it more user-friendly for both taxpayers and professionals. By incorporating feedback from industry experts and simplifying the language, the amendments are expected to ease the compliance burden and reduce legal disputes. As the review progresses, the updated Income Tax Act may bring significant changes by early 2025.