Views sought on updating India’s Income-Tax Act

Finance professionals and members of the public have been invited to make suggestions for a review of the Income-Tax Act, which was announced in this year’s Budget.

The Union finance ministry said comments were sought in four categories: simplifying the language, litigation reduction, compliance lessening, and redundant/obsolete provisions.

The Central Board of Direct Taxes (CBDT), under the ministry, has set up an internal committee to oversee the review. “The goal is to make the Act concise, clear, and easy to understand, which will reduce disputes, litigation, and provide greater tax certainty to taxpayers,” the finance ministry said in a statement.

Union Finance Minister Nirmala Sitharaman announced a review of the Act in her Budget speech earlier this year.

“It has been our endeavour to simplify taxation. We have taken a number of measures in the last few years including introduction of simplified tax regimes without exemptions and deductions for corporate tax and personal income tax,” she said.

“This has been appreciated by tax payers – 58% of corporate tax came from the simplified tax regime in financial year 2022-23. Similarly, as per data available till now for the last fiscal, more than two-thirds have availed the new personal income tax regime,” she added.

The ministry statement said: “Suggestions should specify the relevant provision of the Income-tax Act, 1961 or Income-tax Rules, 1962 (mentioning the specific section, sub-section, clause, rule, sub-rule or form number), as the case may be, to which the suggestion relates under the aforementioned four categories.”

Tax experts say the government’s initiative underpins transparency in tax policy making.

Sumit Singhania, a partner at Deloitte India, said: “Not only is this an unprecedented opportunity for businesses to participate in evolving tax legislation, which will govern them in future, it will also provide the policymakers with the adequate breadth in their formulation approach.
“The impending tax legislation will be an important pillar of India’s aspirational macro-economic future, and it is of utmost importance that the process deployed in developing this legislation is thorough, transparent and worthy.”

And Maneesh Bawa, a partner at Nangia Andersen India, said: “This crowd-sourced approach aims to address the practical challenges faced by taxpayers, accountants, and legal professionals, ensuring that their real-world experiences help shape the reforms.”

The government has suggested comments be directed at four key areas:

• Simplification of language – reducing complexity and making the Act easier to understand.
• Litigation reduction – identifying provisions that lead to disputes and offering solutions to minimise litigation.
• Compliance reduction – streamlining processes to reduce administrative burden on taxpayers.
• Redundant/obsolete provisions – highlighting outdated provisions that can be removed to modernise the law

573 tax appeals dismissed

India’s Supreme Court has disposed of 573 direct tax cases after the monetary limits for filing appeals were revised in the Budget, the finance ministry has confirmed.

The Union Budget 2024-25 provided for an enhanced monetary limit for filing appeals related to direct taxes, excise and service tax in the tax tribunals, high courts and the Supreme Court and the limits were increased to Rs 60 lakh (£55,000), Rs 2 crore (£183,000) and Rs 5 crore (£458,000) respectively.

The ministry said in a statement: “The Supreme Court [has] disposed of 573 direct tax cases where the tax effect is less than Rs 5 crore, in view of the revised monetary limit of filing of appeals.

“This significant milestone aligns with the government’s efforts to reduce tax litigation and promote ease of doing business,” it added.

It said as a result of these revised limits, it is estimated that about 4,341 cases will be withdrawn from various judicial forums over the course of time. This includes:

• Income Tax Appellate Tribunal (ITAT) – 717 cases
• High courts – 2,781 cases
• Supreme Court: 843 cases

Further, it is estimated that around 1,044 cases pertaining to specified legacy Central Excise & Service Tax cases are estimated to be withdrawn from various judicial forums. This include 253 cases in the Supreme Court, 539 in high courts and 252 in the Customs, Excise and Service Tax Appellate Tribunal (CESTAT).

“These measures on the Direct tax and Indirect tax front are expected to significantly reduce the burden of tax litigation and expedite the resolution of tax disputes,” the ministry added.