New Income-Tax Bill Likely To Be Unveiled On Feb. 6 — Profit Exclusive

The much-anticipated draft of the new Income Tax Bill is expected to be unveiled on February 6. The proposed bill aims to bring sweeping reforms to the current Income Tax Act and could potentially see up to 3 lakh words slashed from the near 6 lakh words at present.

According to the people in the know, the draft bill is likely to provide directions to widen the tax net, given the contraction in the tax base following the exemption limit being raised to Rs 12 lakh in the Budget from the existing Rs 7 lakh.

“Given that there are far more taxpayers at the bottom of the income pyramid than at the top, this adjustment (change in slabs and structure under new tax regime) could lead to revenue leakage.

The bill could suggest ways to bring in more taxpayers into the formal system and increase overall tax revenue, a source familiar with the matter told NDTV Profit.

The draft bill aims to significantly reduce the complexity of the existing Income Tax Act by cutting down roughly 3 lakh words. By doing so, the government hopes to make the law clearer and more concise, ensuring better compliance and fewer ambiguities, source explained.

The draft Bill will be sent to the parliamentary standing committee for review and recommendations.

It may also be made public to invite suggestions from stakeholders. "The aim is to consider all suggestions before finalizing the Bill and enacting it into law," said another source. He added that Implementation of the Bill may take longer.

CBDT Chairman Ravi Agarwal told NDTV Profit in a post-Budget interview that the Bill will include all the changes to direct taxes proposed in the Budget.

The Union Budget proposed slew of measure to ease compliance. For instance, it proposed to rationalizing Tax Deducted at Source or TDS and Tax Collected at Source or TCS rates.

This includes increasing the threshold for TCS on overseas remittances under the Liberalised Remittance Scheme or LRS has been increased from to 10 lakh from Rs 7 lakh now.

Additionally TCS may not apply to remittances made for educational expenses. This apart, Taxpayers can file updated return to rectify any omission and made in original tax statement. Even TDS on interest income for senior citizens has been also increased to Rs 1 lakh from earlier Rs 50,000.

The bill is expected to done away with redundant sections of the current Act, which have become outdated or irrelevant. Additionally, there will be an emphasis on improving litigation management, reducing the backlog of tax-related disputes and promoting quicker resolutions.

The comprehensive review of direct taxes promised by the finance minister in the July Budget. The internal committee tasked to review the direct tax laws completed the exercise in 6 months. Sources said that simplified version of tax laws will not affect the assessment of total income arising out of past investments even if no new investments can be made under those provisions.

However, it may have broad exceptions, of which the first is related to income in the current or subsequent years arising from past investments. The other two pertain to litigation, notices, and search.

According to officials in the know, any provision that may have an impact on the determination of total income in pending assessment proceedings will not be done away with. It will be assumed that proceedings related to assessment year 2012-13 onwards may still be pending in regular course.

The other provisions that will be spared from the review will be those with impact on initiation of proceedings in current year related to assessment year 2014-15 or later.

The new Income Tax Bill intent to simplify the language of the tax code, making it more understandable for taxpayers and professionals.