Income Tax Act Review Put On Fast-Track With January Deadline — Exclusive

The revenue department in the Finance Ministry is seeking to fast-track the comprehensive review of the Income-Tax Act 1961, as it aims to complete it by January, ahead of the Union Budget in the following month, officials privy to the discussion said.

The committee, led by Chief Commissioner V K Gupta, is undergoing extensive deliberations on issues and challenges of the decades-old I-T Act in order to make it simpler and more concise.

The panel is looking into rationalising exemptions and deductions, removing duplications, bringing computation methods in line with international standards and further streamlining the tax appeals process.

"Up to 120 sections, sub-sections and clauses are expected to be scrapped from the existing I-T Act, 1961, an official cited above told NDTV Profit.

Sections are especially in the area of exemptions or deductions in telecom, special economic zones and capital gains, he said.

The panel could propose a separate annexure for old clauses for referral purposes in pending cases at various judicial forums across the country.

On whether the direct tax code (DTC) will be introduced, the official said that it is unlikely and the focus will be on simplifying the current Act.

"The exercise is ongoing. It is not yet decided whether there will be a fresh draft that will replace the existing Act or whether we will revise the Act by bringing in amendments, the official underlined.

On DTC, particularly, he said that the draft report was submitted in August 2019, and since then there have been lots of changes introduced in the Act, which requires a fresh perspective.

In 2017, the NDA government set up an expert panel to review the I-T Act and draft a code suggesting a revamp in the direct tax laws. The task force has submitted the report suggesting several major changes in the Act.

Meanwhile, the panel may also seek Law Ministry assistance in drafting the simplified Act, they said.

The Finance Minister Nirmala Sitharaman announced modifications to the I-T Act in the July 2024 Budget to reduce disputes and make the act simple and concise.

The Central Board of Direct Taxes chairman Ravi Agrawal earlier said that the committee is looking at the best global practices that can be adopted. It is also looking at cutting redundancies in the existing law and finding and eliminating those clauses that have reached their sunset.

The committee is looking at the "problem statement" given to it in the recent budget, Agrawal told PTI. It is trying to find the "best way forward" in giving the country a new direct tax law, he said.

The Income Tax Act, 1961, started its journey in 1922. It contains 298 sections, 23 chapters and other provisions in its current form of 1961.

The Union government will have the tax code of the Tax Act, or at least some parts of it, written in simple and easy-to-understand language, Sitharaman said earlier.

"This Budget 2024–25 has made very clear statements that there shall be four major objectives that we would like to achieve: simplifying tax, improving taxpayers' services, providing tax certainty and reducing litigation," she said.