No new tax. What more to expect from the income tax bill

In line with Prime Minister Narendra Modi’s guidance to the finance ministry to keep the Budget “pro-people” and “pro taxpayers”, the government announced a new income tax bill, overhauling the Income Tax Act, 1961. The bill is likely to be tabled in Parliament next week.

While the finance ministry has already assured that there won’t be any new tax in the upcoming bill, the Central Board of Direct Taxes (CBDT) has said that the new bill will go a long way in simplifying the old act in which redundancies have crept in. “Next week you will see a new tax bill. I assure you that there will be no new taxes in the bill,” said revenue secretary Tuhin Kanta Pandey during a post-Budget interaction at PHDCCI earlier this week.

According to the CBDT, the bill will, in a way, be a new direct tax code and will be a comprehensive document. “Over a period of time, a lot of redundancies have crept into the Income Tax Act, 1961. Old, obsolete provisions continue in the statute just due to continuity. Those are being removed. Language is also being simplified to bring more clarity to the taxpayer and minimise litigation,” said Ravi Agrawal, chairman, CBDT.

“To encourage the taxpayer towards compliance, we have to put in place a statute that is easy to understand. Substantial reduction of the current provisions will take place. So it is the new direct tax code in a sense. It will be one comprehensive document,” Agrawal added.

Experts are of the view that with the new tax bill, the tax system will get modernised. “The ongoing review of the Income-tax Act, 1961, seeks to modernise and simplify India's tax system in line with broader economic goals. It aims to enhance the ease of doing business, reduce ambiguity in interpretations, improve tax administration and compliance. This will help increase India's tax-GDP ratio to global levels and support sustainable economic growth,” said Sandeep Chaufla, Partner, PwC.

“The review will also foster a transparent and efficient tax system that attracts investments and advances the government's vision of a Viksit Bharat. The revised income tax law is expected to be clear, concise, consistent and supplemented with illustrative examples to aid understanding and interpretation by various stakeholders. It will also eliminate obsolete and redundant provisions,” said Chaufla.

In the Budget, finance minister Nirmala Sitharaman had emphasised on the “trust first” approach to taxation. “Over the past 10 years, our Government has implemented several reforms for convenience of taxpayers, such as (1) faceless assessment, (2) taxpayers charter, (3) faster returns, (4) almost 99% returns being on self-assessment, and (5) Vivad se Vishwas scheme. Continuing these efforts, I reaffirm the commitment of the tax department to “trust first, scrutinise later”. I also propose to introduce the new income-tax bill next week,” Sitharaman had said in the Budget speech.