The Central Board of Direct Taxes (CBDT) has recently formed a committee to review the Income Tax Act of 1961. This internal committee, comprised of income tax officials from across the country, has been tasked with identifying areas of improvement in the existing law to simplify it for taxpayers and enhance compliance. The goal is to eliminate redundant clauses, adopt best global practices, and streamline the tax law for better efficiency.
CBDT chief Ravi Agrawal has emphasized the importance of this comprehensive review, stating that the committee is working diligently to identify outdated provisions and cut down on unnecessary complexities in the Income Tax Act. By studying global practices and identifying areas for improvement, the committee aims to create a more user-friendly and transparent tax system that promotes compliance among taxpayers.
During a recent event marking 165 years of income tax in India, Agrawal assured Finance Minister Nirmala Sitharaman that the review process will be completed within the stipulated timeframe of six months, as announced in the recent Budget. Sitharaman has emphasized the need for simplifying tax communication to make it more accessible and understandable for taxpayers, thereby reducing disputes and litigation.
The Income Tax Act of 1961, which currently consists of 298 sections and 23 chapters, has been in existence since 1922. The proposed review aims to make the Act concise, lucid, and easy to comprehend, thereby providing tax certainty to taxpayers and reducing the burden of litigation. By streamlining the tax law and making it more user-friendly, the government hopes to encourage compliance and enhance the overall efficiency of the tax system.
In addition to the review of the Income Tax Act, the CBDT has also announced plans to increase the number of officers to expedite the clearance of pending appeals at the Income Tax Department level. This move is aimed at addressing the substantial backlog of appeals and ensuring timely resolution of tax-related issues.
Overall, the comprehensive review of the Income Tax Act represents a significant step towards modernizing India’s tax system and making it more efficient and user-friendly. By adopting best global practices, eliminating redundancies, and simplifying tax communication, the government aims to create a more transparent and compliant tax environment that benefits both taxpayers and the economy as a whole.