Updates on suggestion for Income Tax Act Revamp (Comprehensive Review) from 1st February 2025 as announced by the Union Finance Minister in The Budget (No.2) in 2024. Merging Provisions, Explanations & Illustrations in the Act; Inculcate provisions for increasing accountability of officers & Introducing Ease of Compliance

[Vivek Jalan]

A. Building in Provisions & Explanations in the Act and inculcating Illustrations – Today each Section and Rule of The Income Tax Act is flooded with Provisions and explanations. Then there are circulars as well as notifications, some of which are so old that it is even difficult to find them publicly. This makes reading the Income Tax Act complex.
Even incase one reads the Act and Rules successfully, due to multiplicity of Provisions, explanations, circulars and notifications, interpretation gets into litigation.

It is recommended that all Provisions, explanations, circulars and notifications related to a Section or Rule be merged with the Section or Rule.

 Further, Illustrations may be added in the Section or Rule itself so that litigation due to interpretation can be reduced

B. Inculcate provisions for increasing accountability of officers Increased Accountability of Tax Officials for passing orders in time - Implement accountability measures for tax officers for passing orders in time, ie rectification orders / appeal effect orders and appeal orders. For Example - Sec 154(8) stipulates that the IT Authority shall pass an order (either by rectifying the original order or denying the said application) within 6 months of application filed. However, it is seen that in ground reality the JAO is not passing the order within the stipulated timeline and the assessee has to file multiple applications. Holding officers accountable will improve tax administration efficiency and close litigation in a time bound manner. This maybe built into the Act itself as it will inculcate more confidence in the citizens also to make Income Tax Dept. more efficient. For Eg. Suitable provision may be introduced so that JAO is bound to dispose off the rectification petition within the prescribed timeline. If the JAO does not do so, application u/s 154 would be deemed to be allowed and the JAO should be bound to rectify the mistake.

C. Introducing Ease of Compliance - The revamping should be designed in a way that makes compliance way more simpler for both individuals and businesses operating in India.

1. Common Income Tax Return (ITR) Form – Many disputes happen due to multiple ITR Forms and taxpayers make a mistake in filing the correct form. A case in point is the fact that many taxpayers who have Foreign Assets have filed ITR-1 or ITR-4 whereas they should have filed ITR-2 or ITR-3. Hence they have skipped filing the Foreign Exchange Assets/ Income Schedule. Common ITR Form Would eliminate this confusion. There may be a question that it may make the form big, however it may be divided into various sections and sections not applicable to a taxpayer may not at all be attempted. This would make the filing simpler.

2. With different deadlines for filing income tax returns, TDS return, tax audit, transfer pricing etc, there are chances of missing the dates, leading to penalties. Unification of dates should be done to the best extent possible for all assesses.