The Ministry of Finance is planning to introduce a new Income Tax Act aimed at simplifying the tax system in India, sources told. The new tax framework is expected to replace the existing act, which has been in place since 1961, with the goal of making the tax process more straightforward for individuals and businesses.
An official announcement regarding this new tax law is likely to be made during the Union Budget 2025, scheduled for February.
The government is keen on making the tax regime more user-friendly by reducing the complexity of the current system.
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Aim to simplify existing tax system
The Finance Ministry is working towards simplifying the Income Tax Act by eliminating redundant sections and subsections.
“KISS – Keep It Simple Stupid, that’s the motto the Finance Ministry has been following nowadays. The government’s aim is to simplify the tax regime and the process and around 125 sections and subsections are likely to be abolished,” sources told.
The purpose of this is to make the tax filing process as easy as possible, reducing the burden of compliance on taxpayers.
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One key aspect of the reform is to remove outdated provisions that no longer serve a purpose in today’s economic environment. According to sources, the revamp will focus on reducing paperwork and streamlining procedures.
The Finance Ministry has been actively seeking feedback from tax experts, businesses, and taxpayers.
In these consultations, there has been an overwhelming call to make the tax filing process simpler and less time-consuming. Reducing compliance burdens has been a common theme in these discussions.
The ministry has been reviewing the current provisions of the tax code and is expected to finalise the new Income Tax Act in the coming months.
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Key changes expected
The new Income Tax Act will introduce changes in various areas, including expenditures, investments, assets, liabilities, and sources of income.
The government is also expected to provide clearer guidelines on how income is to be reported, which will help reduce confusion and errors in tax filings.
While the details of the new provisions are still being worked out, the focus remains on simplifying the tax code while ensuring that it remains robust and effective in generating revenue for the government.
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History of income tax in India
The current Income Tax Act, which was introduced in 1961, has been the foundation of India’s tax system for over six decades. It came into effect on April 1, 1962, and applies to the whole of India.
Despite several amendments over the years, the act has become increasingly complex, prompting calls for a comprehensive overhaul.
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