Direct tax code: As the government prepares to present the Union Budget for 2025 on February 1, the Central Board of Direct Taxes (CBDT) is working on a simplified version of the income tax laws. Sources have told that the ongoing comprehensive review of direct tax laws aims to ease legal hurdles and reduce the litigation burden for both the government and the industry.
“As part of the review, the revenue department is currently focusing only on easing the language and is not in favour of changing any tax rates,” sources added.
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Sources also stated, “the review of the existing Income Tax Act, 1961, is also going to ease certain penal provisions, which will reduce litigation along with improving overall litigation management as a key objective of this exercise.”
To conduct this review, the CBDT—the apex board responsible for the formation and implementation of income tax laws in the country, working under the aegis of the revenue department of the finance ministry—formed an internal panel currently undertaking a holistic review of the Income Tax Act, 1961.
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“The panel is considering providing clarity in provisions via simplified interpretations. It is also in favour of adding FAQs for absolute clarity in assessing provisions’ intent for both taxpayers and officers,” sources added.
However, “whether the review will be presented in the form of a new act or introduced through amendments is something the government has not yet decided,” sources said.
Additionally, sources indicated that “the review may result in major easing in the provisions of TDS, TCS, capital gains, and clarifications on issues like taxpayer classification and income sources.”
The government aims to present the findings and proposals from the direct tax laws review in the upcoming Budget 2025 in February.
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