After Loksabha Election 2024, now the Modi government is planning something big. At present, the Modi government has started preparing for the budget of 2025 on 1 February. In such a situation, the Central Board of Direct Taxes (CBDT) has very little time left to prepare a simplified version of income tax laws. Sources said the ongoing comprehensive review of direct tax laws is likely to focus on easing legal hurdles as well as reducing litigation burden for both the government and the industry. “As of now, as part of the review, the revenue department is only focusing on language simplification, and it is not in favor of any tweaking in tax rates,” the sources said.
What is the government going to do?
Sources also said that the review of the existing Income Tax Act, 1961, is also going to simplify some penalty provisions. Along with reducing litigation, the focus will also be on overall litigation management. The Central Board of Direct Taxes (CBDT), responsible for framing and implementing income tax laws in the country, is working for this review. For this, an internal panel was set up under the aegis of the Department of Revenue of the Finance Ministry, which is carrying out a comprehensive review of the Income Tax Act of 1961.
Ease of income tax officials too
“The panel is working on clarifying provisions of the law by making simple interpretations. It is believed that this will make it easier for taxpayers as well as income tax officials. “Whether the review will be presented as a new Act or will it be carried forward only through amendments is yet to be decided by the government,” he said.
Apart from this, sources indicated that “under the review, there may be major relaxation in the provisions of TDS, TCS, capital gains, issues like tax payer classification, and income sources can be better clarified.”
Lot of interest in people
Talking about the review, Grant Thornton Partner Direct Tax in India Akhil Chandna says, “India is expected to issue the new Direct Tax Code 2025 in the upcoming budget. This is a development about which people have a lot of curiosity and interest.
The purpose of this revised tax code is to simplify the existing tax structure, increase transparency, and simplify the provisions of the law for both individual taxpayers and businesses.
Its first goal is to reduce the complexity of tax laws, thereby curbing tax evasion and promoting compliance with the law. Some of the major changes to be introduced in the Direct Tax Code include simplifying the process of filing returns by reducing the number of sections and including more schedules, simplifying tax payer classification for residents and non-residents, doing away with categories like ROR and RNOR, Eliminate most deductions and exemptions to plug loopholes and create a fair tax system; expand the scope of deductions and collections at source (TDS/TCS) to cover almost all income types.
Tax on Capital Gains
Along with this, promoting regular tax payments and reducing tax evasion means taxing capital gains as regular income. This may increase taxes for some people, but it will ensure uniform tax treatment for all types of income.