Chandigarh, January 10, 2025 (Punjab Khabarnama Bureau): Filing Income Tax Returns (ITR) may become much easier for taxpayers in the coming days. The central government is preparing to simplify income tax return filing rules significantly. The government is concerned about the rising tax disputes and nearly $120 billion in unresolved tax cases.
The Central Board of Direct Taxes (CBDT) has formed an internal committee to review the Income Tax Act of 1961. A draft report will be released for public consultation. Additionally, the government is considering reducing the number of forms to simplify the tax return filing process. The Finance Ministry has assured efforts to ease bureaucratic burdens on taxpayers and ensure better compliance.
According to a Bloomberg report, the Central Board of Direct Taxes (CBDT) committee is actively discussing the proposed review of the Income Tax Act of 1961. A draft report is expected to be released for public consultation by mid-January 2025. Sources familiar with the matter, speaking on condition of anonymity, revealed that the information has not yet been made public. The government may introduce the proposed bill in the Budget to be presented on February 1, 2025.
The government is working to simplify the language of the Income Tax Act and streamline information related to formulas and tables, according to a report. However, there will be no mention of tax rates or policies in the proposed changes. This initiative stems from the government’s concern over the growing number of tax disputes.
India has been modernizing its tax laws for decades to reduce bureaucratic burdens on taxpayers and improve compliance. Despite these efforts, the amount involved in tax disputes has doubled to ₹10.5 lakh crore ($123 billion). During the Union Budget presentation for FY 2024-25 in July, Finance Minister Nirmala Sitharaman announced a comprehensive review of tax laws within six months, aiming to make them more taxpayer-friendly.
The government is considering changes to the Income Tax Act, including replacing the term “Assessment Year” with “Tax Year.” This will simplify complex income computation structures and define financial and assessment years as “Tax Year.” The new system will present information in a tabular format for easier understanding, and the number of additional forms required for filing tax returns will be reduced.
A key change is that taxpayers will no longer need a Chartered Accountant (CA) for filing returns. Previously, on Income Tax Day, the Finance Minister advised officials to engage with taxpayers in a face-less, impartial, and friendly manner. The Minister also emphasized simplifying the language of notices sent by the tax department, making them non-technical, so that taxpayers could easily understand them and wouldn’t need lawyers to respond.
Summary: The government plans to simplify tax laws by replacing “Assessment Year” with “Tax Year,” reducing forms, and eliminating the need for CAs in filing returns.