Union Budget 2025: Modi govt plans overhaul of Income Tax filing rules, report suggests
This development comes after years of efforts to modernise India's tax laws. In July 2024, Finance Minister Nirmala Sitharaman announced that a comprehensive review of the tax legislation would be completed within six months.
FollowThe central government is gearing up to simplify its income tax filing rules, aiming to make the process more user-friendly and reduce disputes that have accumulated to over $120 billion in the past decade. This long-awaited overhaul of the Income-tax Act of 1961 is expected to ease compliance for taxpayers while modernising the system.
According to various reports, the proposed changes are in the final stages of drafting and are expected to be released for public consultation by mid-January 2025. The revamped legislation will likely be included in the Union Budget 2025, scheduled to be presented in early February. These reforms are focused on simplifying language and rationalising information through formulas and tables, rather than altering tax rates or policies.
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This development comes after years of efforts to modernise India's tax laws. In July 2024, Finance Minister Nirmala Sitharaman announced that a comprehensive review of the tax legislation would be completed within six months. The primary goal is to reduce bureaucratic hurdles and boost compliance.
India's tax disputes have surged to Rs 10.5 trillion ($123 billion) as of the fiscal year ending March 2023. These disputes highlight the pressing need for a streamlined system to mitigate complexities and encourage smoother interactions between taxpayers and authorities.
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The new system promises a simpler and more transparent approach to tax filing. Key changes under discussion include:
- Replacing complex income computation structures with easy-to-use formulas.
- Standardising the definition of the tax year by replacing the existing distinction between the assessment year and the financial year.
- Introducing tabular formats for taxpayers in similar categories to enhance understanding.
- Reducing the number of supplementary forms required during tax filing and ensuring these are accessible online.
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