The New Income Tax Bill, presented in Parliament on Thursday by Finance Minister Nirmala Sitharaman, calls for simplifying complex tax laws and their language so that taxpayers can understand the procedure with enhanced clarity and ease of compliance.
Simplification of provisions and structure
The existing Income Tax Act of 1961 had expanded to 47 chapters, 819 sections, 18 tables, and six formulae, making it difficult for taxpayers to navigate. Over time, the act had grown to 512,535 words, creating challenges in comprehension and compliance.
In contrast, the new bill significantly reduces the length and complexity of the law, with only 259,676 words, 23 chapters, 536 sections, 57 tables, and 46 formulae. By eliminating redundant provisions and restructuring the act, the new bill aims to create a more efficient tax regime that is easier to interpret and implement.
Focus on simplified language and readability
A key focus of the proposed legislation is to use simpler language to ensure better understanding and enhanced readability for both taxpayers and administrators. The bill removes duplications and unnecessary provisions while logically reorganising sections for greater clarity and ease of reference.
Provisions regarding salary and house property, for instance, have been significantly shortened, with redundancies eliminated and essential clauses retained. The word count for "Salaries" was reduced from 4,401 to 3,420, and for "Income from House Property," from 1,658 to 1,177. All related provisions for salary are now consolidated into one section, making it easier for taxpayers to file their returns.
Integration of provisions and reduced jargon
The new bill also integrates all existing provisos and explanations into the main provisions, eliminating legal jargon and clarifying terminology like "perquisite" and "standard deduction." These terms are now placed in separate sections to improve readability. The bill aims to simplify the tax language by reducing legal and technical jargon, ensuring a more accessible and user-friendly framework for taxpayers.
Minimal changes in salary and house property chapters
The ITD has emphasised that the objective behind the bill is not to overhaul the existing framework but to simplify it, ensuring continuity while improving clarity and efficiency. For areas like "Income from House Property," minimal changes have been proposed as the provisions are already considered clear and well-received by the public. Concepts like the annual value of house property and self-occupied property are widely accepted, with minimal disputes in their interpretation and computation.
Aiming for a tax-friendly environment
The bill is also designed to foster a tax-friendly environment by reducing disputes and improving compliance mechanisms. By providing clearer guidelines and well-structured provisions, it seeks to make the tax framework more predictable and competitive on a global scale. The government has invited stakeholder input to refine the bill further, ensuring that it effectively meets the evolving needs of taxpayers while promoting transparency and efficiency.