In a landmark move, Finance Minister Nirmala Sitharaman has announced a comprehensive review of the Income Tax Act of 1961 as part of the Budget proposals for 2024-25.
The initiative aims to streamline and simplify the existing tax laws to enhance clarity, reduce disputes, and provide greater certainty for taxpayers.
Addressing the nation during her Budget speech, Sitharaman emphasized the need for a more concise and user-friendly Income Tax Act.
“We are embarking on a comprehensive review of the Income-tax Act, 1961. The objective is to make the Act more concise, lucid, and easier to read and understand. This will significantly reduce disputes and litigation, providing much-needed tax certainty to taxpayers,” she stated.
The government will complete the review process within six months.
The Finance Minister outlined several key changes to be initiated through the Finance Bill.
These changes simplify the tax regime for charities, restructure TDS rates, revise reassessment and search provisions, and streamline capital gains taxation.
One of the significant proposals is the unification of the two existing tax exemption regimes for charities into a single framework.
Additionally, the TDS rate structure will change significantly, reducing the 5% TDS rate on many payments to 2% and abolishing the 20% TDS rate on the repurchase of mutual fund or UTI units.
E-commerce operators will also benefit from a reduced TDS rate, dropping from 1% to 0.1%.
Sitharaman also announced several other reforms aimed at easing compliance and reducing the burden on taxpayers.
She explained that the government will credit TCS in the TDS deducted from salaries. Additionally, it will decriminalize delays in TDS payment up to the due date of filing statements. Sitharaman further added that a standard operating procedure for TDS defaults will be provided, and the compounding guidelines for such defaults will be simplified and rationalized.
Towards A More Efficient Tax System
These proposed changes mark the beginning of a broader effort to create a more efficient and taxpayer-friendly income tax system in India.
The Finance Minister’s commitment to reviewing and reforming the Income Tax Act underscores the government’s dedication to fostering a more transparent and predictable tax environment, ultimately benefiting both taxpayers and the economy.
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