Panel Report on Income Tax Act Overhaul Expected by December

By: Admin | August 24, 2024 | Categories: TAX News | 4 Min Read

The finance ministry has established a five-member committee tasked with revamping the Income Tax Act of 1961. The committee, led by a Chief Commissioner of Income Tax, is expected to submit its report by December 2024, according to official sources.

Key Developments:

  • Committee Formation: The panel was formed following an announcement by Finance Minister Nirmala Sitharaman during the presentation of the FY25 Budget. The goal is to conduct a “comprehensive review” of the Income Tax Act to make it more concise, clear, and user-friendly.
  • Anticipated Amendments: After the report is submitted, the government aims to amend the Income Tax Act by February 2025, coinciding with the next Budget.

Expert Opinions:

Tax experts emphasize the need for simplification, citing the numerous amendments made to the Act since its inception. These changes have made the Act complex and prone to multiple interpretations, complicating its implementation.

  • Key Areas of Focus: Experts suggest that the revamped Act should simplify definitions and terms such as ‘Royalty’, ‘Income’, and ‘Liable to tax,’ especially in the context of cross-border transactions. Additionally, the committee may focus on rationalizing and consolidating various expense types under TDS provisions.
  • TDS Simplification: The Income Tax Act currently has 33 sections dealing with different types of payments with TDS rates ranging from 0.1% to 30%. Simplifying these provisions could reduce compliance burdens, minimize disputes, and streamline administration.
  • Digital and Global Considerations: With the expansion of digital economies, the revised Act may incorporate new elements related to territorial nexus, source-based taxation, and anti-tax evasion measures.

Conclusion:

The upcoming changes to the Income Tax Act are expected to simplify and modernize the legislation, making it easier to understand and implement. The overhaul aims to address long-standing issues while adapting to new economic realities.

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