Finance Ministry Unlikely to Introduce New Income-Tax Bill in Budget Session
The Finance Ministry is unlikely to present the much-anticipated New Income-Tax Bill during the upcoming Budget session of Parliament. Although the internal committee, led by Chief Income-Tax Commissioner V.K. Gupta, is expected to submit its report before the FY26 Budget, drafting and enacting the legislation will require additional time.
Key Developments
1. Progress of the Review Committee
The V.K. Gupta Committee is conducting a thorough review of the existing Income-Tax Act, incorporating recommendations from both experts and stakeholders.
Once the committee finalizes its report, the Finance Ministry, in collaboration with the Law Ministry, will begin drafting the new legislation.
2. Legislative Process
After drafting, the proposed bill will undergo scrutiny by the Standing Committee on Finance. This critical step ensures thorough consultation and refinement, addressing any potential issues before the bill reaches Parliament.
3. Finance Minister’s Announcement
During the FY25 Budget speech, Finance Minister Nirmala Sitharaman underscored the importance of simplifying the Income-Tax Act. Her vision focuses on creating a concise and easy-to-understand framework, reducing litigation, and streamlining compliance for taxpayers.
Proposed Key Reforms
1. Simplification of TDS/TCS
The current system, governed by 71 sections on Tax Deduction at Source (TDS) and Tax Collection at Source (TCS), is highly complex. To address this, the committee proposes replacing these sections with a single, comprehensive Schedule of Rates, akin to the Customs Tariff Act. This reform aims to enhance transparency and minimize disputes.
2. Streamlining Penalty Provisions
Currently, penalty provisions are scattered across 45 sections, leading to confusion and inconsistencies. The proposed reform seeks to consolidate these provisions into 2-3 sections, thereby simplifying enforcement and reducing legal disputes.
3. Eliminating Redundant Procedures
Advancements such as Form 26AS have rendered certain procedures, like issuing TDS certificates, obsolete. Eliminating these redundant requirements will significantly reduce compliance burdens for tax deductors.
4. Public Consultation
Before the draft legislation is presented in Parliament, the government will initiate a comprehensive public consultation process. This step ensures that stakeholder input is considered and incorporated into the final draft.
Impact of Reforms
Reduced Complexity
Simplified provisions will make the tax framework more accessible for both taxpayers and professionals.
Lower Litigation
A streamlined and clear structure will address ambiguities, significantly reducing the likelihood of disputes.
Improved Efficiency
Consolidated sections and the adoption of digital processes will enhance administrative efficiency, benefiting both taxpayers and the government.
Conclusion
While the comprehensive reform of the Income-Tax Act is a crucial step toward modernizing India’s tax framework, the meticulous review and consultation process suggest that the new law may not be ready for introduction during the FY26 Budget session. This careful approach, however, ensures that the reforms are robust, effective, and aligned with the needs of all stakeholders.
