ICAI Advocates Tax Benefits for Climate Change Mitigation in Pre-Budget Recommendations 2025
By: Admin
Date: January 4, 2025
Categories: ICAI | News
Reading Time: 4 Min
The Institute of Chartered Accountants of India (ICAI), the apex body for chartered accountants, has proposed a series of tax reforms in its Pre-Budget Memorandum 2025. These reforms aim to foster economic growth, simplify tax compliance, and promote environmental sustainability.
Key Focus on Climate Change Mitigation
One of the standout recommendations by ICAI is the provision of tax benefits for climate change mitigation strategies. The institute emphasizes that such measures will not only help India achieve its climate goals but also encourage businesses to adopt sustainable practices. Consequently, these reforms are expected to drive economic growth while addressing environmental challenges.
Proposed Tax Reforms
ICAI has put forth several key tax reforms to simplify compliance and promote economic development:
1. Separate Income Section for Shares and Securities
The institute recommends a dedicated section in income tax returns to report income from shares and securities, including dividends, interest, and capital gains.
2. Special Tax Regime for Partnerships and LLPs
ICAI has proposed a simplified taxation structure for partnership firms and limited liability partnerships (LLPs). This would reduce their tax burden and encourage ease of doing business.
3. Simplification of Income Tax Return Forms
To make the filing process more user-friendly, ICAI suggests introducing simplified income tax return forms.
4. Capital Gains Rationalization
The institute advocates for simplifying provisions under Sections 54 to 54F of the Income Tax Act. Additionally, it recommends extending the 10% tolerance band under Section 50C(2) for property transactions.
5. Improvements in E-Filing Processes
ICAI highlights the need to rationalize conditions for defective returns. Moreover, taxpayers should be given an opportunity to address issues before their returns are invalidated.
6. Streamlining Processes for Non-Residents
To ease compliance for non-residents, ICAI suggests that property transfers to residents require a CA-certified tax report instead of an assessing officer’s certificate. Furthermore, transferees in such cases should be exempt from obtaining a Tax Deduction and Collection Account Number (TAN).
Simplification of Tax Laws
In addition to the above, ICAI recommends measures to make tax laws more taxpayer-friendly:
- Special Tax Regime for Partnerships and LLPs: Simplified tax structures to reduce compliance burdens.
- Charitable Trusts: Easier registration and taxation processes for charitable trusts.
- Residential Status Provisions: Clearer guidelines to determine the residential status of taxpayers.
- Alignment of TDS/TCS Rates: Align rates with audit trail objectives to reduce discrepancies.
- Mandatory Time Limits for Appeals: Ensure appeal disposals occur within a set timeframe.
- Periodic Reviews: Assessing officers should periodically review pending cases to minimize delays.
- Grievance Redressal: An effective system to address taxpayer concerns.
- Extended Deadlines for Belated Returns: Allow taxpayers to file belated returns until March 31 of the assessment year.
Aligning Tax Policy with Climate and Economic Goals
ICAI’s recommendations underscore the need for tax reforms that simultaneously address economic and environmental priorities. By proposing tax incentives for climate change mitigation, the institute aims to align with India’s sustainability goals.
Furthermore, the focus on simplifying compliance and fostering ease of doing business reflects ICAI’s commitment to supporting both taxpayers and the broader economy.
