New Delhi, Feb 2 (PTI) – The Income-Tax Department's internal committee, tasked with reviewing the outdated direct tax law, has primarily received recommendations centered on simplifying language, restructuring provisions, and expanding the scope of schemes such as presumptive taxation, said CBDT Chairman Ravi Agrawal on Sunday.
In an exclusive post-Budget interview with PTI at his North Block office, Agrawal stated that the committee studied similar tax simplification initiatives in countries like the UK and Australia to guide its recommendations.
Finance Minister Nirmala Sitharaman had announced the comprehensive review of the Income-Tax Act, 1961, during her Budget speech last year. The review aimed to condense and clarify the bulky law—currently spanning 298 sections and 23 chapters—to reduce tax disputes, litigation, and enhance certainty for taxpayers.
Following this, an internal committee was established within the Income-Tax Department, inviting public suggestions across four key areas:
According to Agrawal, the feedback received predominantly focused on simplifying the Act’s language, improving the structural clarity of its provisions, and widening the applicability of presumptive taxation.
“So, these are some of the major suggestions we received. We also analyzed tax reforms in other countries such as the UK and Australia. Additionally, we took inputs from industry stakeholders and trade associations to incorporate the best possible recommendations,” Agrawal said.
“The new Act will remove redundant provisions from the 1961 law, eliminating sections that have already been phased out,” he added. However, he clarified that the fundamental structure remains intact, ensuring a smooth transition. Obligations from previous years will carry forward, leading to an overlap period between the old and new Acts.
As the new Income Tax Bill heads to Parliament, it is expected to usher in a simpler, clearer, and more efficient tax regime, aligning with global best practices while ensuring ease of compliance for Indian taxpayers.
In an exclusive post-Budget interview with PTI at his North Block office, Agrawal stated that the committee studied similar tax simplification initiatives in countries like the UK and Australia to guide its recommendations.
Finance Minister Nirmala Sitharaman had announced the comprehensive review of the Income-Tax Act, 1961, during her Budget speech last year. The review aimed to condense and clarify the bulky law—currently spanning 298 sections and 23 chapters—to reduce tax disputes, litigation, and enhance certainty for taxpayers.
Following this, an internal committee was established within the Income-Tax Department, inviting public suggestions across four key areas:
- Simplification of language
- Reduction of litigation
- Easing compliance
- Eliminating obsolete provisions
New Income Tax Bill Set for Introduction
In her Budget speech for FY 2025-26 on Saturday, Sitharaman announced that the government will introduce a new Income Tax Bill in Parliament this week, replacing the 1961 Act.According to Agrawal, the feedback received predominantly focused on simplifying the Act’s language, improving the structural clarity of its provisions, and widening the applicability of presumptive taxation.
“So, these are some of the major suggestions we received. We also analyzed tax reforms in other countries such as the UK and Australia. Additionally, we took inputs from industry stakeholders and trade associations to incorporate the best possible recommendations,” Agrawal said.
Focus on Expanding Presumptive Taxation
The presumptive taxation scheme is designed to ease compliance for small taxpayers by allowing them to declare income at a pre-set rate, thereby exempting them from maintaining extensive books of accounts for audits.Structural Overhaul Without Fundamental Change
Agrawal emphasized that the new tax law aims to be more presentable and user-friendly, ensuring that taxpayers can navigate its provisions more easily.“The new Act will remove redundant provisions from the 1961 law, eliminating sections that have already been phased out,” he added. However, he clarified that the fundamental structure remains intact, ensuring a smooth transition. Obligations from previous years will carry forward, leading to an overlap period between the old and new Acts.
A PRUDENT Approach to Tax Administration
Agrawal also introduced the PRUDENT approach—an acronym defining the future vision of the tax department:- P – Proactive
- R – Responsive, ensuring rule-based processes without ambiguity
- U – User-friendly
- D – Data-driven
- E – Enabling environment for taxpayers
- N – Non-intrusive administration
- T – Technology and transparency-driven
As the new Income Tax Bill heads to Parliament, it is expected to usher in a simpler, clearer, and more efficient tax regime, aligning with global best practices while ensuring ease of compliance for Indian taxpayers.
