CBDT Chairman Ravi Agrawal stated on Wednesday that the review of the Income Tax Act of 1961 is set to be completed within the designated six-month timeframe.
Union Finance Minister Nirmala Sitharaman, in her Budget speech last month, announced that the direct tax law of the country would be reviewed to make it simple, and the job would be completed in six months.
“We have an important task on hand, and that is the comprehensive review of the Income Tax Act, 1961. The purpose is to make the Act concise, lucid, and easy to read and understand. This exercise is aimed to reduce litigation and provide tax certainty to taxpayers,” Agrawal said during an event held here to mark the 165th Year of Income Tax in India.
The work, though challenging, was transformative, and “we have taken the assignment in a mission mode”, the Central Board of Direct Taxes (CBDT) chief said.
He assured that the task would be completed in the given timeframe.
What Is the Income Tax Act of 1961?
The Income Tax Act of 1961 is the cornerstone of India’s taxation system. It outlines the rules, regulations, and procedures governing the levy, administration, collection, and recovery of income tax in the country. The Act provides a comprehensive framework for taxation, covering various aspects such as:
- Charge of income tax: The Act imposes a tax on the total income of individuals, companies, and other entities.
- Heads of income: Income is classified into five heads: salaries, house property, business or profession, capital gains, and other sources.
- Tax rates: The Act prescribes different tax rates for different income brackets and categories of taxpayers.
- Deductions and exemptions: Certain deductions and exemptions are allowed to reduce taxable income.
- Assessment and collection: The Act outlines the procedures for assessment, filing of returns, and collection of taxes.
- Penalties and interest: Penalties and interest are imposed for non-compliance with the Act.
Why the Income Tax Act Is Being Reviewed?
The Income Tax Act has undergone several amendments over the years to keep pace with changes in the economy, technology, and social conditions. These amendments have introduced new provisions, revised existing ones, and simplified the tax administration process.
The review aims to address several key issues, including;
- Litigation and Disputes: The complexity often leads to disputes and lengthy legal battles. By streamlining the Act, the government hopes to reduce litigation and provide greater tax certainty to taxpayers.
- Ease of Compliance: The review aims to make the tax filing process more straightforward and efficient for taxpayers.
- Global Best Practices: The government intends to incorporate global best practices in taxation to modernize the Indian tax system.
By making the Income Tax Act more user-friendly and efficient, the government expects to improve tax compliance, increase tax revenue, and foster a more conducive business environment.
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