New income tax Bill to use formulas over definitions

Term 'tax year' to be introduced to specify year of earning income for which liability is computed

- Gireesh Chandra Prasad

The new Income Tax Bill, which is likely to be tabled in Parliament this week, will introduce the term 'tax year' to specify the year of earning income for which the tax liability is computed. The bill will also replace verbose definitions with formulas and simplify the tax statute, two persons familiar with the development said. Currently, the Income Tax Act refers to the year of earning taxable income as the "previous year" and the year when the tax return is filed as the "assessment year."

By dropping these terms, which are used multiple times throughout the Act, including in some cases within the same provision, the bill seeks to make the language simpler and the tax statute easier to comprehend. The new bill is also expected to use formulas rather than complicated definitions for various concepts like capital gains, cost of acquisition and inventory valuation.