Tax Reforms: What's In Store?

The government is working on reforming the existing Income-tax Act, 1961. The impending reforms have raised many questions in the minds of taxpayers. Will the old regime and deductions be done away with? Will it really simplify your life? What's the need for these reforms? We try to answer these and other questions regarding tax reforms

- Meghna Maiti

Among the most significant announcements in Union Minister of Finance Nirmala Sitharaman’s Budget Speech in July 2024 was the proposal to undertake a comprehensive review of the Income-tax Act, 1961.

In her Budget Speech, she said: “The purpose is to make the Act concise, lucid, easy to read and understand. This will reduce disputes and litigation, thereby providing tax certainty to the taxpayers. It will also bring down the demand embroiled in litigation. It is proposed to be completed in six months.”

Sitharaman further said that the changes proposed in the Budget were like a precursor to this overall review. Budget 2024 simplified the tax regime for charities, the tax deducted at source (TDS) rate structure, provisions for reassessment and search provisions, along with rules on taxation of capital gains.

The Union Ministry of Finance has also formed a panel headed by chief commissioner of income tax V.K. Gupta to review the provisions.

The review of the tax law has been long pending. It is not the first time that the government has initiated tax reforms in recent decades.

The Direct Tax Code (DTC), which was proposed in 2009, promised to undertake similar reforms. After roughly a decade-and-a-half, tax reforms may finally see the light of the day.

The questions now on taxpayers’ minds are: Will their lives be really simplified with the reformed law? Will the simplification mean easier income tax return (ITR) filing, more tax relief, lesser disputes? Will the law be completely overhauled or only bits of tinkering is to be expected?