Government plans to propose a New Income Tax Bill during Budget Session

Finance Minister Nirmala Sitharaman is expected to propose a bill for a new direct tax law during the budget session, with a focus on simplifying rules, eliminating redundant ones, and attempting to make the language more layman-friendly.

The committee tasked with the changes and is discussing whether the new law to replace the 63-year-old Income Tax Act would be in two, if not three parts, according to sources.

Although the government had stated that the draft law by the panel of officers would be released for public comment, it has decided to send a strong message at a time when it is under fire for complex tax laws by introducing the bill, which can then be tweaked based on feedback from taxpayers and experts.

As a result, officials from the finance ministry and the PMO have worked closely with the panel over the last six to eight weeks to ensure that the budget is ready by the time it is presented.

Sitharaman, who announced the plan in the July Budget, is anticipated to reference the legislation in her speech on February 1, but it is unclear if the law will be introduced in the first or second part of the session.

This is at least the third attempt to amend the Income Tax Act since the Direct Tax Code bill was tabled in Parliament in 2010. As a result, the Modi government formed an expert panel, the reports of which were not made public, and the recommendations were mostly ignored.

The committee has been urged to guarantee that “provisos” in law, which number in the hundreds, are deleted from new legislation.

Similarly, numerous sections are being omitted because they have become redundant as those clauses have been removed from the IT Act over time. “The language itself can be difficult to understand for the common man and the committee has been asked to make it as simple as possible,” according to an source.

However, the government is not yet including new issues in the proposed legislation. Officials warned, however, that a change in language may lead to litigation because taxpayers would desire a new interpretation in some circumstances.