Evaluation of India's Tax Reforms

The Income Tax Act, 1922, launched a specific title/name for several income tax authorities for the first time, laying the foundation for a proper system of administration.

The current Income Tax Act was enacted in 1961 and has been changed almost 65 times.

What is Goods and Services Tax (GST)?

GST is an indirect tax launched by the government on the supply of goods and services up to the final consumption level. It is a multi-stage, oriented tax imposed on every value addition, replacing multiple indirect taxes. Here’s how it works:

• It was launched in 2017 to replace a complex mix of state, central and local taxes with a single unified system.
• Businesses no longer need to contend with different tax rules across states, which makes it easy for interstate trade.
• GST helped reduce transport and warehousing costs by eliminating state-specific barriers.
• It helps in eliminating double taxation, which saves time and money for businesses and helps in increasing efficiency among all major industries.

Corporate Tax Rationalisation

Companies, no matter if domestic or foreign, must pay corporate tax on their income. Domestic companies are registered under the Indian Companies Act and have all their operations and management based in India. whereas Foreign Companies are those that are not registered under the Indian Companies Act and have their management and operations based abroad or elsewhere.

To pay corporate tax, the rate can differ between 20% and 40% depending on the companies’ particulars. The following are the key reforms:

• In 2019, India reduced corporate tax rates to 22% for domestic companies and 15% for new manufacturing ventures.
• It provides a competitive Benefit as these rates are now among the most attractive in Asia. which will help make India a strong choice for global businesses.
• It increases investment, as the move was widely welcomed by both domestic and international investors.
• It supports manufacturing because Lower taxes gave a major boost to the Make in India initiative, which eventually will help in India’s position as a global manufacturing hub.

Continuous modernization

Digitalisation of the taxation system reduces the unnecessary burden of paperwork and promotes the active use of digital devices and online mechanisms for tax collection and tax-related data. This is how it works:

• India has launched faceless assessment, online scrutiny, e-verification and digital appeals.
• This has reduced human interface, which is helping in minimising delays and has improved fairness.
• Businesses now complete tax processes faster and transparently.
• These reforms have increased investor confidence, especially among foreign and Multinational companies (MNCs).
• India is creating a more efficient, predictable and investor–friendly economy, especially among foreign and Multinational companies (MNCs).

New Income Tax Bill 2025

The new Income Tax Bill, 2025 was passed by the Indian Parliament and is expected to come into force from April 1, 2026. The main objective of this reform is to simplify and modernise India’s direct tax system.

Below are the breakdown of what the New Income Tax Bill 2025 involves:

• It is mainly designed to substitute the six-decade-old Income Tax Act of 1961, which had become complex and unwieldy due to multiple amendments and outdated provisions.
• The main goal of this is simplification and rationalisation of the tax law.
• The Bill aims to reduce uncertainty in the existing law, minimize tax disputes and litigation, and promote better tax compliance.
• The Bill supports India’s digital economy goals by merging digital assets and increasing transparency in tax reporting.

Why Tax Reforms Matter for Investment Growth

• Tax reforms help to make a country a better place for business. When the rules are clear and simple investors are attracted and help in the economy strengthens.
• Simplified tax structures have lowered barriers for both new and existing businesses.
• Companies now benefit from reduced logistics amounts and faster interstate operations by eliminating multiple layers of state and central taxes.
• Tax policies are now more predictable and transparent and these modern compliance systems, such as faceless assessments and digital appeals have reduced uncertainties and increased trust among investors.