The Central Board of Direct Taxes (CBDT) Chairman, Ravi Agrawal, has assured that the comprehensive review of the Income Tax Act of 1961 will be completed within the designated six-month period.
![New, Reformed Income Tax Act In 6 Months, Assured CBDT Chairman](https://trak.in/stories/wp-content/uploads/2024/08/Untitled-design-19-2-1280x720-1-1024x576.jpeg)
This announcement follows Union Finance Minister Nirmala Sitharaman’s declaration in her Budget speech last month, where she emphasized the need to simplify the direct tax law to make it more accessible and user-friendly.
Purpose of the Review
The primary objective of this review is to make the Income Tax Act concise, lucid, and easy to understand. During an event marking the 165th Year of Income Tax in India, Agrawal highlighted the importance of this task, noting that it is a significant step toward reducing litigation and providing tax certainty to taxpayers. The review is being undertaken in a “mission mode,” with a strong commitment to completing the task within the stipulated timeframe.
Understanding the Income Tax Act of 1961
The Income Tax Act of 1961 is the foundation of India’s taxation system, governing the levy, administration, collection, and recovery of income tax across the country. The Act provides a comprehensive framework covering various aspects such as:
- Charge of Income Tax: Imposes a tax on the total income of individuals, companies, and other entities.
- Heads of Income: Classifies income into five heads: salaries, house property, business or profession, capital gains, and other sources.
- Tax Rates: Prescribes different tax rates for various income brackets and categories of taxpayers.
- Deductions and Exemptions: Allows certain deductions and exemptions to reduce taxable income.
- Assessment and Collection: Outlines the procedures for assessment, filing of returns, and collection of taxes.
- Penalties and Interest: Imposes penalties and interest for non-compliance with the Act.
Rationale Behind the Review
Over the years, the Income Tax Act has been amended multiple times to keep pace with economic, technological, and social changes. However, these amendments have also introduced complexities, leading to disputes and legal battles. The current review aims to address these issues by:
- Reducing Litigation and Disputes: By simplifying the Act, the government aims to minimize disputes and provide greater tax certainty to taxpayers.
- Ease of Compliance: The review seeks to streamline the tax filing process, making it more straightforward and efficient.
- Incorporating Global Best Practices: The government plans to modernize India’s tax system by integrating global best practices in taxation.
Conclusion
By making the Income Tax Act more user-friendly and efficient, the government aims to enhance tax compliance, increase revenue, and create a more conducive environment for businesses. The successful completion of this review within the specified timeframe is expected to bring significant improvements to India’s taxation framework.
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