The committee has been given a six-month timeframe to complete the review, a timeline assured by CBDT Chairman Ravi Agrawal to Union Finance Minister.
The Central Board of Direct Taxes (CBDT) has established an internal committee to review and simplify the Income Tax Act of 1961 by removing obsolete clauses and adopting global best practices. CBDT chairman Ravi Agrawal made this announcement, emphasizing that the review aims to enhance taxpayer compliance and make the law more streamlined.
This internal committee, consisting of tax officials from across India, has already started identifying areas within the Income Tax Act that need improvement. The committee’s work is part of a comprehensive review mandated by the central government to update the law. Agrawal explained that the focus is on eliminating redundant clauses, known as ‘sunset’ provisions, while integrating international best practices to modernize the Act.
Speaking at an event marking 165 years of income tax in India, Agrawal shared that the committee is working on a “problem statement” outlined in the recent Union Budget. The goal is to devise a forward-looking approach to introduce a new and improved direct tax law.
The committee has been given a six-month timeframe to complete the review, a timeline assured by Agrawal to Union Finance Minister Nirmala Sitharaman. The minister, during the same event, highlighted the need for the Income Tax Department to use simpler language in its notices and communications with taxpayers. This simplification is also part of the ongoing review process, aiming to make tax compliance easier and less intimidating for taxpayers.
The Income Tax Act, 1961, with roots tracing back to 1922, currently comprises 298 sections and 23 chapters. During the presentation of the 2024-25 Union Budget, Sitharaman announced a “comprehensive” overhaul of the Income Tax Act. The objective is to make the law concise, easy to read, and more understandable, reducing litigation and providing certainty to taxpayers. This revision is expected to decrease the number of tax disputes and demands involved in legal battles.
Agrawal also assured that within the next 10-15 days, the CBDT will allocate more officers to expedite the clearance of the significant backlog of appeals pending at the Income Tax Department level.
This comprehensive review is a significant step towards modernizing India’s tax laws, making them more user-friendly, and ensuring smoother compliance for taxpayers across the country.
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