The Finance Minister’s announcement of a review of the Indian Income-tax Act, 1961 aims to simplify the law, remove outdated sections, and clarify its language in the upcoming 2025-26 Union Budget. However, deeper structural issues in the law’s administration also need attention.
Key areas for reform include:
- Litigation mitigation: A robust framework for tax settlements is needed to address the rising tax litigation, especially for disputes reaching the Supreme Court. A permanent dispute resolution mechanism is essential.
- Uniform interpretation: Different interpretations of tax provisions by officers create inconsistencies. The CBDT should issue position papers for standardized interpretation to benefit taxpayers and tax authorities.
- Finality of SC judgments: The increasing trend of reviewing Supreme Court judgments is causing uncertainty, which needs to be curtailed.
- Mergers and acquisitions: Issues with capital gains calculation and grandfathering rules in mergers, demergers, and amalgamations create confusion and unfair tax outcomes. Simplifying these provisions is necessary.
Overall, the review should focus on minimizing litigation, ensuring uniform law interpretation, and addressing long-standing issues, thereby boosting compliance and taxpayer confidence in India’s business environment.