SBI Research, in a recent report, has advocated for a more expedited review of the Income Tax Act as outlined in the Budget 2024-25. The report suggests that the revised Act be introduced as a money bill to facilitate its passage within the mandated 75 days.

This initiative aims to not only simplify and streamline the taxation process but also to foster economic growth and inclusivity. Recommendations from the report include increasing the TDS threshold on bank interest payments from Rs 10,000 to a minimum of Rs 100,000.

Additionally, it proposes transitioning to an annual issuance of TDS certificates (Form 16A) instead of quarterly, aligning it with Form 16 for salaries. This adjustment stems from the primary use of Form 26AS for credit, along with implementing a flat tax rate for individuals earning over Rs 8 lakhs, particularly for those aged 60 to 80, with further provisions for those aged 80 and above.

Earlier this month, the Central Board of Direct Taxes (CBDT) established an internal committee to conduct a thorough review of the Income Tax Act of 1961, which was announced in the Union Budget 2024-25 by Finance Minister Nirmala Sitharaman. The objective is to make the Act more concise, clear, and user-friendly, ultimately diminishing disputes and litigation while enhancing tax certainty for taxpayers.

The committee seeks public contributions and suggestions in four key areas: simplifying the Act, reducing litigation, streamlining compliance, and eliminating outdated or redundant provisions. According to SBI Research, this strategy is designed to tackle the practical challenges encountered by taxpayers, accountants, and legal professionals, ensuring their real-world experiences contribute to shaping the reforms.

SBI Research emphasized the importance of stakeholder participation in the evolution of tax legislation that will govern their future. Furthermore, the report authored by SBI’s Group Chief Economic Adviser, Soumya Kanti Ghosh, noted that as the country increasingly aligns with a progressive taxation framework, the share of direct taxes in total tax revenue reached 56.7 percent in the assessment year 2024, up from 54.6 percent in 2023, marking the highest level in 14 years.

The growth rate of Personal Income Tax (PIT) collections has outpaced that of Corporate Tax (CIT) collections since 2020-21, with PIT rising by 6 percent compared to CIT’s 3 percent growth. The direct tax to GDP ratio improved to 6.64 percent in AY24, the highest since 2000-01, reinforcing the positive impact of enhanced tax compliance, as highlighted in the report.

The number of Income Tax Returns (ITRs) filed in 2024 experienced a remarkable increase, reaching 8.6 crore, compared to 7.3 crore in 2022, with 6.89 crore or 79 percent filed by the due date. SBI Research predicts that the total number of ITR filings for 2025 could exceed 9 crore by the end of March 2025. While states like Maharashtra, Delhi, Gujarat, and Karnataka, which have historically led in income tax filings, are approaching saturation, states such as UP, Bihar, Andhra Pradesh, Punjab, and Rajasthan are beginning to capture a larger share of the incremental growth in filers.