The Institute of Chartered Accountants of India (ICAI) has proposed an extensive overhaul of the Income Tax Act, 1961, following its stakeholder consultation with the Ministry of Finance on September 18, 2024.
ICAI focused on the need for a clear and fair tax regime. Among its proposals are the elimination of complex “exclusions to exclusions” in provisions, exhaustive definitions of terms like “income” and “person,” and simplified criteria for determining residential status. It also called for integrating tax rates into either the Income Tax Act or a dedicated schedule, to avoid scattered references.
A critical component of ICAI’s recommendations is the deletion of redundant chapters, sections, and schedules. Examples include outdated provisions like Chapter XI on additional tax on undistributed profits, which became irrelevant after the Finance Act of 1987, and tax schedules linked to industries and schemes no longer in operation. Such revisions aim to make the law more concise and applicable.
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The ICAI underscored the need for simplified income tax return forms and streamlined compliance mechanisms. Proposals include reintroducing one-page SARAL forms, reducing mandatory fields, and embedding real-time tax calculation tools within forms. The ICAI also advocated for a unified process for PAN amendments and jurisdiction updates.
To address persistent litigation issues, the ICAI suggested codifying established legal principles and mandating adherence to binding court rulings. Furthermore, it called for time-bound processing of tax refunds, aligning with appellate orders, and standardizing audit report forms with legal provisions.
The ICAI recommended introducing social security for taxpayers by allocating a small percentage of taxes paid into individual pension schemes. Additionally, it called for multilingual support for taxpayer submissions and improving server capacities to ensure smooth filing processes during peak periods.
These comprehensive suggestions aim to modernize India’s tax framework, making it more accessible and equitable. The Ministry of Finance is expected to evaluate these proposals as part of its efforts to reform the tax system.
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