The SBI Research report has recommended a prompt review of the Income Tax Act, as announced in Budget 2024-25, to simplify and streamline the taxation process. The revised Act should be introduced as a money bill to ensure it can be passed within the stipulated 75 days, thus aligning it with economic growth and inclusivity.
One of the key recommendations is to raise the TDS threshold on bank interest payments from Rs 10,000 to at least Rs 100,000. Additionally, the report suggests allowing the annual issuance of TDS certificates (Form 16A) instead of quarterly, aligning it with Form 16 for salaries. It also proposes a flat tax rate for individuals earning over Rs 8 lakhs, especially for those aged 60 to 80, with additional provisions for individuals aged 80 and above.
The Central Board of Direct Taxes (CBDT) has formed an internal committee to oversee a comprehensive review of the Income-tax Act, 1961, with the aim of making it concise, clear, and easy to understand. The committee is seeking public inputs and suggestions in four areas: simplification of the Act, reducing litigation, streamlining compliance, and removal of redundant/obsolete provisions.
According to SBI Research, the increasing alignment with a progressive taxation regime has led to the contribution of direct taxes to total tax revenue reaching 56.7 per cent in the assessment year 2024, the highest in 14 years. The growth rate of Personal income tax (PIT) collections has been outpacing Corporate tax collections since 2020-21.
The Direct taxes to GDP ratio rose to 6.64% in AY24, the highest since 2000-01, indicating improving tax compliance. The number of ITRs filed in 2024 saw a significant increase, reaching 8.6 crore, with 6.89 crore filed on or before the due date. SBI Research predicts that the total number of ITRs filed for 2025 could exceed 9 crore by the end of March 2025.
While states like Maharashtra, Delhi, Gujarat, and Karnataka have traditionally led in income tax filings, they are nearing saturation, with states like UP, Bihar, AP, Punjab, and Rajasthan gaining in the incremental growth of filers.
