Sitharaman tables Income Tax Bill in Lok Sabha, seeks review by house committee make unique title from original.

Sitharaman moved a motion to authorize the speaker of the house to set up a select committee of the Lok Sabha to review the bill. “The committee shall make a report by the first day of the next session,” she proposed.

The bill makes significant changes in the way the direct tax statute is written and presented, giving priority to simplicity, ease of understanding and reduction in litigation arising from complexity, in stark contrast to the existing law that is notorious for long-winding sentences with cross references and multiple conditions and sub-clauses.

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The Central Board of Direct Taxes (CBDT), the apex direct tax policy-making body, said the sections dealing with income from salary and house property have been specifically crafted for clarity and ease of compliance so that the taxpayer can on his own read those chapters and file his own tax return, implying that a chartered accountant’s help may not be required.

Terms like ‘perquisite’ have been rewritten in a more structured and clear manner, the tax authority said. Some of the provisions have been taken to the rules, and redundant and repetitive provisions have been removed for better readability.

The presumptive taxation provision for residents and non-residents has been merged for those with income from business or profession, while more formulas have been introduced for previously difficult-to-understand terms such as written-down value of depreciable assets. Schemes that have expired have been removed from the statute, norms applying to small segments of businesses have been moved to schedules, and some procedures shifted to rules to reduce complexity and to focus on the substance of the section.

The bill also revamps provisions relating to non-profit organizations, which enjoy tax exemptions on account of charitable and other purposes meeting social causes. The existing law uses different terms such as trust, institution, university, educational institution and hospital in different provisions. The new bill instead uses a common term ‘registered non-profit organisation’ in line with the international practices.

The CBDT said the bill contains 536 sections compared to 819 effective sections in the current law, many of which are numbered alphanumerically. The bill is written in about 259,000 words, half the volume of the existing law, but uses more formulas for better understanding and clarity.

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Sitharaman explained to the house that these are “not mechanical, but substantial changes,” given that the number of words has come down by half, along with reduction in sections and chapters.

Experts called the rewriting of the law a welcome initiative, and said that as a subsequent step, the government could consider simplifying substantive provisions of the law as well, for example, provisions relating to tax residence.

“The bill marks a significant step towards a simpler tax system. By cutting down on sections and words, it aims to make the tax code more straightforward and user-friendly,” said Sameer Gupta, national tax leader, EY India.

The introduction of a ‘tax year’ concept in place of ‘previous year’ removes confusion around tax periods, encouraging easier compliance, said Gupta. “This bill goes beyond its simplification objectives; it’s a commitment to a transparent and efficient approach to taxation, designed to support the taxpayer and contribute to steady economic growth,” he added.

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The bill refines the existing provisions by restructuring and simplifying the language while retaining the core principles, said Akhil Chandna, partner and global people solutions leader at Grant Thornton Bharat.

The income tax bill is a key element of the reforms Sitharaman announced in her budget speech on 1 February. Tabling it in the current session of parliament signals the government’s intent to make a “soft touch” regulatory framework. The new bill sets in motion the reforms that the Modi administration believes will improve the business climate and promote investments.