Deepak Dwivedi
THE Government has been focusing relentlessly on its ambitious Viksit Bharat vision, aiming to transform India into a fully developed and self-reliant nation by 2047. The Union Budget 2025 has rightly placed significant taxation reforms at the forefront of this vision, effectively balancing the crucial objectives of consumption, investment, innovation, and employment. The Income Tax Bill, 2025, represents yet another step towards simplifying and modernising India’s tax laws. It judiciously avoids sweeping policy changes and maintains tax rate structures, ensuring much-needed consistency and coherence. It attempts to clarify and simplify the language, which would improve compliance rates and reduce the time and resources spent by both taxpayers and the Government. This echoes simplification efforts seen in countries like the US, Australia, and Canada, where streamlined tax processes have led to greater efficiency and compliance.
The consolidation of provisions related to non-residents and foreign companies offers the much-needed ease of reference. Instead of navigating a scattered landscape of legislation, foreign entities now have a single, accessible point of reference. The proposed changes to transfer pricing provisions, allowing block assessment, represent another milestone in easing compliance for foreign firms. The definition of ‘resident’ has been made more precise and unambiguous. Scattered provisions related to salary income have been consolidated, simplifying matters for the vast majority of taxpayers. All this will greatly improve transparency and understanding. The rules governing depreciation, particularly the calculation of ‘actual cost’, have also been streamlined and made more pointed. A clear delineation of the assessment process has demystified complex limitation provisions in the current Act. Lastly, consolidation of tax deducted at source (TDS) provisions and rate rationalisation thresholds, are all welcome. Whether it’s the Finance Bill, 2025, or the new Income Tax Bill, the detailed FAQs provided by the IT Department represent a welcome departure from past practice.
The Bill represents a significant step towards a more effective and equitable income tax system, creating a solid base for improvements. It offers a strong foundation upon which we can build greater efficiency and fairness. While the Bill is commendable, a few key enhancements could further streamline its provisions and amplify its positive impact. Incorporating the Budget announcement of expansion of the safe harbour regime and expediting dispute resolution would be highly beneficial. Further simplifying TDS provisions would greatly ease compliance burdens. Finally, to fully realise the FM’s vision of ‘nyaya’ (justice), rationalising penalties and prosecution provisions is essential. The promising progress made in this direction with TDS provisions can serve as a model for expanding the approach to other areas of the Bill, ultimately creating a truly fair, efficient, and just tax system.
The Finance Minister has announced that the Income tax Bill, 2025, will be reviewed by the Parliamentary Standing Committee on Finance. The consultative approach will ensure a thorough feedback process, incorporating inputs from industry experts, tax professionals, and the public before the Bill’s proposed implementation on April 1, 2026. This is a hallmark of good governance and is practised in various forms in many countries when significant tax reforms are undertaken. We are confident the Government will favourably consider legitimate stakeholder suggestions from the public consultation, laying strong foundation for a tax system that fosters compliance while at the same time promotes economic growth and investment.
