However, keeping in mind the ever-changing global and economic landscape, the New Bill is expected to be clear and direct in text with close to half of the present law, in terms of both chapters and words. It is intended to be simple to understand for both, taxpayers and tax administration, which in turn will lead to tax certainty thereby reducing the impending litigation.
‘Simplification of language’, ‘litigation reduction’, ‘redundant/ obsolete provisions’, and ‘compliance reductions’ seem to be the foundation blocks of the New Bill. The government’s efforts to codify the income-tax laws from the lenses of ‘justice – Nyaya’ rather than ‘punishment – Danda’ is also well founded and will go a long way in building trust of the taxpayers.
As groundwork, suggestions were sought from the public on the existing laws and over 6,500 suggestions were received showing active involvement from the stakeholders. The Central Board of Direct Taxes (CBDT) had also set up an internal committee to oversee the review and assist in drafting the New Bill over an intensive period of six months.
A few key expectations from the New Bill are as under:
Currently, there are multiple tax regimes applicable in case of various taxpayers (such as companies, individuals, Hindu Undivided Family (HUF) Association of Persons (AOPs) Body of individuals (BOIs), co-operative societies, etc.). One can expect convergence to a single tax regime (maybe even, taxpayer wise) with an objective of reducing overall compliance burden and providing tax certainty.
2. There could be a further simplification and rationalisation of withholding tax provisions. While the Budget 2025 has increased thresholds, the withholding tax rates may be further rationalised/ reduced.
3. The current law has several anti-abuse provisions (such as gift tax, unexplained investments/ cash credits, limits for cash transactions, etc) which are resulting in unintended consequences for genuine and bonafide transactions. The New Bill may elucidate clearly the exceptions to such anti-abuse provisions which would result in ease of doing business and reduced litigation.
4. Necessary measures may be introduced in order to reduce the litigation life cycle in India (which could extend up to a decade). These measures may include introduction of newer safe harbour provisions, tax settlement schemes, introduction of newer dispute resolution mechanisms with shorter time-frames, pre-litigation mediation, etc. A defined litigation policy for timely adjudication of cases having issues which are already settled may also help reduce litigation.
5. There are a host of provisions in the current law which are obsolete/ redundant to the extent that they are no longer valid/ applicable. Deletion of such provisions will make the income-tax law in India more precise and objective, thereby, reducing scope for multiple interpretations.
While it is a waiting game (albeit for only a few days), the New Bill is likely to have a profound and positive impact ultimately resulting in achieving fiscal harmony and equity, the premises which will propel India to compete with the developed countries in the next few decades.
The author is Tax Partner, EY India; Mitul Jasolia, Senior Tax Professional, EY India also contributed to the article.
