Centre may simplify income tax filing rules

New Delhi: The Central government is likely to simplify its income tax filing process as part of efforts to reduce disputes and ease the burden on taxpayers. A proposed overhaul of the Income-tax Act of 1961 is currently being finalized and is expected to be released for public consultation by mid-January, sources familiar with the matter said. The revised legislation will be presented as part of the government’s budget in early February.

The proposed changes will focus on simplifying the language of tax laws and rationalising information using tables and formulas, aiming to make compliance more straightforward. However, the revisions will not involve any changes to tax rates or policies.

The government has been striving to modernise its tax system to increase compliance and reduce bureaucratic hurdles. Over the past decade, tax disputes have ballooned to more than $120 billion (Rs 10.5 trillion) by March 2023. Finance Minister Nirmala Sitharaman announced in July that a comprehensive review of the tax legislation would be completed within six months to make the rules more taxpayer-friendly.

Key proposed reforms include replacing complex income computation structures with easy-to-understand formulas, consolidating the assessment and financial year definitions into a single tax year, and presenting tax structures in tabular form for clarity. Additionally, the government plans to reduce the number of supplementary forms needed for tax returns, with more forms becoming available online. These measures aim to reduce the administrative burden and help streamline the tax filing process for millions of taxpayers.

with agency inputs