The new Income Tax Bill aims to make tax regulations more comprehensible, even for the common taxpayer. The government claims that the bill seeks to simplify the language of tax laws, making them more direct and clear. It also plans to cut the number of laws by half, both in terms of chapters and words. The government hopes the new bill will reduce litigation and streamline tax administration. While the initiative to overhaul tax laws, eliminate redundant rules, and trim excess provisions is commendable, it is no easy task. Tax laws are inherently dynamic—court judgements and interpretations continuously expand the legal frame. More than just simplified language, taxpayers would benefit from a commitment to certainty in provisions and a prospective approach to taxation.
The current Income Tax Act has been in force since 1962 and needed an overhaul. The government has often tried changing the rules through amendments—the Income Tax Act 1961 has been amended over 4,000 times. Even under the earlier governments led by Prime Minister Narendra Modi, committees—once under Justice R V Easwar and another time under revenue service officer Arbind Modi—were formed for simplifying the Income Tax Act. Some of the provisions of these committees have already been implemented. Yet, those changes were not enough. This time, the government was not satisfied with cosmetic changes, and wanted to bring about more fundamental changes in the way the rules are written.
Finance ministry bureaucrats claim the language of the income tax laws would become so easy that a common salaried employee can understand his tax liabilities. This way, the government believes, it can put an end to the mounting pile of court cases. North Block bureaucrats have already made it clear the proposed changes will have no rate or structural surprises. It must be mentioned here that the new bill has been drafted in a relatively short span of six months, whereas similar exercises have taken years at other times. The bill will be presented in parliament this week and would go to the standing committee for perusal. Usually, what starts as a simple law gets complex during the consultation process. It remains to be seen how this ambitious project of ‘simplifying’ the tax rules pans out.