Income Tax Overhaul: Revisiting the 1961 Direct Tax Law

An internal committee of the Income Tax Department is reviewing the 1961 direct tax law to eliminate redundant clauses and adopt global best practices, aiming to simplify it for taxpayers. The review, announced by CBDT chief Ravi Agrawal, seeks to make the tax law more concise and facilitate better compliance.

An internal committee of the Income Tax Department is undertaking a comprehensive review of the 1961 direct tax law in an effort to eliminate redundant clauses and incorporate global best practices, according to CBDT chief Ravi Agrawal.

The panel, which includes IT officials from across the country, has begun identifying areas for improvement as part of a central government-mandated review. Agrawal stated that the committee aims to cut outdated provisions and adopt best practices worldwide.

Speaking at an event marking 165 years of income tax in India, Agrawal mentioned that the committee is evaluating a 'problem statement' from the recent Budget to guide the creation of a new direct tax law. The review is expected to be completed within a six-month timeframe, as announced by Finance Minister Nirmala Sitharaman. She emphasized the need for simple language in taxpayer communications to improve compliance.

The current Income Tax Act, which dates back to 1922 and was last overhauled in 1961, consists of 298 sections and 23 chapters. The aim of this review is to make the Act more concise, reduce disputes, and offer greater tax certainty. Agrawal also noted that additional officers will be deployed soon to expedite the resolution of pending appeals.

(With inputs from agencies.)