CBDT forms committee for IT Act review; 'sunset' clauses to be eliminated

An internal committee of the Income Tax Department will review the 1961 direct tax law to eliminate redundant clauses, and adopt best global practices to simplify it for taxpayers for better compliance, CBDT chief Ravi Agrawal has said.

The panel, comprising income tax (IT) officials from across the country, has started working on identifying areas of improvement in the Income Tax Act, 1961, he said, and added that the exercise is being conducted under a central government-mandated comprehensive review of the law, which was mentioned by FM Nirmala Sitharaman in the recent budget presented on July 23rd, 2024.

Central Board of Direct Taxes (CBDT) chairman Agrawal said the committee is looking at the best global practices that can be adopted, as well as cutting redundancies in the existing law and finding those clauses that have reached their sunset, and hence, can be eliminated.

"An internal committee of competent officers of the department from all across the country has been formed. They have started working on identifying areas of improvement. This is a work in progress," he told PTI on Wednesday during an event to mark 165 years of income tax in India.

He said the committee is looking at the "problem statement" given to it in the recent Budget. It is trying to find the "best way forward" in giving the country a new direct tax law, Agrawal said.

During the event, the CBDT chief assured Union Finance Minister Nirmala Sitharaman that the work of reviewing the Act will be done within the stipulated time-frame of six months, as announced by her in the Budget presented last month.

The minister, during the Wednesday event, asked the I-T department to use simple language in its notices and communications with taxpayers, so that they are able to understand these quickly without getting intimidated.

Agrawal said this factor is also a part of the I-T law review. The committee is trying to make tax communication simple and easy to understand to encourage compliance of rules by taxpayers, he said.

The Income Tax Act, 1961, started its journey in 1922. It contains 298 sections and 23 chapters and other provisions in its current form of 1961.

Sitharaman, while presenting the 2024-25 Union Budget, had announced a "comprehensive" review of the Income Tax Act. The purpose is to make the Act concise, lucid, easy to read and understand.

This will reduce disputes and litigation, thereby providing tax certainty to the taxpayers. It will also bring down the demand embroiled in litigation. It is proposed to be completed in six months, she had said.

Agrawal also said the CBDT will "put more officers" within the next 10-15 days to "expeditiously" clear the "substantial" number of appeals pending at the Income Tax Department level.