The Institute of Chartered Accountants of India (ICAI) has submitted its detailed suggestions for the comprehensive revision of the Income Tax Act, 1961.
The move is in line with the Finance Minister’s budget speech for the 2024-2025 financial year, which called for simplification of tax laws and a reduction in the number of disputes and lawsuits.
A committee at the level of the Central Board of Direct Taxes (CBDT) has been charged with this investigation.
The ICAI’s recommendations include a range of measures to simplify income tax laws, such as scrapping outdated chapters, sections and schedules.
They also propose a special tax regime for corporations and limited liability companies (LLPs), along with simplification of income tax return forms.
These suggestions are intended to limit lawsuits and reduce compliance burdens on taxpayers.
In its Pre-Budget Memorandum for 2025, the ICAI calls for tax reforms that support economic growth and environmental sustainability.
The institute suggests tax incentives for climate change mitigation strategies, which are expected to contribute to India’s climate goals while promoting sustainable business practices.
This is in line with the budget’s fifth priority to encourage property ownership among women by reducing stamp duty and suggests removing restrictive provisions on deemed ownership.
The ICAI also recommends introducing a new category for income from shares and securities, which would cover the taxability of dividends, interest or capital gains.
They call for rationalizing the conditions for treating an income return as defective in the e-filing regime and providing an opportunity to be heard before a defective return is deemed invalid.
To simplify the capital gains provisions under sections 54 to 54F, the institute proposes to extend a tolerance margin of ten percent, with the value to be determined by a valuation officer under section 50C(2).
They also recommend rationalizing the tax rate under Section 115BBE with respect to cash credits and unexplained investments.
The ICAI proposes that a report from a chartered accountant certifying the taxable amount should replace the procedure for obtaining a lower tax deduction certificate from a tax officer when a non-resident transfers property to a resident.
They also recommend exempting the recipient responsible for payments to a non-resident transferor from the requirement to obtain a Tax Deduction Account Number (TAN).
ICAI’s final recommendations for simplifying the IT Act include introducing a special tax regime for partnership firms/LLPs, simplifying registration and taxation of charitable trusts, and clarifying provisions for determining the residency status of individuals.