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The Institute of Chartered Accountants of India (ICAI) has come up with its detailed suggestions for the comprehensive revision of the Income Tax Act, 1961.
This move aligns with the finance minister’s budget speech for the financial year 2024-25, which called for simplification of tax legislation and reduction of disputes and litigation.
A Central Board of Direct Taxes (CBDT)-level committee has been tasked with this review.
ICAI’s recommendations include a number of measures to simplify the Income Tax Act, such as the removal of obsolete chapters, sections and schedules.
They also propose a special tax regime for partnerships and limited liability companies (LLPs), along with the simplification of income tax return forms.
These suggestions are intended to mitigate litigation and reduce the compliance burden on taxpayers.
In its Pre-Budget Memorandum for 2025, the ICAI advocates for fiscal reforms that support economic growth and environmental sustainability.
The institute suggests tax benefits for climate change mitigation strategies, which are expected to contribute to India’s climate goals while promoting sustainable business practices.
This aligns with the budget’s fifth priority of encouraging property ownership among women by reducing stamp duty and suggests removing restrictive provisions on deemed property.
ICAI also recommends introducing a new category of income from shares and securities, which would cover taxation of dividends, interest or capital gains.
They are calling for streamlining the conditions for treating an income return as defective under the e-filing regime and providing an opportunity to be heard before a defective return is considered invalid.
To simplify the capital gains provisions of sections 54 to 54F, the institute suggests extending a tolerance band of 10% where the value is determined by a valuation officer under section 50C(2).
They also recommend streamlining the tax rate under section 115BBE on unexplained cash credits and investments.
The ICAI proposes that a Chartered Accountant’s report of taxable income should replace the process of obtaining a lower tax credit certificate from an Assessing Officer when a non-resident transfers property to a resident.
They also recommend exempting the transferee responsible for payments to a non-resident transferor from the requirement to obtain a Tax Deduction Account Number (TAN).
ICAI’s final recommendations to simplify the IT Act include introducing a special tax regime for partnership firms/LLPs, simplifying the registration and taxation of charitable trusts and clarifying the provisions for determining the residential status of people.
