The Institute of Chartered Accountants of India (ICAI) has presented comprehensive suggestions for revising the Income-tax Act, 1961, aligning with the Finance Minister’s vision for simplification. Aimed at reducing disputes and compliance challenges, ICAI’s recommendations cover key areas such as simplifying tax laws, removing obsolete provisions, and enhancing procedural clarity. Specific proposals include introducing special tax regimes for firms and LLPs, revising the taxation structure for charitable trusts, and easing the process for determining residential status. To mitigate litigation, ICAI suggests aligning TDS/TCS rates with audit trail objectives, limiting adjustments under section 143(1)(a), and establishing robust grievance redressal mechanisms. For reducing compliance burdens, it recommends a year-wise e-ledger system for tax credits, extending deadlines for filing returns, and simplifying income tax return forms.
In its Pre-Budget Memorandum 2025, ICAI advocates for tax reforms that foster economic growth and support sustainability. Suggestions include providing tax benefits for climate change mitigation efforts and encouraging women’s property ownership by revising stamp duty policies. Further rationalization measures include introducing a unified tax category for income from shares and securities, simplifying capital gains provisions, and rationalizing tax rates for unexplained investments. Additionally, ICAI proposes recognizing depreciation under the Companies Act, streamlining e-filing conditions, and easing tax compliance for non-resident transactions. These initiatives aim to align tax policies with broader economic and social objectives while ensuring clarity and fairness in implementation.
ICAI, established by an Act of Parliament in 1949, is a statutory body regulating the Chartered Accountancy profession in India. It serves over 4.26 lakh members and nearly 9.85 lakh students, making it the largest professional accountancy body globally. With a network of regional councils, branches, and international chapters, ICAI plays a pivotal role in shaping financial and tax policies in India and abroad.
The Institute of Chartered Accountants of India
(Set up by an Act of Parliament)
January 3, 2025
ICAI Press Release
ICAI Submits suggestions on Comprehensive Review of the Income-tax Act, 1961 and Pre Budget Memorandum 2025
ICAI submits Suggestions on Comprehensive Review of the Income-tax Act, 1961
For a comprehensive review of the Income-tax Act, 1961, as proposed by the Hon’ble Finance Minister Smt. Nirmala Sitharaman in her Budget speech 2024-25 to simplify the language of the Act and reduce disputes and litigation, a CBDT-level committee was formed. A stakeholder consultation, chaired by the Revenue Secretary, Ministry of Finance, was held on 18th September 2024, wherein ICAI presented its Preliminary inputs on Comprehensive Review of the Income-tax Act, 1961.
On this occasion, CA. Ranjeet Kumar Agarwal, President, ICAI, said, “ICAI’s recommendations encompass suggestions to simplify tax laws not only in the form, but also in substance. Simplification is required not only in the language of law to reduce the scope for multiple interpretations, but also in the structure and framework of the Act, the computation mechanism and the procedures. The comprehensive review process should result in a simple, fair and equitable income-tax law.”
ICAI has now submitted its detailed inputs on Comprehensive Review of the Income-tax Act, 1961, which encapsulates a spectrum of suggestions for simplification of the income-tax law, removal of obsolete chapters, sections and schedules in the Income-tax Act, 1961, mitigating litigation and reducing compliance burden. ICAI’s significant suggestions on each of the above components include:
On simplification of the Income-tax law:
- introduction of special tax regime for firms/LLPs,
- simplification of the registration and taxation regime of charitable trusts,
- simplification of provisions for determining residential status of individuals,
- dispensing with the need to exercise option for special tax regimes through separate forms.
On mitigating litigation:
- alignment of TDS/TCS rates with the objective of serving as an audit trail,
- limiting the adjustments under section 143(1)(a) to arithmetical errors and prima facie incorrect claims,
- periodic review of disposal of cases by Assessing Officer
- mandatory time limit for disposal of appeals
- effective grievance redressal mechanism
On reducing compliance burden:
- introduction of year-wise E-Ledger system for crediting TDS/TCS and advance tax payments which can be adjusted against the income-tax due,
- extension of time limit for filing belated return to 31 st March of the assessment year,
- simplification of income-tax return forms
- addressing specific concerns in the faceless assessment regime.
ICAI submits Pre-budget Memorandum 2025
ICAI has also submitted its Pre-Budget Memorandum 2025 advocating prudent tax reforms aimed at fostering economic growth and encouraging environmental sustainability. Provision of tax benefits for promoting climate change mitigation strategies, which will not only contribute to India’s climate change goals but also drive economic growth by promoting sustainable business practices is a suggestion in this
direction.
In line with priority 5 of the Budget 2024-25 to encourage property ownership by women by reducing stamp duty, the Memorandum suggests removal of restrictive deemed ownership provision under section 27 as well as the clubbing provisions under section 64(1)(iv)/(vi).
Towards the objectives of simplification and rationalisation of the income-tax law, mitigating litigation and reducing compliance burden, the Pre-budget suggestions include.
- inserting a new head of income “B – Income from shares and securities”, encapsulating all provisions relating to taxability of income therefrom, whether by way of dividend, interest or capital gains;
- allowing depreciation computed as per the Companies Act, 2013 as deduction under the Income-tax Act, 1961 also;
- simplifying the capital gains provisions under sections 54 to 54 F;
- extending 10% tolerance band to cases where value is determined by the Valuation Officer under section 50C(2);
- rationalising rate of tax under section 115BBE in respect of cash credits, unexplained investments etc;
- rationalising conditions for treating a return of income as defective in the e-filing regime and provision of opportunity of being heard before treating a defective return as invalid;
- obtaining report of a chartered accountant in the prescribed form certifying the sum chargeable to tax instead of going through the process of obtaining certificate of lower deduction of tax from the Assessing Officer, where a non-resident transfers immovable property to a resident; and exempting the transferee responsible for paying to a non-resident transferor from the requirement of obtaining TAN.
About ICAI
The Institute of Chartered Accountants of India (ICAI) is a statutory body set up by an Act of Parliament under the Chartered Accountants Act, 1949 for the regulation and development of the profession of Chartered Accountancy in India. The Institute functions under the administrative supervision of the Ministry of Corporate Affairs, Government of India. With around 9.85 lakh students and over 4.26 lakh members, today ICAI is the largest professional accountancy body in the world. ICAI has a wide network of 5 Regional Councils and 177 Branches within India and a global presence with 52 Overseas Chapters and 29 Representative Offices spanning 81 cities across 47 Countries worldwide.
It would be better if 11ua valuation rule is also amended to the effect that registered valuer is also empowered to provide valuation report under DCF. This way companies act and income tax act will be aligned..
Excellent suggestions which will help Assesses. A few more like making the Tax return a question and answer form so that litigation cn be reduced. A pop up at the time of assessment by CPC wherein any relevant case law as applicable for the current period and jurisdiction can be initiated so that unneccesary litigation and appeals can be avoided. Where appeals have been decided by the High Court and do not fall within the parameters of appeal , these can come as a pop up for the AO or Faceless Assessment officer so that notices can be reduced and administration and procedures can become streamline.