SBI Research recently urged a rapid review of the Income Tax Act, initially proposed in the Union Budget 2024-25. The report emphasized that revising the Act as a money bill would enable a streamlined 75-day legislative process, allowing for a simplified tax system that could boost economic growth and reduce compliance burdens.
The report also suggested raising the TDS threshold on bank interest from Rs. 10,000 to Rs. 100,000 and shifting to an annual issuance of TDS certificates (Form 16A) rather than quarterly, aligning with Form 16 for salaries. For senior taxpayers aged 60-80, SBI Research recommended a flat tax rate and additional considerations for individuals over 80. This comes as part of broader efforts, including recommendations for the Income Tax Department to solicit public feedback on simplifying tax provisions, reducing litigation, and streamlining compliance procedures. An internal committee has been set up by the Central Board of Direct Taxes (CBDT) to manage this overhaul, targeting clarity and reduced disputes.
Additional amendments in the Budget 2024-25 target various tax provisions, including exemptions on certain capital gains and tax rate reductions for foreign companies. Provisions to simplify TDS processes include lowering TDS on e-commerce payments and extending credit for TCS against TDS on salaries, all aimed at reducing taxpayer burden. Digitalization initiatives across GST, Customs, and Income Tax are also planned for completion within two years to enhance efficiency and taxpayer convenience.
SBI Research highlighted the growing tax compliance, as seen in the significant increase in filed Income Tax Returns (ITRs) and direct tax contributions, which constituted 56.7% of total tax revenue in AY 2024, the highest in 14 years. The number of ITR filings is projected to exceed nine crore by March 2025, with the strongest growth in states like Uttar Pradesh, Bihar, Andhra Pradesh, and Rajasthan, contrasting with near-saturation in traditional tax bases like Maharashtra and Delhi.
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These updates reflect a shift towards a more accessible and transparent tax system, aimed at supporting India’s economic and digital transformation efforts, while improving taxpayer experience and compliance.