Finance Minister Nirmala Sitharaman on Thursday refuted the allegation that the new Income Tax Bill is just a mechanical change.
She introduced the Bill in the Lok Sabha and immediately requested the Speaker, Om Birla, to constitute a Select Committee to examine it. “The committee will be urged to submit its report by the 1st day of next session (Monsoon Session),” she said, despite TMC and Congress members opposing the Bill. Once enacted, the new Bill will replace the Income Tax Act 1961.
“The current Income-tax Act was enacted in 1961 and came into existence with effect from April 1, 1962. It has been amended nearly 65 times with more than 4,000 amendments,” she said, justifying the need for a new Bill. Meanwhile, Finance Ministry officials said the Bill proposes eliminating redundant provisions, reducing its length by nearly half. The drafting style of the new Bill is straightforward and clear, making the provisions easier to understand by incorporating more than 57 tables compared to 18 tables in the Income-tax Act, 1961. Sub-sections and clauses have been used, instead of relying on provisos and explanations for exceptions and carve-outs.
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“This minimises cross references and conflict by aggregating all applicable provisions related to a single scenario in one place,” an official said.
All provisos (about 1200) and explanations (about 900) have been removed. iv. The 1961 Act contains numerous cross-references to sections, sub-sections, clauses, sub-clauses, items, and sub-items, making the provisions challenging to interpret. The new Bill adopts a simplified reference system, allowing provisions to be cited by simply mentioning the section. For instance, section 133 (1)(b)(ii) in the new Bill would indicate sub-clause (ii) of clause (b) of sub-section (1) of section 133 in the existing Act. This change makes the Act’s language easier to understand.
Assessment year removal
A significant aspect of the Bill is the elimination of the concepts of ‘previous year’ and ‘assessment year’. Prior to 1989, the concept of ‘previous year’ and ‘assessment year’ was introduced because taxpayers could have different twelve-month previous years for each source of income. From April 1, 1989, the previous year was aligned to a financial year in all cases.
However, ‘assessment year’ continued to be used for various proceedings under the Act. Thus, a taxpayer was required to track two different periods, i.e., the ‘previous year’ as well as the ‘assessment year’. This presented difficulties in complying with the provisions of the Act, especially for a new taxpayer who had to keep track of the ‘previous year’, ‘assessment year’ as well as ‘financial year’.
Readability improved
The official also said that the readability of tax law has been improved by using simpler language, as against traditional legal language. Where multiple situations are covered, the sections have been made enumerative. Wherever feasible, extensive use of table formats has been made. TDS provisions have been presented in a tabular form. Certain provisions, such as Section 10, which contained about 150 clauses, have been placed in Schedules and presented in the form of tables.
“As a result of the comprehensive exercise, the size of the new Bill has reduced by about half on one hand and one the other, the provisions have been consolidated and presented in a userfriendly format,” the official said.
