1 Sep 2025 : In a move aimed at reducing compliance burden and making taxation more transparent, the government has announced plans to simplify the mammoth Income Tax Act within the next six months. The ambitious reform is expected to streamline provisions, eliminate redundancies, and introduce a more user-friendly structure for taxpayers and businesses alike.
The announcement was made by Finance Minister Nirmala Sitharaman, who highlighted that the Income Tax Act, first enacted in 1961 and now stretching over thousands of sections, has become overly complex over the decades. Frequent amendments, overlapping provisions, and complicated exemptions have led to confusion among taxpayers and increased litigation.
Key Objectives of the Reform
The government’s reform agenda focuses on three major goals:
- Simplification and Clarity – Removing outdated clauses, reducing legal jargon, and making tax provisions easier to interpret.
- Improving Ease of Compliance – Streamlining processes for filing returns, claiming deductions, and responding to tax notices through digitization and automation.
- Minimizing Disputes – Clarifying grey areas to reduce tax litigation and bring predictability for businesses.
A high-level task force comprising tax experts, economists, and legal professionals will be responsible for drafting the revised Act. Public consultations are expected to be conducted in the coming weeks to include feedback from industry bodies, chartered accountants, and common taxpayers.
Boost to Investor Confidence
Tax experts believe that simplifying the law will boost investor confidence, as a clearer framework will help companies plan better and avoid compliance hurdles. Rakesh Mehra, Partner at a leading audit firm, said,
“India’s current tax law is notoriously complex. A simplified Act can go a long way in improving the country’s ease of doing business and attracting foreign investment.”
Focus on Digital Transformation
The government also plans to further digitize tax administration, using AI-based systems to detect tax evasion and assist taxpayers with real-time query resolution. This would reduce manual intervention, improve transparency, and cut down on harassment allegations faced by tax authorities.
Impact on Individual Taxpayers
For salaried individuals and small business owners, a simplified law is expected to make tax filing faster and less confusing. Industry watchers anticipate consolidation of exemptions and deductions, making it easier to calculate taxable income without relying heavily on consultants.
Timeline and Next Steps
The government has set a six-month deadline to complete the process, with the draft expected to be tabled in Parliament during the Budget Session 2026. If passed, the new Income Tax Act could come into effect from April 1, 2026, coinciding with the next financial year.
Economists suggest this reform could be one of the most significant steps toward tax modernization since the introduction of GST, potentially leading to higher voluntary compliance and improved revenue collections.
Summary
India will simplify its Income Tax Act within six months, removing outdated provisions, digitizing compliance, and reducing litigation to boost taxpayz