February 2025 is poised to usher in a new era of tax simplicity in India, as the upcoming Union Budget 2025-26 aims to reform the Income Tax Act, making tax filing easier for citizens, according to sources.
Sources in the Finance Ministry told India Today TV that a series of major reforms to the income tax system are in the works. These reforms are focused on enhancing compliance, streamlining tax structures and improving the overall ease of doing business.
Amid evolving global and domestic challenges, India is seeking to boost economic growth. Over the past decade, the government has made significant strides in easing the tax burden on businesses and individuals. The proposed changes are intended to provide relief to taxpayers while broadening the tax base.
The intricate Indian tax system presents significant challenges for both businesses and individuals. A prime example is the time-consuming process of filing income tax returns.
- Filing individual tax returns takes approximately 2-3 hours to 1-2 days.
- For a small company (with a turnover of less than 1 crore), it usually takes about one week.
- For a mid-sized business (with a turnover of 1-5 crore), filing returns generally takes around 10 days.
- For large companies (with a turnover above 5 crore), it can take up to one month or even longer to file returns, depending on the complexity and scale of the business.
- Additionally, an audit requires a minimum of 15 days.
India Today TV spoke to Chartered Accountants and tax experts, who unanimously agreed that the excessive complexity of forms and queries has significantly increased the burden of tax compliance. With increased liability, the CAs are forced to exercise extreme caution.
The challenges are not limited to income tax returns. Filing Goods and Service Tax (GST) returns is equally cumbersome, often taking 15 days to a month. Moreover, audits can extend over several months. The GST filing can take up to a month, while audits can last for months.
WHAT SIMPLIFICATION MEANS FOR COMMON MAN
One of the greatest fears shared by individuals and businesses alike is the prospect of non-compliance with income tax returns, as a notice from the tax department can be a daunting experience. However, the ongoing simplification efforts, frequently discussed by both Finance Minister Nirmala Sitharaman and Prime Minister Narendra Modi, aim to transform tax filing from a dreaded task into a routine process.
Historically, the Income Tax Department was often perceived as an entity solely focused on making life difficult for citizens. Recognising this sentiment, the government introduced the faceless assessment scheme on April 1, 2021. This initiative was designed to minimise human interaction in tax disputes and assessments. Under this system, the Income Tax Department handles returns, refunds, assessments, scrutiny, and appeals, with cases being assigned randomly to assessing officers, regardless of geographical location.