• Notification Date: 28-02-2022
• Notification No: N/A

Direct Tax Laws are getting Simplified

The government has provided several exemptions and special tax rates in India to incentivise some sections of people, businesses, and economic activities. This has resulted in a complex income tax law structure in the country. The government has attempted to simplify the income tax structure several times but in vain. Earlier, the government had simplified the indirect tax provisions by the implementation of GST. It is high time to do the same for the direct taxes.

The revenue secretary has emphasized the necessity to amend the tax laws. While addressing the tax professionals, the revenue secretary has recently stated that the government should withdraw the various exemptions and the special treatments provided to some selected individuals and businesses.

The government had tried to remove several unnecessary exemptions by drafting the Direct Taxes Code. But while the third draft was ready, the exemptions were again brought back under the GST provisions and the Code was declared ineffective. The NDA government formed a committee to solve the issue by simplifying the direct taxes. But the committee also failed to bring any significant changes.

In 2019, the NDA government took action to simplify the corporate taxes by reducing the tax rates and removing the exemptions. The NDA government also tried to simplify the income tax laws by announcing new Income tax slabs for the taxpayers. But the new tax slabs are not much active as the old slabs are very much under enforcement till the present day. The new tax slabs are not being adopted by a lot of taxpayers and they prefer following the old ones.

The Central Government is expected to disincentivise the older tax regime. It is about to nullify some of the exemption provisions. This new initiative of modifying the older tax slabs by removing the exemptions and facilities will motivate the taxpayers to shift to the new tax regime. The government will also make necessary alterations in the capital gains tax rules. This will further bring uniformity and transparency in the long-term capital gains and the tax rates applied to them.