What India Inc wants from the new Income-Tax Act?, ETCFO
A survey conducted by KPMG in India in January 2025 has highlighted key concerns and expectations from the ongoing review of the Income-tax Act, 1961, announced by the Government of India in July 2024. The review aims to make the tax laws clearer, more concise, and user-friendly, thereby reducing disputes and litigation, and providing greater tax certainty to taxpayers.
According to the survey, which gathered insights from over 200 respondents across various sectors including industrial manufacturing, automotive, financial services, and technology, the most pressing issue identified by 84% of respondents is the need for simplification of disputes and litigation.Respondents emphasised the importance of reducing complexities surrounding the Tax Deducted at Source (TDS) provisions, which currently cover over 30 transaction categories, with 64% suggesting these provisions should be simplified. Other areas cited for attention included capital gains taxation, business income calculations, and transfer pricing.
A significant 96% of the respondents expressed support for the creation of a government-published income-tax commentary, similar to the model used by the OECD, to help provide greater clarity. Furthermore, 93% called for beneficial clarifications from tax circulars and notifications to be incorporated directly into the Income-tax Act, to ensure better transparency and reduce ambiguity.
Case backlog
The survey also shed light on the growing backlog of tax cases in the country, with over 6 lakh cases pending, including more than 5.5 lakh at the CIT (Appeals) level. To address this issue, 69% of the respondents supported the introduction of a mediation or arbitration scheme to facilitate faster and amicable dispute resolution, while 62% believed that giving tax authorities the power to appeal decisions made by the Dispute Resolution Panel (DRP) could enhance its effectiveness.
Additionally, 98% of the respondents called for the establishment of mandatory timelines for the disposal of appeals by the CIT (Appeals) to reduce the growing litigation backlog.
In terms of making tax compliance more efficient, 61% of respondents favored a hybrid model for interactions with tax officials, combining both faceless and physical meetings. However, 87% of those surveyed advocated for the removal of mandatory TDS certificate issuance, citing that the information is already available in Form 26AS, and 64% supported providing TDS credit based on Form 26AS, irrespective of when the income is taxed.
While 58% of respondents expressed support for a reduction in corporate tax rates, citing high effective tax rates, 34% believed that the current rates are adequate. On the other hand, 43% of respondents felt that the simplified and concessional tax regime had eased compliance, though 24% disagreed, and 33% had yet to adopt it.
In terms of timelines and reporting improvements, a significant 82% of the respondents favored extending the deadline for filing belated or revised returns to March 31 of the relevant assessment year. Furthermore, 94% of respondents suggested that the transfer pricing safe harbor rules be reoriented to make them more effective and attractive.
Despite broad support for faceless assessments, 41% of respondents felt that these measures had not reduced aggressive or high-pitched assessments. Additionally, 60% of the participants believed that CIT (Appeals) should be exempt from the faceless mode to improve dispute resolution.