CBDT forms committee to review Income Tax Act, will eliminate ‘sunset’ clauses

An internal committee under the Central Board of Direct Taxes (CBDT) has been established to review the Income Tax Act of 1961. The committee will be led by VK Gupta, Chief Commissioner of Income Tax.

Union Finance Minister Nirmala Sitharaman had announced the formation of this committee during her July 2024 Budget speech, emphasising that the review process would be completed within six months. The primary goal is to simplify the Act, making it more concise, clear and easier to understand, which is expected to reduce disputes and litigation and provide greater tax certainty for taxpayers.

“The purpose is to make the act concise, lucid, and easy to read and understand. This will reduce disputes and litigation, thereby providing tax certainty to the taxpayers. It will also bring down the demand embroiled in litigation,” Sitharaman stated.

According to officials, the internal committee’s main focus will be on eliminating outdated clauses and incorporating best global practices to enhance compliance. 

An official shared that the committee is currently reviewing the relevance of specific sections and preparing a draft for consultation, which will later be opened for stakeholder feedback.

In a post-budget interaction, Revenue Secretary Sanjay Malhotra clarified that the review is not intended to create a new direct tax code but to conduct a comprehensive examination of the existing law. 

Malhotra added that the first draft of the revised and simplified Income Tax law will be prepared by the internal committee of the tax department following the review.