Union Budget 2025: Centre may take steps to simplify ITR filing process, says report

Budget presentation: The upcoming Budget for the fiscal year 2025-26 is expected to introduce significant tax reforms, including tax concessions, adjustments to tax slabs, and simplification of income tax filing regulations. According to a report by Bloomberg, Union Finance Minister Nirmala Sitharaman is set to announce an overhaul of the Income Tax Act of 1961, which is currently in its final stages of preparation. 

These changes are anticipated to be open for public feedback by mid-January, with the primary goal of reducing tax disputes that have accumulated to over $120 billion over the last ten years. 

The demand for income tax relief is increasing, and there are indications that the Narendra Modi-led government might be working on simplifying the ITR filing process. According to a report by Bloomberg, the revised legislation is expected to be announced in the Union Budget for 2025-26 after public consultation.

The potential changes may include simplifying language, rationalizing information using formulas and tables, but there will be no adjustments to tax rates and policies.

It is worth noting that tax disputes have more than doubled to Rs 10.5 lakh crore over the past decade, up to the fiscal year ending in March 2023. 

According to the report, potential modifications that may be included:

> Substituting income computation structures with formulas
> Consolidating the assessment year and financial year into a unified definition of tax year
> Implementing tabular representation for clarity for similar taxpayers
> Decreasing the number of additional forms required for taxpayers to include with their tax returns.

In the Budget speech in July 2024, FM Sitharaman stated that a comprehensive review of tax legislation will be completed within six months.

In November 2024, Finance Minister Nirmala Sitharaman led a meeting to discuss the Budget announcement of conducting a comprehensive review of the Income Tax Act, 1961. The Income Tax Department received 6,500 suggestions from stakeholders regarding the review of the Income Tax Act.

FM Sitharaman in her Budget speech said: “It has been our endeavour to simplify taxation. We have taken a number of measures in the last few years including introduction of simplified tax regimes without exemptions and deductions for corporate tax and personal income tax. This has been appreciated by tax payers. 58 per cent of corporate tax came from the simplified tax regime in financial year 2022-23. Similarly, as per data available till now for the last fiscal, more than two thirds have availed the new personal income tax regime.”