Union Budget 2024: FM announces review of I-T Act 1961, Vivad Se Vishwas Scheme to resolve pending appeals on tax disputes 

All services under GST, Customs and Income Tax to be digitalised and made paper-less in two years 

While presenting the Union Budget 2024-2025 in the Parliament today, Union Minister for Finance & Corporate Affairs, Nirmala Sitharaman emphasised that it has been a consistent endeavour of the government to simplify taxation, improve tax payer services and reduce litigation. 

The finance minister observed that the move has been appreciated by the tax payers. Sharing details, she said that 58 percent of corporate tax came from the simplified tax regime in financial year 2022-23 and more than two-thirds have availed the new personal income tax regime in the last fiscal year as per available data, she highlighted. 

Pursuing the agenda of simplifying taxation, the Union Finance Minister outlined a number of measures in her Budget speech. Announcing a comprehensive review of the Income-Tax Act, 1961 in six months to make it concise and lucid, Sitharaman said, “This will provide tax certainty to the tax payers reducing disputes and litigation.” 

In another measure to reduce tax-uncertainty and disputes, a thorough simplification of reassessment has been proposed. Outlining the proposal, the FM said that an assessment hereinafter can be reopened beyond three years from the end of the assessment year only if the escaped income is Rs 50 lakh or more, up to a maximum period of five years from the end of the assessment year. 

Sitharaman announced that in search cases, a time limit of six years before the year of search, as against the existing time limit of 10 years. 

Initiating tax simplification process for charities and of TDS in the Finance Bill, the minister proposed that the two tax exemption regimes for charities are to be merged into one. The 5 percent TDS rate on many payments is being merged into the 2 percent TDS rate and the 20 percent TDS rate on repurchase of units by mutual funds or UTI is being withdrawn.  

Highlighting the digitalisation of all the major tax payer services under GST and most services under Customs and Income tax, Sitharaman announced that all the remaining services including rectification and order giving effect to appellate orders will also be digitalized and made paper-less over the next two years. 

Acknowledging the good results visible at various appellates, the Union finance minister emphasised that litigation and appeals will continue to receive highest attention of the government.  

Pursuing this objective, Vivad se Vishwas Scheme, 2024 for resolution of certain income tax disputes pending in appeal has been announced in the Budget speech. It has been proposed to increase monetary limits for filing appeals related to direct taxes, excise and service tax in the Tax Tribunals, High Courts and Supreme Court to Rs 60 lakh, Rs 2 crore and Rs 5 crore, respectively.  

The scope of safe harbor rules will be expanded along with streamlining the transfer pricing assessment procedure to reduce litigation and ensure certainty in international taxation, the FM added. 

Sitharaman in her Budget speech said that GST has decreased the tax incidence on common man, reduced compliance burden and logistics cost for trade and industry.  

In order to facilitate trade, several amendments have been made to the GST Laws. As part of this, Extra Neutral Alcohol used in manufacture of liquor will be kept out of the purview of the central tax. Similar amendments are also proposed in IGST and UTGST Act. Further, newly added Section 11A will empower the government to regularize non-levy or short levy of central tax due to any general practice prevalent in trade. 

The time limit to avail input tax credit has been relaxed by inserting two new subsections to Section 16 of CGST. The amended Act will also provide a common time limit for issuance of demand notices and orders. Also, the time limit for tax payers to avail the benefit of reduced penalty, by paying demanded tax along with interest is increased from 30 days to 60 days. 

In order to further facilitate trade, the maximum amount of pre-deposit for filing appeal with the Appellate Authority is being reduced from Rs 25 crore of central tax to Rs 20 crore of central tax. The amount of pre-deposit for filing appeal with the Appellate Tribunal is being reduced from 20 percent with a maximum amount of Rs 50 crore of central tax to 10 percent with a maximum of Rs 20 crore of central tax.  

Additionally, the time limit for filing appeals before the Appellate Tribunal is being modified with effect from August 1 to avoid the appeals from getting time barred, on account of Appellate Tribunal not coming into operation. 

 Apart from these, several other changes such as empowering government to notify GST Appellate Tribunal to handle anti-profiteering cases have been brought to ease trade.