Income Tax Department Invites Public Feedback on Draft Rules for Simplified Tax Filing
The Income Tax Department has taken a significant step towards modernizing India's tax framework by releasing a set of draft rules under the newly enacted Income Tax Act, 2025. On Saturday, the department opened a public consultation window, inviting feedback from experts and citizens alike to refine these proposed regulations. This move is part of a broader initiative to streamline tax compliance, making it more user-friendly and efficient for all taxpayers.
Major Overhaul: From 1961 to 2025
The new Income Tax Act, 2025, is set to replace the decades-old Income Tax Act of 1961, effective from April 1. This transition marks a pivotal shift in India's tax legislation, with the draft rules designed to align with the act's simplified language and procedural ease. The department emphasized that the framing of these rules follows the same principle of simplification that guided the redrafting of the law itself.
Reduction in Rules and Forms
One of the most notable changes in the draft rules is the substantial reduction in bureaucratic procedures. The earlier framework comprised 511 rules and 399 forms, which have now been streamlined to 333 rules and 190 forms in the draft Income-tax Rules, 2026. This represents a cut of approximately one-third in procedures and more than half in the number of forms. The department stated that this reduction was achieved by eliminating redundancy and consolidating rules wherever possible, ensuring that the core policy content is preserved while enhancing clarity.
Introduction of Smart Forms
The draft rules introduce a set of 'smart forms' that are expected to revolutionize the tax filing experience. These forms have been simplified extensively to reduce the compliance burden on taxpayers. Key features include:
- Standardization of Information: Common data points have been standardized across forms to minimize repetition and errors.
- Automated Reconciliation: The forms are designed with pre-fill capabilities, allowing for automated reconciliation of data, which makes filing more intuitive and less prone to mistakes.
- Simplified Language: The language used in the forms has been clarified to avoid operational, administrative, or legal ambiguities, with notes also being simplified for better understanding.
These smart forms are not just about ease of use; they are expected to enable centralized processing and data-driven decision-making, ultimately leading to improved services for taxpayers.
Focus on Ease of Compliance
In its statement, the Income Tax Department highlighted that the simplification of language in the rules is a core objective. Formulas and tables have been incorporated where necessary to aid comprehension. The department noted that the proposed changes aim to eliminate redundancy from the Income-tax Rules, 1961, while introducing adjustments in line with the new Income Tax Act, 2025. These simplifications are anticipated to contribute to ease of living and ease of business for all sections of taxpayers, leveraging technology to bring considerable convenience.
Expert Opinions on the Draft Rules
Tax professionals have welcomed the draft rules, noting their potential to enhance compliance efficiency. Richa Sawhney, a tax partner at Grant Thornton Bharat LLP, commented that the new rules are drafted to be easy for all taxpayers to comply with. She emphasized that the use of tables will improve navigation, and the focus on technology in pre-filled forms will reduce compliance time and inadvertent errors. Sawhney urged stakeholders to provide feedback to mitigate any teething issues during implementation and ensure a smooth transition.
Sandeep Jhunjhunwala, a partner at Nangia Global, described the rationalized rules as reflecting a "thoughtful and forward-looking approach to legislative implementation." He praised the department's efforts to modernize the tax system through these changes.
Public Feedback and Participative Effort
The Income Tax Department has underscored that the framing of these rules is a participative effort. Feedback from the public and experts is being accepted until February 22. This inclusive approach aims to gather diverse perspectives to fine-tune the rules before they are finalized, ensuring they meet the needs of taxpayers effectively.
The draft rules represent a significant leap towards a more streamlined and technology-driven tax administration in India. By reducing complexity and enhancing user experience, they are poised to make tax filing a simpler and more efficient process for millions of taxpayers across the country.
