5th March 2025 (11 Topics)
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Little has changed in the Income-Tax Bill, 2025
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Context
The Union Finance Minister introduced the Income-Tax Bill, 2025, aiming to replace the Income-Tax Act, 1961. The government claims the new legislation will simplify tax laws, reduce litigation, and enhance clarity for taxpayers and administrators. However, critics argue that the Bill primarily makes cosmetic and structural changes without addressing deeper complexities and ambiguities in the existing law.
Lack of Real Simplification
- Continued Complexity: Despite claims of clarity, the Bill retains dense legal language, making tax laws inaccessible to ordinary taxpayers.
- Superficial Textual Changes: Alterations like replacing “notwithstanding” with “irrespective” do not improve comprehension but merely shift terminology.
- Structural but Not Substantive Reforms: While redundant provisions are removed, the fundamental approach to income taxation remains unchanged, limiting real benefits.
Increased Litigation & Uncertainty
- Retaining Old Definitions: The Bill still refers back to provisions in the 1961 Act (e.g., definition of "income"), leading to confusion rather than clarity.
- Judicial Precedents at Risk: Courts have settled various tax disputes over decades, but the new Bill rearranges provisions, potentially reopening settled issues.
- Reassessment Power Remains Vague: While the Bill retains the tax authority’s power to reopen past assessments, it fails to clearly define critical terms like “risk management strategy”, which invites potential misuse.
Expansion of Search and Seizure Powers
- Digital Surveillance Powers: The Bill explicitly grants tax officials access to electronic data, emails, and social media accounts, significantly expanding government intrusion.
- No Judicial Oversight: Authorities can override digital security protections without judicial approval, raising privacy concerns under the Puttaswamy Judgment (2017).
- Risk of Data Exploitation: Unlike previous laws, officials can now legally search digital communications, creating risks of abuse and excessive state control over personal data.
Practice Question
Q. Discuss the importance of clarity and accessibility in taxation laws. How can excessive state control in tax administration be balanced with the need for effective compliance and enforcement?
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