Context:
Despite several reforms, tax disputes continue to rise in terms of monetary value. Various governments have attempted to simplify taxation, but legal battles persist. The government now plans to introduce a new Income Tax Bill to streamline tax laws and reduce litigation.
Previous Efforts to Reduce Tax Disputes
- Direct Taxes Code (DTC) Bill (2010)
- It was proposed to replace the Income Tax Act, 1961. It focused on simplifying tax slabs and reducing exemptions. It lapsed with the dissolution of the 15th Lok Sabha.
- Arun Jaitley’s Approach (2015-16)
- Allocated the introduction of a new DTC Bill to the dustbin.
- Instead, rationalized corporate tax rates.
- Modi Government’s Reforms
- Introduced a new tax regime with multiple slabs.
- Corporate tax overhauled in 2019, reduced rates, but limited exemptions. Fewer exemptions = Fewer disputes.
- Introduced a new tax regime with multiple slabs.
Key Initiatives to Reduce Litigation
- Faceless Assessment – Reduced human interface.
- Taxpayers’ Charter – Rights and transparency.
- Early Tax Returns – Almost 99% of returns are self assessed.
- Vivad se Vishwas Scheme (VVS) 1.0 & 2.0 – Settlement schemes for tax disputes.
- VVS 1.0 (2020): Settled ₹99,756 crore across 1,46,701 disputes.
- VVS 2.0 (2024): Used by 33,000 taxpayers whose deadlines ended in January.
Tax Disputes Continue to Rise Despite Reforms
- Tax disputes pending before various tribunals have increased over the last years except in 2021-22.
- Corporate tax disputes were 52% higher in value terms as compared to personal tax disputes during 2023-24.
- Government increased monetary limits for appeals:
- ITAT: 15 times increase.
- High Courts & Supreme Court: 20 times increase.
Soon to be tabled in Parliament the Upcoming Income Tax Bill (2024-25).
