India Unveils Sweeping Income Tax Reforms to Simplify Compliance
The Indian government has released draft income tax rules that promise to significantly reduce the compliance burden for taxpayers. These new regulations, set to replace the 1962 Act from April, aim to streamline processes by cutting down on forms, declarations, and leveraging technology.
Major Simplifications for Senior Citizens
A key highlight is the simplification for individuals aged 75 and above. The tax department has proposed transforming Form 12BBA into a basic authorization document. This allows eligible seniors to authorize their banks to compute and deduct taxes automatically. The revised form reduces the number of fields by approximately 46%, potentially eliminating the need for many seniors to file returns altogether.
Reduced Non-PAN Declaration Requirements
Under the current system, individuals without a Permanent Account Number (PAN), such as minors, must file Form 60 for 21 different transactions, generating around 13 crore declarations annually. The new rules drastically cut these non-PAN declaration requirements. No filings will be necessary where data is already accessible through banking systems or digital payments, as announced by the government on Monday.
Faster PAN Issuance and Higher Transaction Limits
The draft rules also focus on expediting PAN issuance, which receives about five crore applications yearly, through new simplified forms. Furthermore, the transaction limits for quoting PAN have been raised across several categories:
- Cash deposits or withdrawals: PAN will be mandatory for transactions totaling Rs 10 lakh or more in a financial year, up from the current requirement of Rs 50,000 in a single day.
- Vehicle purchases: The threshold for quoting PAN when buying motor vehicles has been increased. Currently, PAN is required for purchases exceeding Rs 5 lakh, with two-wheelers exempted.
- Other transactions: Limits have also been raised for property purchases and hotel bill payments.
Embracing Digital Economy and Updating Perquisites
The proposed rules incorporate modern financial developments. Central Bank Digital Currency (CBDC) will be recognized as an accepted mode of electronic payment. Additionally, cryptocurrency exchanges will be mandated to share information with the tax department, enhancing transparency in the digital asset space.
In line with current market conditions, the value of tax-free perquisites provided by employers, such as official vehicles and free meals, is proposed to be enhanced. Officials stated that the overarching goal is to capture only relevant information while leveraging technological advancements from reporting entities under the Income Tax Act.
Stakeholder Consultation and Finalization Timeline
Released for public comments on Saturday, these draft rules are open for stakeholder feedback. The government expects to finalize the regulations by the first week of March, paving the way for implementation in the upcoming financial year.
