The recently introduced Direct Tax Code 2025 aimed to simplify India’s tax regime as taxpayers long-sought more clarity and ease. To some extent it managed to achieve this goal, but industry players point to where it has failed and the need for structural reform.
An tax expert said, “While the stated intent is simplification, the rewording of key provisions has, in some instances, created ambiguity that may lead to greater litigation rather than ease of compliance,” at a seminar on Friday organised by the Bangalore Chamber of Industry and Commerce.
He quoted the changes in royalty taxation now expand the scope of income that is deemed to arise in India, such that it applies even when transactions occur between non-residents with no direct link to India.
Replacing terms such as ‘notwithstanding’ with ‘irrespective of’ may have unintended consequences, leading to the mandatory override of existing provisions without clear justification, he said, arguing that such modifications create uncertainty.
“There is a significant expectation gap between taxpayers, tax professionals, policymakers, and the Government of India. Taxpayers seek simplicity, expecting a new Income Tax Act to make compliance easier. The Income Tax Department, however, aims for amendments that expand its tax net,” pointed out K R Sekar, past president and mentor, another tax expert said.
He further highlighted the need for further simplification and structural reforms in order to prevent disputes. “The tax officers should be categorised—one handling assessments without revenue targets, another focusing solely on tax collection, and a third acting as a relationship manager for key taxpayers,” he urged.
Another tax expert pointed out that the complexity from the bill may be overwhelming for taxpayers. He said, “This Bill retains references to the Income Tax Act of 1961, requiring every taxpayer to cross-check both laws. Ambiguities remain in the transition provisions regarding the TDS credits under the 1961 Act to be carried forward. Another critical issue is the lack of an efficient appellate mechanism. The absence of mandatory timeframes for appeal disposal risks frustrating taxpayers’ rights.”
Source from: https://www.deccanherald.com/business/new-tax-code-simplification-is-an-unfulfilled-promise-2-3426900
