View: Apart from simplifying matters, the new Income-Tax Bill is a big step for the system to rewire itself

India's much-awaited Income-Tax Bill 2025, replacing the country's 6-decades old incumbent framework, has been welcomed by a vast majority of professionals, businesses and citizens. That's not surprising for a society that has come such a long way, from even just a decade ago, with respect to the quality of its business environment, its accelerated digital transformation and explosion in its entrepreneurship. This tax bill seems perfectly timed with its promise to:

• Simplify and ease conduct of business

• Bring clarity to policy and reduce scope for tax disputes

• Institutionalise a reliable digital knowledge base of our tax environment to streamline tax administration

In many ways, India's recent transformation has been both relentless and holistic. The nation's appetite to simplify, make transactions transparent and create a foundation for ongoing progressive change led to the birth of its unique digital identification system, Aadhaar. This created a foundation for simplification of direct benefits transfer, also paving the way for quick and easy verification of identity for numerous other citizen services like banking, mobile phone connections, DMAT accounts and more.

The next wave of reforms brought in ease and efficiency of financial transactions. GSTN, too, built its indirect taxation platform to help taxpayers prepare, file returns and streamline indirect tax payments. Likewise, the I-T portal started to enable taxpayers to file returns using prefilled forms, faceless assessments, online payments and leveraging personalised dashboards while centralising the processing of returns and refunds. Citizens also got greater flexibility and more instruments to make tax remittance through TIN 2.0.

I-T Bill 2025 is taking the simplify-clarify-amplify approach another step forward. The existing law, over the past 60 years, has seen several incremental amendments that incorporate specific court rulings, clarify legislative intent and furnish specific explanations. Nirmala Sitharaman, in her 2024 budget speech, emphasised the need for a comprehensive review of the I-T Act to make it lucid and easy to understand.

This, she reiterated in her 2025 budget speech, is a key pillar to realise the vision of 'Viksit Bharat'. The new bill, indeed, brings a fresh vision akin to the approach embraced by countries like Britain and Australia. It strikes a fine balance between simplification and legislation, as is evidenced by the response of stakeholders like taxpayers, businesses, industry associations and professional bodies.

It whittles down redundancies and simplifies language for both payers and administrators. In fact, the number of words in the new bill is down to 2,59,676 from the earlier 5,12,535. Further, the streamlining of processes through digitalisation and improved transparency in policies will go a long way in easing compliance and reducing tax litigations.

So, what will drive amplified progress?

• The tax bill judiciously provides for the Charter of Taxpayers to be codified into the Act. The Direct Tax Board can also issue such orders, instructions, directions or guidelines to other I-T authorities, as it considers fit, for the administration of the charter. Codifying Charter for Taxpayers will prove to be a vital instrument in building a trustworthy and equitable tax system that ensures fairness, transparency and accountability in administration.

• The bill, prudently, doesn't propose major changes to tax policies or rates. This serves well to establish continuity and certainty on key fiscal legislation.

• Simplifying processes, reducing compliance burdens and focusing on certainty and clarity of legislation will go a long way in attracting foreign investment and accelerating economic growth-driving activities in the country.

The proposal to codify and digitise processes such as declaration for TDS, lower tax deduction certificate, etc., will work to reduce errors and delays associated with human intervention while bringing in greater transparency. Effective tech-support, naturally, will be key.

• Greater digitalisation of tax processes means that, over time, digital storing of data and insights can be harnessed to drive intelligent AI algorithms and amplify policy environments to realise India's growth aspirations.

The real test of the merits of the new I-T Bill is premised on how it is implemented by tax administrators. Effective management of litigations arising from transition to the new tax laws will be key. Continued focus and commitment to digitise and efficiently support tax administration will determine the extent of progress. Substantive efforts still need to be made to manage the extent of compliance needed. Creative approaches would need to be embraced to expeditiously tackle the resolution of disputes and litigations already in the system's backlogs, because these are inadequately addressed by the new bill.

To make any transformation really work, the system needs to rewire itself. Rarely, if ever, is this a one-and-done project. Our policymakers, and supporting ecosystem, will need to continue to navigate this journey over the years, ensuring our policies and programs are as progressive as our expanding vision for India. The I-T Bill 2025 is a giant step in the right direction.

The writer is chairman-co-founder, Infosys, and former chairman, UDAI (Unique Identification Authority of India)