India’s Income Tax Act, 1961, is arguably among the most complex pieces of legislation in a country once known for its maze of Kafkaesque laws. Though enacted 14 years after independence, it extended the colonial legacy of antiquated, verbose language—full of ifs, buts and caveats—that made it nearly impossible to decipher, even for experts with decades of experience.
Over the years, more than 4,000 amendments further complicated the Act. The inevitable panoply of disputes and litigation have been a drag on the economy. While India improved its ease of doing business ranking from 142 to 63, between 2014 and 2020, our much lower rank of 115 in “paying taxes” parameter remained a persistent concern.
In 2014, Prime Minister Narendra Modi championed the ‘minimum government, maximum governance’ movement. Since then, over 1,550 antiquated laws have been scrapped—including relics like the 19th century toll on boats plying the Ganga. True to that spirit, Finance Minister Nirmala Sitharaman announced last year in Parliament that the Income Tax Act would undergo a drastic simplification.
Imaging: Deni Lal
This February, she presented the draft Income Tax Bill 2025 in the Lok Sabha. It was referred to a select committee of MPs—under my chairmanship—for review.
Importantly, the government had decided, as a first major step, to simplify the Income Tax Act as it existed, without introducing policy changes on applicability of taxes, exemptions or tax rates. The logic behind this—that the simplification of the tax code was a huge exercise in itself and needed to be implemented as the first major reform—was sound. This was a necessary precursor, which would make subsequent policy changes far easier to incorporate and implement.
The finance ministry and the Central Board of Direct Taxes deserve credit for their exhaustive work on the draft. They cut the word count by nearly half, modernised the language and reorganised provisions. The key objectives were to make the bill easy to understand, easy to comply with, and, thus, reduce disputes and litigation.
I was pleasantly surprised by my experience in the select committee. In my 25 years as an MP, I can say without hesitation that this was the most productive committee I have ever served on. Cutting across party lines, members worked with unprecedented cooperation, focussing on national and taxpayers’ interests.
Over hundreds of hours, we engaged in extensive consultations, and sifted through tens of thousands of pages of suggestions received from all over the country.
From micro-enterprises to large corporations, lawyers, accountants, taxpayers, industry bodies and non-profit organisations—every voice was heard. In the process, we made more than 300 recommendations to further simplify the bill, from minor grammatical changes (which sometimes have major interpretative repercussions) to substantive alterations. In a few cases, it was even felt that adding back a few words to some clauses would lead to further clarity.
We also received many suggestions that were beyond the strict mandate of our committee—relating to substantial policy changes and further reforms. I am sure they will be taken up for consideration in the coming months and years.
Ours was one of the rare, if not unique, committees that submitted its report on schedule, without seeking an extension. It took many late nights, but the effort was worth it. Any delay would have pushed implementation beyond the next fiscal year.
With Parliament expected to pass the bill in August, the stage is set for significant improvement in taxpayers’ experience.
Baijayant ‘Jay’ Panda is National Vice President of the BJP and a member of the Lok Sabha.