Income Tax Act 1961: What is It, Its Relevance Today, and The New Budget 2024-2025

In the Customs and Income Tac, all the services under GST are set to be made paper-less. Yes, these are to be made digitalized in the coming two years, and this is one of the many changes expected ahead, as Ms. Nirmala Sitharaman, the  Union Minister of Finance and Corporate Affairs brought forward the Union Budget 2024-2025 in the Parliament. The Finance Minister expressed that it has been a constant effort of the government to make the taxation process easy for all, and to enhance the tax payer service while lessening the litigation.

The Finance Minister of India has been well acknowledged by the tax payers in the country. She further said that aboutv58 percent of the corporate tax actually came from the simplified tax regime in the financial year of 2022-2023. Additionally, more than two-thirds have actually chosen fir the new personal income tax regime, in the previous fiscal year according to the Information available to the Finance Minister.
Also, she further expressed one more measure to bring the disputes and the tax-uncertainty down. This could be done through a rather simplification of the reassessment. The Finance Minister expressed that an assessment could be reopened beyond three years from the end of the assessment year. In case the escaped income is either Rs 50 lakh or more than that, up to a period of five yeas from the end of the assessment year. 
The Finance Minister further expressed the details that in search cases, there exists a time period of six years prior to the year of search, as against the time period of 10 years.

The Finance Minister brought about the tax simplicatio process of TDS and for charities while presenting the bill. She explained that the two tax exemption regimes for charirties are actually to be merged into one single tax regime. The TDS rate of 5 percent on many payments is actually going to be merged into 2 percent TDS rate. The 20 percent TDS rate o repurchase of units by UTI or mutual funds is going to be withdrawn.

Sitharaman underlined the digitalization of all the important tax payer services under the GST and services under the Customs and Income tax, and declared that all the rest of the services including order giving effect to appellate orders an rectification are also going to be paper-less and made digitalized in the upcoming two years.

The Finance Minister acknowledged the good results seen at the multiple appellates.

"I am announcing a comprehensive review of the Income Tax Act of 1961. This will help reduce disputes and litigation, and it is expected to be completed within six months." is what the Finance Minister Nirmala Sitharaman stated. 

Here's a look at the Income Tax Act of 1961.

Income Tax Act of 1961

The Income Tax Act of 1961 is a set of rules and regulations. It is on these rules that the Income Tax Department of the country levies, administers, gathers, and recovers taxes. It carries 298 sections and 23 chapters, along with some essential provisions containing all the taxation aspects in the country.

It is important to note that the nature of the Income Tax Act of 1961 is direct. This means that the taxpayer is to pay direct taxes at a specific percentage according to the income of the taxpayer.

One key objectives of the Income Tax Act 1961 is Price Stability. The IT Act aims to maintain price stability in the economy. It can be done by means of laying out regulations for direct taxes. The Income Tax Act of 1961 serves a means to control private spending. It keeps a check on the inflation of commodity prices.

Salient Features of the Act

As per the Income Tax Act of 1961, the income tax is a kind of direct tax that requires to be borne by the taxpayer. The tax cannot be transferred to another individual.

Additionally, the Central Government of India controls this kind of taxation.

The Income tax is applicable to the income of the taxpayer which was earned in the previous year.

The tax calculation is application according to the income tax slab of the assessee.

Relevance of the Act

The Act stands as a significant piece of legislation in the country. The Income Tax Act of 1961 governs the income tax system of the country.

First things first, the Act enables regulation of income tax. The Act lays down the regulations and rules for the imposition, calculation, and collection of income tax from the businesses and individuals in the country.

The Income Tax Act enables revenue generation. The Act offers a possibility for systematic revenue collection, which is important for funding public services, development projects, and infrastructure.

Comprehensive Review of the Income Act of 1961

The Finance Minister talked about "a comprehensive review of the Income-tax Act of 1961."

According to the Finance Minister, the purpose of doing the same is to make the Act "more lucid, concise, and easy to read and understand." The purpose is to reduce disputes and litigation. This, according to the Finance Minister, will be providing tax certainty to the tax payers.

The efforts are expected to get finished in about six months, and these efforts are meant to reduce litigation. “beginning is being made in the Finance Bill by simplifying the tax regime for charities, TDS rate structure, provisions for reassessment and search provisions and capital gains taxation.”

Nirmala Sitharaman, the Finance Minister said “a beginning is being made in the Finance Bill by simplifying the tax regime for charities, TDS rate structure, provisions for reassessment and search provisions and capital gains taxation.”

Finally, the new changes introduced

In the Union Budget 2024 speech, Finance Minister Nirmala Sitharam has brought forward some key changes to the new income tax regime.

The new income tax regime tax slabs:

The changes include new income tax slabs for FY 2024-2025, along with a hike in the standard deduction. 

Earlier, the standard deduction was Rs 50,000, but it is now hiked to Rs 75,000.

Additionally, the tax slab limit for tax rate of 5 percent was changed to Rs 7 lakh to Rs 5 lakh.

The capital gains tax regime was changed. The tax rates were increased.

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