I-T Department Releases Draft Rules and Forms for New Income Tax Act 2025 Seeking Public Input

The tax department has introduced draft rules and forms under the new Income Tax Act, 2025. This initiative aims to simplify tax provisions and lessen compliance burdens, making the process more user-friendly. The new act will replace the Income Tax Act of 1961 and is set to be effective from April 1. Stakeholders are invited to provide feedback on these drafts by February 22.

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In a bid to streamline processes, the draft Income-tax Rules, 2026, have been significantly condensed. The existing rules and forms from 1962, which include 511 rules and 399 forms, have been reduced to 333 rules and 190 forms. This reduction is achieved by eliminating redundancies and consolidating where possible. The department encourages stakeholders to review these changes and share their comments.

Focus on Simplified Forms

The newly designed income tax forms aim to ease taxpayer obligations. By standardising common information across forms, the compliance burden is expected to decrease. These smart forms feature automated reconciliation and prefill capabilities, enhancing the filing experience by making it more intuitive and less prone to errors.

Additionally, the language used in these forms has been simplified to prevent any operational or legal misunderstandings. This simplification is part of a broader effort to make tax provisions easier to understand and apply, benefiting both individuals and businesses.

Technological Integration in Tax Compliance

Grant Thornton Bharat LLP Partner Tax Richa Sawhney highlighted the emphasis on technology in these reforms. The pre-filled and reconciled forms are expected to cut down compliance time and minimise unintentional mistakes. This technological focus aligns with the department's goal of improving user experience.

Two navigators accompany the new draft rules and forms. One maps old rules to new ones, while the other does the same for forms. These tools are designed to guide stakeholders through the transition, ensuring clarity and understanding of the changes.

Rationalisation of Archaic Provisions

Nangia Global Partner Sandeepp Jhunjhunwala noted significant updates in perquisite thresholds like tax-free meal values at work and employer gifts. These changes align the tax framework with current economic conditions, addressing long-standing demands for reform.

Jhunjhunwala also pointed out revisions in defining an Accountant under the new act. Now, professionals with over ten years of experience and annual receipts exceeding Rs 50 lakhs qualify for certification purposes. For partners in accountancy or valuation services, annual receipts must surpass Rs 3 crore.

The proposed rationalisations are expected to simplify tax provisions further, aiding comprehension across all taxpayer categories. These changes aim to improve living standards and ease business operations by making tax processes more straightforward.

With inputs from PTI