The comprehensive review of the six-decade-old Income Tax Act should scrap redundant sections and sub-sections and go for one rate of tax and no surcharge and cesses as they only complicate the language, tax experts said.

They have also raised concerns that the ambitious six-month timeline for the overhaul could limit the scope of changes.

“There are various slabs applicable for a surcharge and then a cess is levied additionally. Ideally, there should just be one rate of tax and no surcharge and cesses as those only complicate the language," Ashish Mehta, partner, Khaitan & Co, said.

"A higher rate of tax may be prescribed for income slabs exceeding a certain threshold to compensate for the loss of revenue on account of surcharge and cess. Certain provisions under the Income Tax Act such as sections 11 and 12 relating to charitable trusts could be simplified,” Mehta said.

The Central Board of Direct Taxes (CBDT) has set up an internal committee to oversee the review process.

Officials have indicated that the CBDT panel would look into rationalising exemptions and deductions, removing duplications, bringing computation methods in line with international standards and further streamlining the tax appeals process.

Over 100 sections, sub-sections and clauses in the area of exemptions or deductions in telecom, special economic zones and capital gains are expected to be scrapped from the existing I-T Act, 1961.

Mehta said “in terms of tax withholding provisions, there are dozens of sections providing for TDS / TCS on various transactions at various rates. There should be consolidation of these provisions as well as rates to streamline the compliances.

"There are various provisions such as sections 10A, 10B, etc which had sunset clauses requiring taxpayers to begin production/activity by a certain date that has lapsed.

"Additionally, there are a lot of deductions (like sections 80HHA, 80HHB, etc) that were linked to setting up / activities undertaken in the past, which have lapsed. These sections may be relevant from a pending litigation perspective but can certainly be dropped from the statutes with a view to simplifying them.”

Gouri Puri, partner, Shardul Amarchand Mangaldas & Co, said: “The government has made significant efforts this year to ramp up the Indian income tax statute. It began with the rationalisation of angel tax and capital gains tax regime. Revisiting the tax law to simplify compliance and facilitate ease of doing business in India has become essential.”

Nikhil Tiwari, tax partner, EY India, said: “This move is critical and in line with the Government's plan to reduce the overall tax litigation, as recently the department's right to file appeal at various appellate forums has been restricted by enhancing the monetary limit above which only can they file appeals before the tribunals and courts.”

However, there are concerns about the six-month timeline set for the review.

Narayan Jain, president of the All India Federation of Tax Practitioners, highlighted the time and effort previously invested in the unfinished Direct Tax Code project. He fears a compressed schedule could limit the scope of the I-T Act revisions.