Income Tax Policy Survey

• Interpretation of tax law and computing taxable income/tax payable are the key challenging areas in the Income Tax Act (ITA).
• Respondents emphasized the need to streamline the tax regime to provide greater certainty for taxpayers.
• The use of technology to assist taxpayers in the ITR filing process received the highest praise, with 61 percent of respondents rating these initiatives as successful or very successful.

National, 4 December 2024: As the Finance Ministry reviews the Income Tax Act, a Deloitte Touché Tohmatsu India (Deloitte India) survey shows that 94 percent of industry leaders prioritise simplifying tax laws, while 43 percent call for improved tax dispute resolution mechanisms. The goal is to enhance tax certainty, reduce ambiguities, minimise litigation, boost investor confidence and improve taxpayer services.

Tax reporting complexities hinder the ease of doing business, especially for small firms struggling with burdensome compliance. Over 70 percent of these businesses emphasized the need for simpler processes. Additionally, businesses are concerned about the high time and cost of tax litigation, highlighting the need for streamlined and efficient dispute resolution.

Despite these challenges, 61 percent of respondents appreciated recent reforms, particularly the integration of advanced technology through the Annual Information Statement (AIS) and Taxpayer Information Summary (TIS) tools. These pre-filled tax returns have simplified access to financial data, reducing the time spent on data collation and encouraging higher voluntary compliance, as reflected in the rise in tax returns filed over the past two years.

Gokul Chaudhri, President – Tax, Deloitte India, said, “To enable its full economic potential and establish itself as a growth leader, India has an opportunity to revamp the tax framework that is simplified and digitally advanced. The government has made commendable strides with initiatives such as GST simplification, e-invoicing and faceless tax assessments. There is an opportunity for fair value computations and ease in preparing and filing income tax return forms for individuals. A modernised tax system, aligned with recent government initiatives, would enhance compliance, drive growth and bolster India’s competitiveness on a global scale.”

Additionally, 74 percent of respondents highlighted the need to simplify and streamline the return filing process. Executives stressed the importance of clear guidelines and stronger reporting standards within the TDS system to improve compliance and business efficiency. Businesses also called for faster dispute resolution, timely appeal processing and an end to repetitive assessments. Key reform suggestions include a streamlined patent regime, simplified hiring exemptions and a “one rate, one section” model for TDS to reduce compliance burdens.

Amrish Shah, Partner, Deloitte India, said, “In a welcome move, the Honourable Finance Minister, in her Budget Speech for the fiscal year 2024–25, announced the historic initiative of reviewing the existing income tax law, an exercise aimed at simplifying the law, making it easy to read and comprehensible, thereby reducing disputes and litigation and providing tax certainty. This move is well aligned with the policy objective to revamp the economic and commercial legislations to suit the economic needs of India, a nation aiming to become one of the top three economies of the world in the next five years.”

The survey offers a detailed analysis of India’s evolving business and professional needs to sustain economic growth and retain its position as the fastest-growing economy. It recommends streamlining transfer pricing regulations by adopting global best practices and reducing tax complexities through proactive measures that ensure clarity and alignment of rules to support effective business structuring.

The survey revealed strong industry support for introducing tax laws that promote manufacturing, advance ESG priorities and foster innovation and R&D as key drivers of economic growth. About 71 percent of respondents emphasized the need for tax incentives to boost domestic manufacturing, enhancing the sector’s growth and job creation potential. The government can use income tax as a strategic tool to position India as a hub for multinational R&D centres. Legislators must introduce targeted incentives to drive research, innovation and manufacturing, acting as a catalyst for employment generation and economic expansion.

As the Union Budget approaches, these survey insights provide crucial guidance for developing policies that align with India Inc.’s needs. By modernising the tax framework, improving dispute resolution and optimising tax incentives, India can unlock growth, enhance competitiveness and attract global investment, supporting its vision of becoming a “Viksit Bharat.”

About the survey

Deloitte India LLP conducted the Income Tax Policy Survey in an online mode, engaging over 320+ industry professionals across a spectrum of industries, including technology, media and telecommunications; financial services; life sciences and healthcare; consumer; energy, resources and industrials; and government and public services. The survey assessed the impact, challenges and organisational preparedness for digital tax administration.

The respondents included C-suite executives, general managers, finance directors, presidents, and finance and taxation managers. The survey identifies key areas of improvement and reforms necessary to enhance the effectiveness of the income tax policy framework and support economic growth.
This press release has been issued by Deloitte Touche Tohmatsu India LLP.
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