New Income Tax: While Australia took 3 years and UK even longer, how did tax reforms in India happen in 6 months? | Mint

India’s income tax law has recently undergone a major reform with a new Bill having been introduced in the Lok Sabha on Thursday and proposed to be reviewed by the select committee.

The new Income Tax Bill aims to make the tax legislation simpler, concise and easy to read, so that there is less litigation arising out of complex provisions. Recently, income tax department also released a set of FAQs (frequently asked questions) to highlight what lessons they learnt from other countries.

Although this is a historic move in the context of Indian tax law, similar steps have been taken in other countries as well.

For example, this exercise was done in the UK during the period 1994 to 2010 for simplifying the language i.e., a total of 16 years. When something similar was done in Australia in late 1990s (during 1994 to 1997), it took around nearly three years.

On the contrary, India took merely six months to come up with a simpler draft.

Last year, Finance Minister Nirmala Sithraman on July 23, 2024 announced that the income tax law will undergo a comprehensive review. That time, she had given a timeline of six months i.e., until Jan 23, 2025.

Thereafter on Feb 1, 2025 during the Budget speech she mentioned that the exercise has been completed and the new Bill will soon be rolled out. Eventually, Ms Sitharaman introduced the new Bill in Parliament on Feb 13 and sought review by select committee.

Long or short

When something similar was done in the UK, it was divided into five separate Act with their page count increased. This led to a more segmented but a bigger tax law overall.

The same thing happened in Australia when a similar exercise led to a longer tax code.

These international experiences emphasise the delicate balance between simplification and the need for clear, unambiguous legal language. Drawing from these lessons, effort has been made to focus not just on linguistic simplification but also on structural rationalisation.

Consultations included

The Central Board of Direct Taxes (CBDT) has also revealed that consultations were held with the taxation authorities of other countries which had undertaken similar exercise in the recent past. These include Australian Tax Office and Treasury, and the UK’s Office of Tax Simplification.

Aside from this, the documents prepared in 2009 and 2019, were also referred, while undertaking the exercise. In order to simplify the language, they also referred to international and national guidance material which include ‘Drafting Guide for Simplification of Laws’ issued by Legislative Department, Ministry of Law and Justice.

The tax department also received a total of 20,976 online suggestions for simplification and removal of redundancies which were analysed and divided into relevant categories.