The Survey was conducted to gather insights from industry leaders regarding the ongoing review of the Income-tax Act, 1961.
The Government of India had, in July 2024, announced to undertake a comprehensive review of the Income-tax Act, 1961 (‘the Act’). The aim is to make the Act concise, lucid, easy to read and understand, which will reduce disputes and litigation, thereby providing tax certainty to the taxpayers.
While the simplification exercise is underway, KPMG in India conducted a survey in January 2025 to capture industry views and expectations therefrom. The survey covers views from over 200 respondents comprising of executives from the following sectors – Industrial Manufacturing, Automotive, Financial Services, Consumer Markets, Infrastructure, Energy and Natural Resources, Technology, Life Sciences, Healthcare and Pharma and others.
Key highlights:
1. Priority Areas for Tax Simplification
- 84% of respondents identified dispute/litigation simplification as the most critical need.
- 64% believe that TDS (Tax Deducted at Source) provisions, which currently cover 30+ transaction categories, should be simplified.
- Other areas requiring attention include capital gains taxation (43%), business income calculation (38%), and transfer pricing (50%).
2. Interpretation & Certainty in Tax Laws
- 96% support the creation of a government-published income-tax commentary, similar to the OECD model, to provide clarity.
- 93% want existing beneficial clarifications from tax circulars/notifications to be incorporated directly into the Income-tax Act.
3. Dispute Resolution & Litigation Reduction
- More than 6 lakh tax cases are pending, with 5.5 lakh at the CIT(Appeals) level.
- 69% support introducing a mediation/arbitration scheme to facilitate early and amicable dispute resolution.
- 62% believe allowing tax authorities to appeal Dispute Resolution Panel (DRP) decisions would enhance its effectiveness.
- 98% want mandatory timelines for disposal of appeals by CIT(A) to reduce litigation backlog.
4. Making Compliance Easier
- 61% prefer a hybrid model for interactions with tax officials (part faceless, part physical meetings).
- 35% support full transition to faceless mode, but 4% still prefer offline interactions.
- 87% advocate removing mandatory TDS certificate issuance, as the same information is already available in Form 26AS.
- 64% suggest that TDS credit should be given based on Form 26AS, regardless of when the corresponding income is taxed.
5. Corporate Tax Rates & Compliance Regime
- 58% favor reducing corporate tax rates, citing high effective tax rates, including dividend taxes.
- 34% believe the current rates are fine, and 7% want reductions only for non-resident companies.
- 43% say the simplified/concessional tax regime has eased compliance, while 24% disagree, and 33% have not yet adopted it.
6. Timelines & Reporting Improvements
- 82% want the deadline for filing belated/revised returns extended to March 31 of the relevant assessment year.
- 94% suggest reorienting the transfer pricing safe harbor rules to make them more effective and attractive.
7. Challenges with Faceless Assessments
- While 61% support faceless interactions, 41% say faceless assessments have not reduced aggressive/high-pitched assessments.
- 60% believe CIT(A) appeals should be taken out of faceless mode for better dispute resolution.
