New Tax Bill Simpler Law, More Lawsuits

 

An expert warns the new bill won’t reduce confusion until the old and new tax systems are merged, potentially increasing legal challenges for taxpayers.

The government’s new Income Tax Bill 2025 is designed to simplify tax law, but a leading academic warns it could actually lead to more legal disputes. Dr. Saumya Aggarwal from Delhi’s Shri Ram College of Commerce (SRCC) argues that as long as two separate tax regimes exist, confusion and litigation are likely to rise, not fall, creating new headaches for taxpayers.

The Core Problem: Two Systems Create Confusion

While the new law simplifies language and reduces the number of sections, Dr. Aggarwal believes it fails to address the root cause of taxpayer confusion: the parallel existence of old and new tax regimes. Taxpayers must constantly choose between the two, leading to uncertainty and potential errors that could end up in legal disputes.

"The litigation will only increase, and confusion will continue for the next few years until both the tax regimes are merged," she stated in a recent interview. She explained that while the new bill is a step toward simplicity, its benefits are undermined by the complexity of maintaining two different systems.

Impact on Middle-Class Savings

Dr. Aggarwal also raised concerns that the new tax regime, in its current form, discourages saving among middle-class families by removing popular deductions. To counter this, she suggests reintroducing a few key tax breaks to encourage financial prudence.

"Some deductions should be allowed to mobilise savings among the middle-class," she recommends. "For instance, 80D (medical insurance premium), contribution to PPF, term insurance, and deductions for disability should be restored." This would make the new regime more attractive while also promoting long-term financial security for taxpayers.

A Step-by-Step Guide for the Current Filing Season

With the September 15 deadline approaching, Dr. Aggarwal offers clear advice for taxpayers:

1. File Early: Don't wait until the last minute. "The portal can get slow towards the end, and taxpayers would then have to face hassles," she advises. Late filing can lead to interest penalties and prevent you from carrying forward any capital losses.
2. Disclose Everything: Be sure to report all sources of income, including exempted income like certain capital gains or agricultural income. If you own assets outside India, they must be disclosed in the appropriate ITR form.
3. File Your Own Return: For most salaried individuals using ITR-1 or ITR-2, Dr. Aggarwal strongly recommends filing the return yourself. "The utility is Java-based and quite simple," she notes. "If you make a mistake, you can revise the return any number of times." However, for business income, she suggests consulting a chartered accountant.

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