A recent Deloitte survey highlighted widespread support for simplifying income tax processes in India, particularly for individual taxpayers. The survey, which collected responses from over 320 industry professionals, calls for several changes to reduce the complexity of income tax filing and compliance.

Simplified ITR Forms for Individuals and Corporates
One of the major requests from respondents, with 74% of the participants supporting it, is the need for simpler Individual Tax Return (ITR) forms. The survey points out that a large number of taxpayers struggle with the complexity of these forms, which often leads to errors and delays. Furthermore, nearly 71% of respondents also advocated for the simplification of corporate ITR forms to make the filing process more user-friendly for businesses.

Easier Computation of Incentives and Deductions
The survey found that a significant 76% of respondents were in favor of simplifying the process of calculating eligible tax incentives and deductions. This indicates that taxpayers find it challenging to correctly understand and compute their tax-saving opportunities, which is a critical part of the filing process.

Streamlining TDS Framework: 'One Rate, One Section'
Deloitte suggests a major overhaul of the Tax Deducted at Source (TDS) framework. The recommendation is to limit the number of sections related to withholding tax, which would involve classifying payments into just two or three distinct categories. More importantly, each section should have a single, uniform tax rate. For example, 1% TDS on tangible goods, 2% on services, 0.1% on e-commerce transactions, and 10% on other transactions like dividends and interest. This simplification would reduce the compliance burden without affecting tax revenue significantly.

Eliminating Form 16A
Another key suggestion is to eliminate the requirement for Form 16A, a document issued to employees detailing the TDS deductions made from their salary. This would be redundant, according to the survey, as all the relevant TDS information is already available in the Form 26AS and the Annual Information Statement (AIS) of the taxpayer. Removing Form 16A would streamline the documentation process and reduce unnecessary paperwork for taxpayers.

Tax Audit Report Simplification
The survey also emphasizes the need to simplify tax audit reports. Approximately 73% of the respondents expressed concerns about the complexity of tax audits. Simplifying the tax audit process would ease the burden on businesses and individuals required to file these reports annually.

Improving Foreign Tax Credit and Fair Value Computation
Nearly 73% of respondents favored simplifying the computation methodology for foreign tax credits and the fair value of assets and property. This would help taxpayers, particularly those involved in international transactions, to better understand and compute these values without excessive complexity.

Towards a Simpler Tax Law
Deloitte advocates for a simpler and more coherent income tax law. The suggestion is to avoid using legal provisos and instead integrate the text into clear, easy-to-understand sentences. The goal is to make the law more readable and accessible to taxpayers, ensuring that the logical functions of tax provisions are more apparent. Combining related sections, currently scattered across different parts of the tax statute, into one cohesive chapter could make the law more structured and less confusing.

The overarching theme of the survey is the need for a tax system that is simpler, more efficient, and less burdensome for taxpayers. By reducing complexities, the government can improve compliance rates while maintaining effective tax collection. These changes would lead to a more taxpayer-friendly system, ensuring that filing and compliance processes are manageable for both individuals and corporates.