New Income Tax Bill likely to introduce ‘tax year’
In a move aimed at simplifying the income tax compliance process, the new Income Tax Bill is expected to introduce the concept of ‘tax year’ in place of the current ‘assessment year’. As per reports, the change is being made to address the confusion that many taxpayers face when filing taxes, often mistaking the ‘assessment year’ with the ‘financial year’ (previous year).
The ‘tax year’ concept is expected to follow the same 12-month period as the financial year, ranging from April 1 to March 31. This change is likely to make tax compliance easier and more straightforward for taxpayers.
Currently, the income tax laws in India follow a system where the ‘assessment year’ is different from the ‘financial year’. The financial year runs from April 1 to March 31, while the assessment year runs from April 1 of the next year to March 31 of that year. This dichotomy often leads to confusion among taxpayers, particularly those who are new to filing taxes.
For instance, the financial year 2022-23 ends on March 31, 2023, but the assessment year for that financial year will be 2023-24, which begins on April 1, 2023, and ends on March 31, 2024. This time lag can be confusing, especially for those who are not familiar with the tax laws.
The introduction of the ‘tax year’ concept aims to eliminate this confusion and make the tax filing process more streamlined. Under the new system, the tax year will run concurrently with the financial year, making it easier for taxpayers to keep track of their tax obligations.
The change is also expected to simplify the tax compliance process for taxpayers, as they will no longer have to worry about the assessment year being different from the financial year. This will reduce the likelihood of errors and omissions in tax filing, which can lead to penalties and fines.
The ‘tax year’ concept is not unique to India. Many countries, including the United States, have a similar system where the tax year runs concurrently with the calendar year or the financial year.
The introduction of the ‘tax year’ concept is likely to have a positive impact on the overall tax compliance process in India. It will make it easier for taxpayers to understand their tax obligations and file their taxes on time. The change will also reduce the burden on the tax authorities, as they will no longer have to deal with the complexities arising from the difference between the assessment year and the financial year.
In conclusion, the introduction of the ‘tax year’ concept in the new Income Tax Bill is a welcome move that aims to simplify the tax compliance process in India. The change will make it easier for taxpayers to understand their tax obligations and file their taxes on time, reducing the likelihood of errors and omissions. As the tax laws in India continue to evolve, it is essential to stay informed about the latest changes and updates to ensure compliance and avoid any penalties or fines.
