The Indian government is likely to make the Income Tax Act simpler in the first phase review and is likely to continue the comprehensive review into the next fiscal year, with a second phase in FY26. While the current review, expected to be completed by early 2025, focuses primarily on simplifying the legal text and removing outdated provisions, the second phase will target more substantive reforms, a senior government official said.

“The second part of the Income Tax Act review will aim at simplifying compliance for taxpayers through substantive changes in dispute resolutions and other mechanisms,” the official told Moneycontrol. “It is not just about removing archaic provisions but making the entire structure more user-friendly. Compliance should be easier and smoother."

In its ongoing first phase, the government is concentrating on making the legal language of the Income Tax Act simpler, without altering the existing provisions. This part of the review is intended to make the Act shorter and easier to understand. "The Income Tax Act is being redrafted to simplify its language. The goal is to thin out the Act and make it simpler to convey the same meaning,” the official noted, adding that the revised Act is likely to be presented in the Union Budget for FY26.

The government is committed to simplifying the Act in a phased manner, with the first phase focusing on textual changes. "The first part of the review, which will culminate in early 2025, is primarily about rewriting the present formulation of the Act to make it less cumbersome without changing substantive provisions. The law is not being made less complex in terms of compliance yet, but it’s being made clearer," the official clarified.

"The second part of the review will remove substantive provisions and change them to ensure compliance is easier. Dispute resolution mechanisms will also be overhauled to make the law more taxpayer-friendly," the official explained.

“The government is committed to simplifying the Income Tax Act with both substantive and textual changes," the official emphasised, indicating that the two-part review is expected to bring long-term benefits to taxpayers and improve India’s overall direct tax administration system.