Review of customs duty rates to be completed before next Budget, first draft of revised Income Tax Act likely to be ready by then, says Revenue Secretary

Revenue Secretary Sanjay Malhotra said on Friday that the review of customs duty rates is likely to be completed in time for the Union Budget 2025-26, while efforts are underway to have at least a first draft of the revised Income Tax Act ready by then.

“Yes, the effort is to have the first draft of the revised Income Tax Act ready before the next Budget,” Malhotra told BT, indicating that the final version could take longer due to the need for more consultations.

Both review exercises will start immediately, with internal committees of officials being set up for these tasks.

The customs duty review will be completed before the Budget and will be a comprehensive exercise. “The purpose of the review is to reduce the number of rates and rationalize them to avoid classification disputes,” Malhotra explained.

In the Union Budget 2024-25, Finance Minister Nirmala Sitharaman announced a comprehensive review of the customs duty rate structure over the next six months to rationalize and simplify it for ease of trade, removal of duty inversion, and reduction of disputes. She also announced a review of the Income-tax Act, 1961, to make it concise, lucid, easy to read and understand, and to reduce disputes and litigation.

Commenting on the Budget announcement to abolish the angel tax, which has been a concern for startups and investors, Malhotra said it was proving to be a deterrent for investors. He clarified that past notices to companies will continue as per the law.

“In a budget focused on growth and employment generation, it was deemed fit to remove this irritant,” Malhotra said about the decision to abolish the angel tax.

He elaborated that while the angel tax was an anti-avoidance measure to deter money laundering, it also impacted investments. “It is difficult and impossible to value companies objectively. Even though the instances of its incorrect application are very small, its ramifications and impact are significant,” he noted, adding that companies are hesitant to invest due to uncertainty about receiving notices.