The simplicity in tax complexity

Income Tax Act 2023 opens a fresh chapter in the country's financial story. For many years, paying taxes felt like facing a maze, endless forms, confusing rules, and a silent distance between citizens and the tax authority but the new law tries to change that feeling.

It brings clarity, ease, and a spirit of partnership between people and the state. Its main goal is simple -- help every citizen understand their tax, accept it with confidence, and proudly play a role in building the nation.

This law is more than just a tool to collect revenue. It's a promise of trust, a new kind of social understanding. Paying tax is no longer a fearful duty; it's a sign of responsible participation. It means you're helping to shape your country's future, quietly but meaningfully.

Final Settlement of Tax Liability

Under Section 163 (11) of the Income Tax Act, 2023, any income on which tax is deducted at source, meaning the tax is withheld at the time the income is received — will be treated as final tax liability.

This means that no further tax calculation is required for that income. In other words, such income will not be added to the taxpayer's total taxable income, and the deducted amount will be considered the full and final payment of tax.

Simply put, if you earn income such as profit from savings certificates, export incentives, or capital gains from selling property, and tax has already been deducted at source, that deduction completes your tax responsibility for that income.

The state considers it fully settled, freeing you from additional calculations or assessments.

Incomes Covered Under Final Tax Liability

Under the final tax liability system, certain categories of income are treated as fully taxed once the applicable tax is deducted at source, freeing individuals from further inclusion of such income in their total income or from being taxed again at regular rates.

These categories include profits from savings certificates, compensation received for property acquired by the government or any authority, and cash incentives granted to exporters.

Capital gains arising from the sale or transfer of property are also covered under this system, with the tax withheld at source serving as the final discharge of liability.

Individuals earning solely from operating commercial motor vehicles are likewise subject to this regime, where the advance tax paid on such vehicles is deemed final.

However, if they declare income exceeding the amount implied by that advance tax, the surplus is taxed at regular rates.

Furthermore, for individuals exempted from filing income tax returns, the tax deducted at source on their income is treated as final, ensuring a simplified and conclusive taxation process.

This framework simplifies the tax system. When taxes deducted at source are treated as final, taxpayers know exactly where their liability ends.

Such clarity fosters trust ; and trust is the foundation of an ethical economy. After all, the strength of an economy is not measured only in numbers but in fairness.

This law strengthens that sense of justice.

When citizens realize that the state views them not as subjects but as partners, tax payment ceases to feel like an obligation and becomes a source of pride.

Perhaps, one day, taxpayers will truly say, "I pay taxes because I have a stake in this nation." That day will mark the true horizon of simplicity hidden within the complexity of taxation.

However, even if one is subject to final settlement of tax liability, filing a return is still mandatory; there is no exemption from submitting the return.

But this rule does not apply to those who have been exempted from filing returns.

The writer is the head of finance at Dot Birth Limited. He can be reached at [email protected]