How the Union Budget 2025 aims to reduce Litigation in India

On 1st of February 2025, the Finance Minister of India Ms. Nirmala Sitharaman presented the Union Budget of India for 2025-2026. The Union budget has introduced various steps that aim to streamline dispute resolution, reduce litigation, and promote India’s ease of doing business. Currently, commercial disputes and tax disputes form a significant chunk of cases pending with the Indian judiciary which has also led the country fall behind in the ease of doing business index.  

Jan Vishwas Bill 2.0 -

The finance minister in her speech introduced the Jan Vishwas 2.0 Bill which will decriminalise more than 100 obsolete laws and provisions. The Jan Vishwas 2.0 will further reduce time, cost and effort in conducting litigation in India. The Jan Vishwas Act 2023 showed to be a great success that decriminalised 183 central acts and amended various archaic provisions from various legislations like Press and Registration of Books Act of 1867, the Indian Post Office Act of 1898, the Boilers Act of 1923, the Indian Forest Act 1927. The section 3 of this act also provides that fines and penalties for mentioned in central acts would increase 10% every three years.

Direct Tax Code (DTC) –

The Finance Ministry next week will introduce the new income tax bill titled the “Direct Tax Code (DTC)”.. This new tax bill aims to significantly simplify the present income tax act and reduce tax-based litigation. This bill will also nullify several provisions of the income tax act which have turned obsolete such as provisions dealing with royalty tax. Apart from cleaning the archaic provisions the government is very much interested in simplifying the income tax act so that tax-based disputes can be reduced. The reason why the government is so keen to simplify and fasten the process of tax dispute resolution is that over Rs. 10 Lakh crore worth of tax dispute is pending across the country.

The government has also taken steps in the past that press for settlements instead of long stretched trials. Modi’s successful Vivad Se Vishwas scheme, which closed on January 31, 2024, and saw 40,000 applications for dispute resolution between the state and the people. The finance minister also announced that the thresholds for appeals in tax cases have been raised at each level of high court, supreme court and the tribunal level. The Central Board of Direct Taxes (CBDT) and the Central Board of Indirect Taxes (CBIT) have been working together since long to eliminate provisions from Indian tax law that prolong dispute resolution.

Conclusion –

Overall, the measures introduced in this budget aims to ease compliance, expand services, build robust regulatory environment, promote international and domestic investment, and effect decriminalisation of archaic legal provisions. The tax reforms aimed to unburden judiciary and reduce the timeline of litigation. By adopting a much more liberal approach, the union budget aims to create a transparent and taxpayer-friendly environment. This budget is indeed a significant step towards India’s vision of becoming a world leader in “Ease of doing business”.