Prof D Mukherjee
The OECD (2023) reports that tax revenue remains the primary source of Government funding, relying heavily on economic growth and taxpayer compliance. In contrast, non-tax revenue depends on factors like strategic disinvestment, efficient public sector management, and resource utilization. The Ministry of Finance (2024) reports that 83% of total revenue comes from tax collections, while 17% is derived from non-tax sources.To maximize revenue, tax compliance mechanisms must be strengthened by improving administration quality while keeping compliance costs competitive. World Bank (2022) reports reflect that high compliance costs can deter voluntary participation, reducing efficiency in tax collection. The Income Tax Act, 2025, aims to modernize compliance processes and enhance inclusivity. Expanding the base of tax professionals-including CMAs and CSs alongside CAs-would improve efficiency, ensuring better tax planning, management, and administration. Recognizing these professionals within the new tax framework would represent a shift from restrictive fiscal policies to a progressive, market-driven approach, aligning with contemporary economic demands.
A tax system that embraces professional diversity enhances efficiency, promotes competition, and lowers compliance costs. Including CMAs and CS professionals in tax administration would expand the expert pool, improving governance, risk assessment, and revenue assurance. IMF Report (2023) observed that countries with streamlined tax compliance see reduced revenue leakages and higher collections. Leveraging these professionals’ expertise can strengthen compliance and foster a business-friendly tax environment.Historically, CMAs had exclusive authority over indirect taxes under the Central Excise and Salt Act, 1944, but this was expanded to CAs in 2009-2010, reshaping tax advisory services. As India implements the Income Tax Act, 2025, ensuring CAs, CMAs, and CSs have equal roles in tax planning and compliance is essential. A level playing field among these professionals would address modern policy challenges and align with India’s evolving, market-driven economy.
The new income tax legislation, introduced in Parliament on February 13, 2025, by the Finance and Corporate Affairs Minister, is currently under review by the 31-member Parliamentary Standing Committee on Finance, chaired by Mr. Baijayant Panda, MP. This committee bears the crucial responsibility of exercising sound judgment and ensuring that the fundamental objectives and rationale behind replacing the Income Tax Act of 1961 with the Income Tax Act of 2025 are both achievable and well-justified. The need for this legislative transformation stems from the significant evolution of India’s economic framework.
In 1961, when the previous Income Tax Act was enacted, India primarily operated under a closed economic system characterized by elements of a mixed economy. However, with the introduction of economic reforms in the early 1990s-particularly Liberalization, Privatization, and Globalization (LPG)-the country transitioned into an open and competitive global market. These reforms have yielded substantial economic benefits, positioning India as the world’s fourth-largest economy with a GDP nearing $5 trillion. In this dynamic environment, the fundamental tenets of a market-driven economy revolve around competition, cost efficiency, and quality service delivery. Any form of monopoly-whether absolute or discriminatory-can hinder economic efficiency and cost-effectiveness, irrespective of the sector in question, be it manufacturing, services, or taxation.
Given this backdrop, it is crucial for lawmakers to formulate policies that reflect the realities of the global economic system and incorporate best legislative practices that serve national interests. A key recommendation in this regard is the expansion of the definition of “Accountant” as outlined in Clause 515(3)(b) read with Clause 2(1) of the Income Tax Bill, 2025. This amendment would ensure the inclusion of CMAs and CS professionals in tax administration, thereby fostering a more diverse and competitive compliance ecosystem.
At the time of enacting the Income Tax Act of 1961, ICMAI (formerly ICWAI) was still in its nascent stages, and the Institute of Company Secretaries of India (ICSI) had not yet been established as a statutory body-it gained legislative recognition only in 1980. As a result, the 1961 Act largely delegated tax compliance responsibilities to CAs within the meaning of Section 2(1) (b) of the Chartered Accountants Act of 1949 holding a certificate of practice. However, over the past six decades, ICMAI has developed significant expertise in financial and cost management and tax planning, management and compliance, placing it on par with ICAI. Similarly, ICSI has grown in stature and proficiency over the last four decades. Given this evolution, continuing to restrict tax-related roles predominantly to CAs would be outdated and counterproductive to the principles of fair competition and professional diversity.
By recognizing the capabilities of CMAs and CS professionals in the tax framework, the Government can introduce a more inclusive and dynamic tax compliance structure that caters to the needs of an increasingly complex economic environment. The inclusion of these professionals would not only reduce the burden on existing tax advisors but also improve compliance efficiency, prevent revenue leakages, and promote a broader, more competitive tax advisory ecosystem. This change would align with global best practices, where multiple professional designations contribute to tax administration, ensuring a robust and efficient fiscal system.
The Companies Act, 2013, introduced key reforms in corporate governance, financial reporting, and compliance. It formally recognized CAs and CMAs as Internal Auditors, acknowledging their expertise in financial analysis, cost management, and risk assessment. Meanwhile, CSs were designated as Key Managerial Personnel (KMPs) due to their critical role in corporate compliance and governance reported byMinistry of Corporate Affairs, (2023). However, the Act excluded CAs and CMAs from KMP roles, despite their financial management expertise. A major oversight in the Act is the exclusion of CAs and CMAs from CFO positions, even though CFOs are classified as KMPs. This is paradoxical, as CFOs oversee budgeting, risk management, compliance, and financial strategy-areas where CAs and CMAs excel (OECD, 2023). By not explicitly recognizing them for CFO roles, the legislation may have weakened corporate financial oversight, limiting the effectiveness of financial management in Indian companies. The rise in financial irregularities and corporate fraudspost-2013 raises concerns about theoversights in the Companies Act, 2013. Several corporate collapses have been linked toweak financial controls and compliance failures (Financial Stability Report, RBI, 2023). Had CAs and CMAs been formally recognized as CFOs and KMPs, many frauds might have been detected or prevented.
As theIncome Tax Bill, 2025, is reviewed, lawmakers should address past legislative gapsand ensure meaningful reforms. A thoroughclause-by-clause evaluation is crucial to prevent inconsistencies and ensure the new tax laweffectively strengthens governance and compliance.
A fundamental concern in legislative drafting is avoiding the “old wine in a new bottle” scenario-where new laws are merely rebranded versions of outdated frameworks without substantive improvements. As reflected in the World Bank Report, 2023, tax laws to be truly progressive and efficient, they must reflect the contemporary realities of a market-driven economy, emphasize competition, cost-effectiveness, and quality, and eliminate monopolistic practices that hinder efficiency. One crucial step in this direction would be revisiting the definition of “Accountant” under Clause 515(3)(b) read with clause 2(1) of the Income Tax Bill, 2025, to ensure that tax compliance, advisory, and planning responsibilities are distributed more equitably among CAs, CMAs, and CS professionals.
A strong fiscal governance system must recognize the evolving expertise of financial professionals. When the Income Tax Act, 1961, was enacted, CMAs were still emerging, and ICSI was not yet a statutory body. Over six decades, CMAs have gained expertise in cost management, financial strategy, and tax administration, equating them with CAs. Similarly, CSs have strengthened their role in corporate governance and regulatory compliance. Overlooking this progress in new tax laws would be a regressive step.
As the Income Tax Bill, 2025, advances, policy decisions must be evidence-based and aligned with global best practices. India’s economic landscape has shifted from a closed economy to a $5 trillion global powerhouse, driven by Liberalization, Privatization, and Globalization (LPG). IMF (2023) opines that sustain growth, fiscal policies must prioritize competition, cost efficiency, and service quality. Ensuring inclusivity in tax administration will strengthen governance and economic resilience.
With increasing fiscal demands, tax compliance frameworks must be reformed to improve efficiency, cost-effectiveness, and inclusivity. The Income Tax Act, 2025, should streamline procedures while recognizing CMAs and CS professionals in tax administration. A modern, competitive compliance system aligned with a market-driven economy will promote transparency, fairness, and efficiency. As the Parliamentary Standing Committee on Finance reviews the bill, it must ensure adaptability to contemporary economic realities. Strengthening governance and inclusivity will enhance compliance, prevent revenue leakages, and support long-term economic growth.
With India’s population exceeding 1.5 billion, relying on a single professional body for tax compliance is impractical. Just as India expanded IITs and IIMs from 3-4 in the 1960s to over 25 today, a similar expansion in professional regulatory bodies should be considered. Countries like the UK, Canada, USA, EUs Australia, South Africa, Nigeria etc have multiple financial institutions managing governance. The Indian Government should explore creating additional professional bodies to meet evolving demands.Lawmakers must thoroughly review the Income Tax Bill, 2025, ensuring its provisions reflect modern economic needs rather than outdated policies. By incorporating diverse financial professionals and embracing a progressive, digital-first approach, India can establish a robust and future-ready tax framework.
(The author is an Educationist, a Management Expert and an Independent Researcher)
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