The government has set in motion the process of rewriting income tax laws to bring them in sync with the contemporary Indian economy.

On Tuesday, the government constituted a 10-member committee to overhaul the provisions of the Income-Tax Act (I-T Act), 1961 with the aim of reducing litigation arising from ambiguous drafting of laws.

The deadline for the committee has been staggered, with the first batch of recommendations due on 31 January 2016, so that they can be incorporated in the Finance bill to be presented along with the Union budget for 2016-17.

“We have, over the last few months, been resolving a lot of past issues and now time has come to look at some provisions of the I-T Act to look at how their drafting quality can be improved in order to avoid ambiguity so that everybody is certain as to what the Act itself says,” finance minister Arun Jaitley told reporters.

The move is likely to provide relief to both domestic and foreign investors who have been vocal about the lack of clarity in Indian tax laws and the subsequent prolonged litigation caused by it. Around Rs.4-5 trillion is estimated to be locked up in litigation at various courts and appellate authorities.

The move also comes in the backdrop of the rapid rise of e-commerce in India and the consequent need to put in place tax regulations to govern online marketplaces.

This can be seen as the government’s second attempt to overhaul the I-T Act of 1961. The previous government’s proposal to introduce a direct taxes code bill to replace the Act was shelved by the National Democratic Alliance (NDA).

Jaitley has on several occasions signalled the need for an overhaul of the tax regime, especially with the intent of making Indian corporate entities more competitive. In fact, in his budget speech this year, the minister committed the government to gradually reducing corporate tax rates, currently at 30%, to 25%, and at the same time phasing out tax exemptions.

The committee, which has been constituted under retired Delhi high court judge and former president of the income tax appellate tribunal R.V. Easwar, has members from both the government and the private sector.

The committee has been asked to suggest modifications to the I-T Act to bring in predictability and certainty in tax laws without substantially impacting either the tax base or revenue receipts.

Other terms of reference of the committee include identifying provisions in the Act triggering litigations arising from different interpretations and provisions impeding the ease of business. The committee has also been asked to look at provisions that need simplification in the light of existing jurisprudence.

“Any step that is taken to address the menace of tax disputes is welcome. A need has been felt for many years to revisit the provisions of the income-tax Act that help in improving the ease of doing business and reduce litigations,” said Mukesh Butani, chairman, BMR Advisors.

The finance ministry is hoping that the committee, which has a tenure of one year, will submit its first set of recommendations in the next few months so that the government can incorporate the changes in the finance bill next year.

“We are hoping the committee can submit as many recommendations as possible in its first batch of suggestions by 31 January so that they can be incorporated in next year’s budget,” said Hasmukh Adhia, revenue secretary in the ministry of finance. “There are members from the private sector as well and they will know which sections lead to the most litigations and need to be addressed at the earliest.”

Other members of the committee are former law secretary V.K. Bhasin; Rajiv Memani, chairman-India region, EY; advocate Ravi Gupta; Ajay Bahl, founder and senior partner at AZB, a law firm; investment adviser Pradip P. Shah, who is the chairman, IndAsia Fund Advisors Pvt. Ltd; two officers of the Indian Revenue Service—Arvind Modi, considered the architect of the direct taxes code, and Vinay Kumar Singh; Vinod Jain, a chartered accountant; and Mukesh Patel, an advocate handling tax matters.

The committee has been given the option of working in sub-groups but has been asked to put its draft recommendations in the public domain for stakeholder feedback.

“The statement indicates that though the basic structure of the current income-tax Act will be retained, the government will review provisions that are leading to litigation or impacting its intention of improving the ease of doing business in India. Cross-border taxation, including transfer pricing, is one of the areas that sees too much litigation. The recent MAT (minimum alternate tax) controversy is another example,” said Sudhir Kapadia, partner and national tax leader at EY.

“However, there are already various committees that have looked into this or are looking into this. This committee should leverage the work already done by them,” he added.

He was referring to the battle between the government and foreign portfolio investors (FPIs) over the applicability of MAT on such investors. Eventually, after the recommendation of a panel led by former judge A.P. Shah, the government decided to amend the income-tax laws to exempt FPIs from MAT, which is levied on profit-making entities that don’t pay corporate income tax because of exemptions and incentives.