(Daily News Scan - DNS English) Government Task Force on Direct Tax
Important Points:
The Central Government had appointed a special committee Task Force on Direct Tax Code, to review the existing 58 years old Income Tax Act. The report was recently submitted by the committee. This Task Force was constituted in 2017 having 8 members, headed by the Central Board OF Direct Taxes (CBDT) member Akhilesh Ranjan.
In this DNS we will talk about the Task force and the expected benefits from the new reports.
The Income Tax Act 1961 needed to be redrafted as it was drafted a long time ago. The Task Force was assigned to draft direct tax laws that were similar and prevalent in other countries along with incorporating best international practices keeping in mind the need of the country. The reports are yet to be made public but it is expected that the announcements will simplify the six decade old Income Tax Act.
The committee has emphasized on the need to review the existing tax brackets, expenses and implementation of guidelines for startups. One of the main motives of this committee was to make the Income TAX Act simpler with the focus on lowering the burden on individuals and companies.
The committee’s new suggestions could make the existing Income Tax Act friendlier and moreover to reduce the burden for middle income group taxpayers. A common tax rate of 25% will be set for domestic and foreign companies which will promote the ease of doing business. It is expected that a special set of provisions for startups may have been proposed by the committee. Apart from this, it is expected that recommendations to the government will be made to further reduce the tax burden on companies earning upto Rs 400 crore. Currently Foreign companies are liable to pay tax at 40% compared to domestic companies who pay a lesser % of tax. Also foreign companies are not subject to payment of the DIVIDEND DISTRIBUTION Tax imposed on domestic companies, creating a difference in base tax rate.
As per the reports the middle income earners may get a significant tax relief as the task force is supposed to suggest 10 % tax rate slab for annual income between Rs 2.5 lakh and Rs 10 lakh. Along with that the tax payers will be distributed into 4 different tax slabs. The 20% tax slab may cover the income between 10 lakh to 20 lakh, followed by 30% slab covering income between 20 lakh to 2 crore. Moreover the report is expected to suggest a full tax rebate on or above income Rs 5 lakh, and a tax rate of 35% is expected to be the highest for the ones with income above Rs 2 crore annually. Also the Assessing officers will be substituted with Assessment Units.
The new taxation law will bring new taxation concept as well as schemes that will reduce litigation. The new draft code aims at bringing certainty to taxation of personal and corporate income and capital gains. The expert panel aims to make the direct tax law sophisticated, advanced and capable of dealing with the business in a digital economy. India has a population of around 1.3 billion but tax payers here are on 74 million. The code aims to increase the tax base as well. If implemented properly the new tax rule will be very beneficial and it may reduce corruption.
