A government-appointed task force headed by CBDT member Akhilesh Ranjan on August 19 submitted its report on the new Direct Tax Code, which seeks to replace the existing Income Tax Act. The details of the report, however, could not be known immediately.
The task force was assigned to draft direct tax laws in line with the norms prevalent in other countries, incorporating international best practices, and keeping in mind the economic needs of the country.
India has been following the philosophy of phasing out tax incentives, which complicate the law and lead to litigation, and of simultaneously reducing the tax rate so that businesses get the benefit of low tax incidence upfront.
The proposals in the draft code are aimed at bringing more certainty to taxation of personal and corporate income and capital gains, and at bringing the gist of numerous judicial pronouncements made since 1961, when the current tax law came into force, in one place for easy reference. It could improve ease of doing business and reduce the compliance burden as well as tax disputes.
The Finance Ministry in a tweet said, "Union Minister of Finance and Corporate Affairs Smt. @nsitharaman received the report submitted by Shri Akhilesh Ranjan, Convenor of the Task force constituted by the Government to draft New Direct Tax Law, in New Delhi today."
The government will release the report of the panel, led by Central Board of Direct Taxes (CBDT) member Akhilesh Ranjan, in the public domain for consultations after examining the recommendations. Income tax payers earning up to Rs 55 lakh per annum may end up with a major tax relief if recommendations to change the tax bracket and rebates are accepted, according to sources.the panel has pressed for a corporate tax cut for domestic and foreign firms to 25 per cent from 30 per cent for large companies and 40 per cent for overseas firms.
The capital gains tax regime, minimum alternate tax and dividend distribution tax have also been reviewed by the task force. The panel also favoured doing away with Dividend Distribution Tax by suggesting taxing dividends in the hands of shareholders.
However, details of specific recommendations on these were not known.
The task force suggested replacing the concept of assessing officer with assessment units, besides faceless scrutiny of cases picked through centrally and randomly allotted mechanism. Aimed at reducing tax litigation, the panel recommended the concept of mediation between taxpayer and the CBDT. Taxpayers may be allowed to opt for a negotiated settlement before a Collegium of Commissioners once they receive the draft order, according to sources.
Other members of the task force include Girish Ahuja (chartered accountant), Rajiv Memani (Chairman and Regional Managing Partner of EY), Mukesh Patel (Practicing Tax Advocate), Mansi Kedia (Consultant, ICRIER) and G C Srivastava (retired IRS and Advocate). Prime Minister Narendra Modi, during the annual conference of tax officers in September 2017, had observed that the Income-Tax Act, 1961, was drafted more than 50 years ago and it needs to be redrafted.
The panel was initially supposed to submit its report to the government, within six months, by May 22, 2018, which was further extended till August 22. Following Arbind Modi's retirement on September 30, 2018, Akhilesh Ranjan-led panel was tasked to submit report by February 28, 2019. It was then extended till May 31.