Indian Income Tax Act set for overhaul

[Varun]

New Delhi: After the indirect tax regime was transformed by the implementation of the goods and services tax (GST), the 56-year-old Income Tax Act is now set for an overhaul.

On Wednesday, the finance ministry sets up a six-member task force to draft a new direct tax law that will better serve the country’s economic needs by widening the tax base, improving compliance and ease of doing business.

Prime Minister Narendra Modi observed at a tax officials’ conference in early September that the Income Tax Act of 1961 was over half-a-century old and needed to be re-drafted.

Arbind Modi, member, Central Board of Direct Taxes, was named convener of the six-member panel that has been tasked to draft a new law. Modi was also a key contributor to the direct taxes code proposed by the previous United Progressive Alliance government.

Almost all the ideas in the proposed direct taxes code—including General Anti-Avoidance Rules meant to crack down on complex corporate arrangements aimed at tax evasion and provisions to tax offshore transfer of assets located in India—have already been adopted in the existing Income Tax Act. Also, a key proposal in the erstwhile direct taxes code of phasing out corporate tax exemptions and lowering of the tax rate to 25% from 30% is being implemented in stages.

For individuals, the direct taxes code proposed that income in the Rs2-5 lakh bracket be taxed at 10%. The current tax slab is more liberal than that—income up to Rs2.5 lakh per annum is exempt from tax for individuals (Rs3 lakh in the case of senior citizens) and income of up to Rs5 lakh is taxed at 5%.

“The committee has not been given any specific direction to evolve a new law. It is open to the committee to come up with a draft by studying existing provisions and models in other countries,” a person briefed about the development said, requesting anonymity.

Globally, governments have been on a drive to combat what is regarded as aggressive tax planning by businesses using a complex web of subsidiaries across jurisdictions to keep tax outgo artificially to a minimum.

The other members of the panel are Girish Ahuja, chartered accountant; Rajiv Memani, chairman and regional managing partner of EY; Mukesh Patel, advocate; Mansi Kedia, consultant, ICRIER; and G.C. Srivastava, advocate.

Chief economic adviser Arvind Subramanian will be a permanent special invitee in the task force, which will submit its report in six months.

Experts welcomed the move but remained nervous about any major disruption in direct tax laws after the unsettling initial impact of the GST roll out. GST dismantled inter-state barriers to trade.

“In light of the disruption caused in the past on account of structural reforms, it is desirable to have a stable tax regime till at least 2019,” said Amit Maheshwari, partner, Ashok Maheshwary and Associates LLP. “The move to overhaul direct tax laws to improve ease of doing business, widening the tax base and to provide stringent penalties for evasion is welcome,” he added.

http://www.livemint.com/Politics/9u...rms-task-force-to-review-income-tax-laws.html

Holla this government seems to be in the mood. The current tax structure is clunky and inefficient - almost anything that this committee recommends will be better, and hope it segues nicely into GST (indirect tax) to be holistically effective.

 

[SandyB]

The government needs to make evasion a lot tougher. That's the only way any sizeable change will come. The recent reforms greatly inconvenienced the poor & middle classes and a lot of blue collar workers, while the biggest and moderately big fish all found workarounds.

Catching the bigger crooks will improve the perception of the govt too.

 

[Zahid87]

The government needs to make evasion a lot tougher. That's the only way any sizeable change will come. The recent reforms greatly inconvenienced the poor & middle classes and a lot of blue collar workers, while the biggest and moderately big fish all found workarounds.

Catching the bigger crooks will improve the perception of the govt too.

Catching the bigger crooks is a first world problem. Everyone struggles with that.

Governments in the SC should focus on getting the normal person to think and accept that tax evasion is wrong. If you can get the majority of the lower and middle classes to pay income tax, then you are halfway there.

At the moment, my perception is that society as a whole thinks tax evasion is a great and clever thing to do. They then justify it saying government is corrupt, then complain the next day that the government is incapable of providing adequate public services/facilities.

 

[GBK_Fan]

The government needs to make evasion a lot tougher. That's the only way any sizeable change will come. The recent reforms greatly inconvenienced the poor & middle classes and a lot of blue collar workers, while the biggest and moderately big fish all found workarounds.

Catching the bigger crooks will improve the perception of the govt too.

You are mixing GST and demonetisation.GST makes tax evasion more difficult for the trading community

 

[SandyB]

You are mixing GST and demonetisation.GST makes tax evasion more difficult for the trading community

Lol, nothing needs to be said about DeMo, but GST did cause a lot of pain for small traders/shopkeepers. My dad partially owns a couple of small shops that sell footwear. Our income isn't even in the taxable GST bracket , even then the number of forms we need to fill and the number of filing we need to do are mind boggling .

This involves paying a CA/tax consultant like 600-1000Rs per form to make up the forms, maintaining a perfect inventory of goods bought or sold etc.

Last week alone, we had our GST submission rejected because ONE PAIR of shoes we procured in the list had a faulty / repeated serial number. We then contacted our supplier, who washed his hands off saying it was the manufacturing company's fault . Then we had to contact the Manufacturer, who said they had printed the wrong serial on that product. We had to get that corrected and the forms redone, just to submit it again.

We don't take stock on credit and my dad is retired and invested in this as more of timepass than any actual profit motive, so we didn't suffer much, but Imagine this happening to largely uneducated shopkeepers, many of whom depend on a regular flow of stock for their livelihood and in many cases take stock on credit . ?

I still support GST as it was much needed reform, but the execution was deeply flawed. You already know the Shitshow with the restaurant prices.

 

[GBK_Fan]

Lol, nothing needs to be said about DeMo, but GST did cause a lot of pain for small traders/shopkeepers. My dad partially owns a couple of small shops that sell footwear. Our income isn't even in the taxable GST bracket , even then the number of forms we need to fill and the number of filing we need to do are mind boggling .

This involves paying a CA/tax consultant like 600-1000Rs per form to make up the forms, maintaining a perfect inventory of goods bought or sold etc.

Last week alone, we had our GST submission rejected because ONE PAIR of shoes we procured in the list had a faulty / repeated serial number. We then contacted our supplier, who washed his hands off saying it was the manufacturing company's fault . Then we had to contact the Manufacturer, who said they had printed the wrong serial on that product. We had to get that corrected and the forms redone, just to submit it again.

We don't take stock on credit and my dad is retired and invested in this as more of timepass than any actual profit motive, so we didn't suffer much, but Imagine this happening to largely uneducated shopkeepers, many of whom depend on a regular flow of stock for their livelihood and in many cases take stock on credit . ?

I still support GST as it was much needed reform, but the execution was deeply flawed. You already know the Shitshow with the restaurant prices.

Your post runs contrary to your earlier post. Tax evasion is more difficult now for traders both big and small. The execution has been pathetic, as with all policy initiatives from this government.

 

[SandyB]

Your post runs contrary to your earlier post. Tax evasion is more difficult now for traders both big and small. The execution has been pathetic, as with all policy initiatives from this government.

The government needs to make evasion a lot tougher. That's the only way any sizeable change will come. The recent reforms greatly inconvenienced the poor & middle classes and a lot of blue collar workers, while the biggest and moderately big fish all found workarounds.

Don't Recent reforms involve DeMo, which its been pretty clear a lot of the big fishes didn't loose as much , and many unorganized workers & poor suffered.

 

[GBK_Fan]

Don't Recent reforms involve DeMo, which its been pretty clear a lot of the big fishes didn't loose as much , and many unorganized workers & poor suffered.

Ok, fair enough. I took it as you meant long term policies not one off acts like demonetisation.

 

[Bhaag Viru Bhaag]

There are rumours that soon cheque books will be banned too.

 

[CricketCartoons]

There are rumours that soon cheque books will be banned too.

The rumours are false, spread by useless people.

 

[big_gamer007]

Currently 1.5% Indians pay income tax unless this number is increased only thing that will happen is the 1.5% who pay income tax will suffer even more and the rest will enjoy benefit.. So hopefully tax evasion is made extremely tough and tax payer base drastically widened..

 

[karthikc]

Currently 1.5% Indians pay income tax unless this number is increased only thing that will happen is the 1.5% who pay income tax will suffer even more and the rest will enjoy benefit.. So hopefully tax evasion is made extremely tough and tax payer base drastically widened..

Long term goal should be abolish income tax.

There are far more alternate ways to generate revenue. None of the rich people will pay the required tax. They employ chartered accountants to bypass the law.

 

[CricketCartoons]

Long term goal should be abolish income tax.

There are far more alternate ways to generate revenue. None of the rich people will pay the required tax. They employ chartered accountants to bypass the law.

Quite ironic when you are studying on taxpayers money and not paying any taxes.

 

[jusarrived]

You are mixing GST and demonetisation.GST makes tax evasion more difficult for the trading community

GST is going to be more effective cos of Demonetization

 

[jusarrived]

Long term goal should be abolish income tax.

There are far more alternate ways to generate revenue. None of the rich people will pay the required tax. They employ chartered accountants to bypass the law.

Typical of us Indians to expect these things . We are a developing country , stop having unrealistic expectations that tax will or should be abolished . The reforms brought it is to make it difficult to evade taxes be it rich or poor with or without the help of a CA . Given an opportunity everyone from top to bottom are corrupt and will use every loophole not to pay taxes .

 

[jusarrived]

Don't Recent reforms involve DeMo, which its been pretty clear a lot of the big fishes didn't loose as much , and many unorganized workers & poor suffered.

Sir , its of little relevance if some of these guys get caught or not . There is absolutely no difference between a guy who runs a 100cr business and cheats 30cr and a guy who makes 15 lakh and evades taxes of 30K using fake HR bills . As a society we are corrupt , just that some get an opportunity to scam in crores and some only in thousands . Pretty much everyone , especially the middle class who cries about corruption in the country his main issue is that there is some one else making money and not them self .

 

[jusarrived]

Catching the bigger crooks is a first world problem. Everyone struggles with that.

Governments in the SC should focus on getting the normal person to think and accept that tax evasion is wrong. If you can get the majority of the lower and middle classes to pay income tax, then you are halfway there.

At the moment, my perception is that society as a whole thinks tax evasion is a great and clever thing to do. They then justify it saying government is corrupt, then complain the next day that the government is incapable of providing adequate public services/facilities.

Very well said , unfortunately a large majority in SC think exactly like you explained .

 

[karthikc]

Typical of us Indians to expect these things . We are a developing country , stop having unrealistic expectations that tax will or should be abolished . The reforms brought it is to make it difficult to evade taxes be it rich or poor with or without the help of a CA . Given an opportunity everyone from top to bottom are corrupt and will use every loophole not to pay taxes .

Anyway the panel has 6 months to come up with their recommendations. We can come back to this after that report comes up

 

[someone21]

Indians want to develop like the western world, but don't want the same kind of formalities, strict laws & regulations. The latter is important and this government thankfully is working on it. Like things are getting linked to each other (Aadhar), banks accounts closely scrutinized (demonetization), and business need to file and audit their records well (GST).

When such things happen in overseas, nobody complains. But now it's happening in India, people talk about the inconvenience. It's unacceptable.