Centre makes fresh attempt to revamp direct tax legislation
NEW DELHI: The National Democratic Alliance (NDA) government will take a fresh look at modernizing the Income Tax Act, 1961, after an earlier effort by a six-member task force got derailed.
The centre on Monday appointed Akhilesh Ranjan, member (legislation), Central Board of Direct Taxes (CBDT), as the new convener to head the task force, which will advise the government on drafting a new direct tax law that suits India’s economic requirements. The report has to be submitted by February 28. The report will be an important document for the Modi administration to showcase before the national polls early next year, articulating the tax policy direction it would pursue if the NDA returned to office.
Other members of the task force, which had earlier missed the August 22 deadline, will remain the same.
The Modi administration has so far attempted to phase out corporate tax concessions, reduce corporate tax rates for small businesses to 25% and give relief to small income earners by lowering tax rates. The government also plugged some of the massively abused loopholes in the bilateral tax treaties with Mauritius to prevent tax-evaded money coming back into the country in the form of foreign direct investment.
The new direct tax legislation is expected to make taxation more progressive, wherein the tax burden will be higher on those with better payment capacity. This approach was evident in the government’s choice of tax rates when it reformed indirect taxation by ushering in the goods and services tax (GST). Luxury items are subject to the highest rate of 28%-plus cess and mass use items are either exempted or are kept in the 5% GST slab, although a fourslab system risked making GST more complex.
The task force is, however, unlikely to propose the difficultto-implement inheritance tax. “Although it may be easier to say that one should tax the rich more, implementing an inheritance tax is complex. It can only lead to high-income earners getting resettled elsewhere,” said a tax official, requesting anonymity.