PwC India recommends single tax on capital market transactions

Consultancy firm PwC India has suggested a single tax on capital market transactions as against the current practice of levying STT and capital gains tax.

In comprehensive recommendations to the task force set up by the government to redraft the over 50 year old Income Tax law, PwC has also made a case for reducing compliances for non-residents to promote ease of doing business in India.

In November last year, the government had constituted a task force for redrafting the Income Tax Act, 1961 in sync with the economic needs of the country.

The six-member task force consists of Arbind Modi, CBDT Member (Legislation) as the Convener and other members, including Girish Ahuja (chartered accountant), Rajiv Memani (Chairman and Regional Managing Partner of EY) and Mansi Kedia (Consultant, ICRIER).

Chief Economic Adviser Arvind Subramanian will be a permanent special invitee in the task force.

In its recommendations, PwC India said multiple levy of tax on the same transaction increases the cost of transactions and makes the Indian capital market unattractive to investors.

"There should be a single tax levy (of either Securities Transaction Tax (STT) or capital gains tax) instead of the current regime of levying both taxes," it said.

The tax consultancy firm further stressed on simplification of compliance obligations and said there should a single return for income-tax and withholding tax could be made to allow for one consolidated assessment.

On reducing compliances for non-residents, it opined that if full taxes have been withheld, they should be exempt from filing tax returns in India.

This regime is currently available only for dividend and interest incomes.

Further, "non-resident taxpayer should be excluded from the ambit of Transfer Pricing compliance in India, provided its Indian associated enterprise has undertaken the required compliances," PwC India said in another recommendation.

It has also made recommendations on dispute prevention and resolution as well as streamlining of Transfer Pricing provisions.