Simpler tax regime likely in Budget

Finance Minister Arun Jaitley on Monday hinted that some tax change recommendations of the committees headed by Parthasarathi Shome and R V Easwar might be incorporated in the coming Union Budget proposals.

"The law must be simple. Then, even if there are a large number of assessees, then chances of litigation are at a minimum. Since we amend the Finance Act every year through the Income Tax Act, the Act itself has become very complicated. There is a group under (retired) Justice Easwar which is looking into cleaning up the Act...The Shome committee report has also given many recommendations, which we are at an advanced stage of looking into. It has suggested many reforms in the tax administration itself," Jaitley said, addressing the platinum jubilee celebrations here of the Income Tax Appellate Tribunal.

PANELS’ SUGGESTIONS

Parthasarathi Shome

• Widening the use of the permanent account number
• Abolition of the post of revenue secretary
• Revamp of the dispute resolution mechanism
• Spending a tenth of the tax department’s budget to improve taxpayer service

R V Easwar

• A friendlier tax regime and measures to ease litigation
• Reduction in the tax deducted at source on interest rates and post office deposits
• Raising the threshold limits for the levies and rationalising of capital gains tax

The Easwar panel was asked to come up with a clear and neater tax regime, to reduce litigation. The minister said the government would simplify tax laws to this end.

Shome headed the Tax Administration Reform Commission (TARC), which gave four reports. It has made several recommendations to make the tax administration payer-friendly and accountable. The proposals include widening the use of the permanent account number, abolition of the post of revenue secretary, a complete revamp of the dispute resolution mechanism and spending a tenth of the tax department's budget to improve taxpayer service.

TARC also recommended a tax council to develop a common tax policy and legislation for both direct and indirect taxes, and merit-based promotions of officials. It also suggested merger of the Central Board of Direct Taxes and Central Board of Excise and Customs.

The Easwar committee gave its first draft set of proposals last week, also calling for a friendlier tax regime and measures to ease litigation. It recommended reduction in the tax deducted at source on interest rates and post office deposits, raising the threshold limits for the levies and rationalising of capital gains tax.

The panel said nearly 65 percent of the personal income tax collected in India was through TDS, whose provisions need to be made less "tedious" and more tax-friendly.

The committee proposed raising the threshold for TDS to Rs 15,000 from Rs 2,500 annually, and reducing the tax rate to five per cent for interest on securities from the present 10 per cent. It also recommended raising the threshold limit to Rs 15,000 from the present Rs 10,000 for bank deposits and Rs 5,000 for others.