Industry and tax experts have pitched for a single levy on capital gains of listed securities, besides a reduction in the equalisation levy and abolition of minimum alternate tax (MAT), to a high-level panel looking into the overhaul of the 60-year-old income tax law.
The government had set up a committee under Central Board of Direct Taxes (CBDT) member Arbind Modi to look into the income tax systems in various countries and global best practices, among others. The panel is drafting the New Direct Tax Legislation and is likely to submit its report by May 31. It is also expected to revisit the income tax slabs, while widening the tax base.
Consultants PwC India recommended levying either securities transaction tax (STT) or capital gains tax on listed securities, instead of levying both. The government has imposed long-term capital gains tax on listed securities from the current financial year, but has retained STT as well.
“Multiple taxes on the same transaction increase costs and make the Indian capital market unattractive for investors. There should be a single tax levy (either STT or capital gains) instead of the current regime of levying both,” PwC said.
PwC India also suggested a reduction in the equalisation levy to align it with the EU proposal of 3 per cent.
Naveen Wadhwa, tax expert with Taxmann, said while easier procedures were required, law should be tweaked by deleting redundant provisions. Another expert said there were 872 sections in the Income Tax Act, 694 rules and 253 forms, making the whole law complex.
Abhishek Rastogi, partner with Khaitan & Co, said the limit for presumptive taxation should be raised from Rs 5 million to Rs 10 million. Section 44 of the Income Tax Act deals with presumptive taxation on professionals and treats 50 per cent of the income as profits and imposes tax.
Huge backlog in litigation and distrust between tax administrators and taxpayers was the core issue, said Ashok Shah, partner, NA Shah Associates.