Expert Committee to simplify income tax laws headed by Justice (retired) R.V. Easwar has submitted its report to Union Finance Ministry.
The 10 member committee has recommended simplifying provisions related to tax deduction at source (TDS), tax refunds and claims of expenditure for deduction from taxable income.
It also has suggested several taxpayer-friendly measures to improve the ease of doing business in the country, accelerate process of tax dispute resolutions and reduce litigation.
Key recommendations are
- Deferring the contentious Income Computation and Disclosure Standards (ICDS) provisions and making the process of tax refunds faster.
- Deletion of a clause in IT Act, 1961 that allows the IT department to delay tax refund due beyond six months. In case of delay in refunds levying higher interest.
- IT department should stop the practice of adjusting tax demand of a taxpayer against legitimate refunds due whose tax return is under assessment.
- Treat stock trading gains of up to 5 lakh rupees as capital gains and not business income.
- TDS rates for individuals must be reduced to 5 per cent from current 10 per cent. Dividend income should be treated as part of total income.
- Exempting non-residents not having a Permanent Account Number (PAN), but seeking to provide their Tax Identification Number (TIN) for the applicability of TDS at a higher rate.
- Most of the working processes of the IT departments should be conducted electronically in order to minimize direct human interface.
- Eligibility criteria under the presumptive tax scheme to be increased to 2 crore rupees from 1 crore rupees to make it easy for small businesses. Such scheme should be also for professionals.
Union Government had constituted this committee in October 2015 by following up on a promise to provide a fair and predictable tax regime.
The committee was tasked to suggest recommendations to overhaul the IT Act, 1961 to remove ambiguities that cause unnecessary litigation and update the laws based on various judgements.