A committee set up by the government to change direct tax laws has suggested several taxpayer-friendly measures to improve the ease of doing business, reduce litigation and accelerate the resolution of tax disputes.
In its first report made public, RV Easwar Committee has recommended simplifying provisions related to tax deducted at source (TDS), claims of expenditure for deduction from taxable income and for tax refunds.
Recommendations to check or curb litigation/facilitate speedier disposal:
(a) Amendments to provide that in cases where shares are shown as capital assets and held for one year or less, the Assessing Officer will not re-characterise the surplus on sale as business income, provided the surplus in a year is rupees five lakhs or less; in case they are held for a period more than one year, and shown as capital assets (and not as stock-in-trade), surplus to be taxed as long-term capital gains.
(b) Amendments to Section 14A to provide that (i) dividend received after suffering dividend-distribution tax and share income from firm suffering tax in the firm’s hands will not be treated as exempt income and no expenditure will be disallowed as relatable to them; (ii) expenditure disallowed shall not exceed the amount claimed. Recommendation for issue of executive instructions that no interest be disallowed if source of investment is directly relatable to taxable income.
(c) Amendments to Section 50C to bring it in line with Section 43C so far as it relates to agreements for sale of property executed prior to the date of registration of sale deed, fixing the sale price.
(d) Amendment to Section 56(2)(viib)(ii) to eliminate taxation of the purchaser of the property on the amount of difference between the sale price and the stamp-duty value.
(e) No re-opening or revision of assessments under sections 147 and 263 respectively merely on the basis of audit objections.
(f) Amendment to Section 255(3) to enhance the monetary limit for SMC cases before the Tribunal to rupees one crore from the present rupees 15 lakhs.
(g) Amendment to Section 254(2) to reduce the time-limit for rectification of orders of the Tribunal from the present four years to 120 days.
(h) No penalty for concealment (i) if assessee has taken a bona fide view of a provision enabling a claim etc. or on the basis of any judicial ruling of any Tribunal, High Courts or Supreme Court and (ii) if any addition or disallowance is made ad hoc on assumptions or without evidence.
(i) Deletion of section 143(1D) – Avoiding undesirable delay in issue of refunds
(j) Making of fresh claim during assessment proceedings
(k) Stay of disputed demand under certain circumstances
(l) Prescribing time limit for disposal of petitions for waiver of penalty and interest under sections 273A, 273AA and 220(2A)
Recommendations to promote ease of doing business and simplify procedures:
(a) Enhancement and rationalisation of the threshold limits and reduction of the rates of TDS. TDS rates for individuals & HUFs to be reduced to 5% as against the present 10%.
(b) Simplification & rationalisation of the provisions of Section 197 and Rules for lower or non-deduction of TDS, aimed to improve ease of doing business.
(c) Proposal for certain amendments in rules 28, 28AA and 28AB to resolve practical difficulties faced by persons granted certificates for lower deduction under section 197
(d) Proposal for certain amendments in rule 37BA to obviate hardships arising in relation to claiming of credit for tax deducted under section 199
(e) Proposal for certain amendments in rule 30 and 31 in relation to time and mode of payment of TDS and filing of statement of TDS under the provisions of section 200
(f) Rationalisation of the provisions for maintenance of books of account and tax audit.
(g) A presumptive income scheme for professionals
(h) Deferment of ICDS
(i) Exemption to non-residents not having Permanent Account Number (PAN), but who furnish their Tax Identification Number (TIN) in their country of residence from the applicability of TDS at a higher rate under section 206AA
(j) Amendment to section 234C to provide relief where a new business is started during the financial year
(k) Grant of timely refund with interest and also providing for payment of higher interest in case of delayed refund
(l) Rationalization of the provisions relating to set off of refunds due to an assessee
(m) Release of property attached under section 281B on submission of bank guarantee
Background of RV Easwar Committee:
The Government of India has constituted a Committee with a view to simplify the provisions of the Income Tax Act, 1961, with Justice R.V. Easwar as Chairman. The Terms of Reference (ToR) of the Committee was:
- To study and identify the provisions/phrases in the Act which are leading to litigation due to different interpretations;
- To study and identify the provisions which are impacting the ease of doing business;
- To study and identify the areas and provisions of the Act for simplification in the light of the existing jurisprudence;
- To suggest alternatives and modifications to the existing provisions and areas so identified to bring about predictability and certainty in tax laws without substantial impact on the tax base and revenue collection.