1. Income Tax Act, 1961 review: 4 remarkable ways Narendra Modi government’s new Direct Tax Law will benefit taxpayers

Income Tax Act, 1961 review: 4 remarkable ways Narendra Modi government’s new Direct Tax Law will benefit taxpayers

The Modi government has constituted a six-member task force to review the Income Tax Act, 1961, and draft a new Direct Tax Law in consonance with economic needs of the country.

By: | Updated: November 23, 2017 11:08 PM
direct tax code, New Direct Tax Law, modi government, how new tax law will benefit taxpayers, authorities, Simplify Law, Declutter Redundant Provisions A simple, easier-to-interpret direct tax code with minimal conflicts will go a long way in providing certainty and clarity to the tax payers.

The Modi government has constituted a six-member task force to review the Income Tax Act, 1961, and draft a new Direct Tax Law in consonance with economic needs of the country. The Terms of Reference of the task force is to draft an appropriate Direct Tax Legislation keeping in view (i) the direct tax system prevalent in various countries, (ii) international best practices, (iii) economic needs of the country, and (iv) any other matter connected thereto. The task force will set its own procedures for regulating its work and is required to submit its report to the government within six months.

It may be recalled that during the Rajaswa Gyan Sangam held on 1st and 2nd September, 2017, Prime Minister Narendra Modi had said that the Income Tax Act, 1961 was drafted more than 50 years ago and needs to be re-drafted.

Commenting on the government move to draft a new direct tax legislation, Vikas Vasal, Partner & Tax Leader, Grant Thornton India LLP, says that it’s a move in the right direction, and in line with government’s stated intent to boost investor and business confidence in the country.

“It’s a long journey, and constitution of the task force is the first step. A simple, easier-to-interpret direct tax code with minimal conflicts will go a long way in providing certainty and clarity to the tax payers. Unnecessary litigation on otherwise settled issues only results in waste of productive time and effort. Hopefully, the new code will address these issues, incorporating the learnings from the current tax law, as well as the decade-long discussions on the earlier Direct Tax Code that was shelved some time back,” he says.

Here’s how the new Direct Tax Law is expected to simplify tax-related issues and boost investor and business confidence:

1. Simplify Law and Declutter Redundant Provisions: The current Income Tax Act is more than 5 decades old and has suffered thousands of amendments over these years. Formation of a committee for drafting a new Direct Tax Code is a progressive step to do away with the past baggage and make the law relevant to the current business environment. A new code would simplify the law and declutter redundant provisions.

2. Pro-Business Development: This is a pro-business development as concerns of the industry can be addressed in the new law. “The government has in recent past taken several initiatives such as the issuance of clarification on debated issues, issuing detailed guidelines on new regulations, acceptance of judicial decisions etc. for the benefit of the taxpayers. One would expect that several of such measures would find a place in the new law,” says Vasal.

3. Reduce Litigation: The provisions of the Income Tax Act have been a subject matter of extensive litigation, which has led to complexity in the interpretation. A new law, without a baggage of past jurisprudence, would be simpler to interpret and is expected to reduce litigation.

4. Plug Loopholes in a Single Shot: The Direct Tax Code would provide an opportunity to the authorities to plug the loopholes in a single shot rather than making it an annual exercise. It is an excellent opportunity to make the law simpler, taxpayer-friendly, less prone to litigation and free from interpretational loopholes.

There is a word of caution though. “We need to learn from our past experience of the previous version of the direct tax code and make sure that a new law is developed on the threshold of simplicity rather than rehashing of the existing Income Tax Act in a new format,” says Vasal.

  1. M
    MKS dri
    Nov 24, 2017 at 2:53 pm
    Government should abolish Income Tax once and for all as it has been seen that only a small percentage of people are covered and many other people who are earning in crores also are getting away without paying IT. Instead of IT, the government should levy EXPENDITURE TAX as this would cover complete ambit of the population and would ensure sure shot income for the government. A strict rules and regulations should be enforced for full compliance of this expendityre tax.
    Reply
    1. S
      SS
      Nov 24, 2017 at 12:32 pm
      If you are serious, tax Agricultural Income, Remove std deductions, all section 80s, dump MAT if its still around, allow Gst deductions from personal taxes., disallow CAs from practising taxation.
      Reply
      1. V
        vivek prakash srivastva
        Nov 24, 2017 at 12:22 pm
        Direct Income tax should be removed (as only 3-4 crs mainly ried class is paying 100 tax and others are paying nil or very less tax) and indirect taxes may be increased suitably to compensate direct taxes (like GST at 5,`12,18,28 may be increased 3-5 more and 2-3 transition tax, while at GST 0 should remain 0 so that BPL should not be effected)
        Reply
        1. F
          Fca Prashant Chavan
          Nov 24, 2017 at 12:19 pm
          24.11.2017 Dear Readers, Hail NaMo ! ... lage raho .. aage badho .. Jai Ho !! Mera Bharat Mahaan !!!
          Reply
          1. B
            bhakt
            Nov 23, 2017 at 8:39 pm
            hope people wake up in 2019
            Reply
            1. Balakrishnan Gurumurti
              Nov 23, 2017 at 6:51 pm
              futile exercise even 1961 Act is a mess when it tried to modify 1941 Act, what Modi understands is very little,he talks too much a normal character of this man as if previous others were great fools, nothing can be simpler, but only can be simple says Einstein , nothing shd be simpler, does this Modi understands the difference between simple and simpler, sorry, better stop all these nonsensical waste of time and resources on these work meaningless work,sorry man.
              Reply
              1. M
                Manish
                Nov 23, 2017 at 6:25 pm
                Great step,.Only this govt. could think of this. If there would have been congress at helm, things would have continued as it is with additional burden of new amendments.All the new developments are welcome.
                Reply
                1. G
                  G N Rajan
                  Nov 23, 2017 at 6:08 pm
                  Tax on Bank Interest should be abolished with immediate effect.
                  Reply
                  1. K
                    kumar patra
                    Nov 23, 2017 at 6:07 pm
                    govt will tax more,and will take money from whois working,distribute to create votebank in name of policies,those who are not working,they are poor.no country will progress if it does not respect merit,knoweldge,work culture,all liers are good adminstrator.
                    Reply
                    1. Harvinder Maini
                      Nov 23, 2017 at 5:19 pm
                      DAILY NEW DRAMA BY THIS FENKU DRAMA COMPANY, BUT NOTHING PRODUCTIVE SO FAR.
                      Reply
                      1. E
                        Eve Fernandez
                        Nov 23, 2017 at 5:06 pm
                        I shudder to think the disruptions this move will bring after the demonetization and GST fiascos. Hope the implementaion will not cause hardship.
                        Reply
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