Simplification, transparency, and ease of compliance have been the focus areas in taxation of the Narendra Modi government, since 2014. In the first 100-days of its present tenure, the government has done the same through targeted reforms, say experts.
Among the notable initiatives in first 100-days are the rejig of the capital gains tax structure, tweaks in the personal income tax slabs (in the new regime), introduction of measures to reduce litigation, setting up a committee to review the Income Tax Act, and showing intent to rationalise the GST structure.
Finance Minister Nirmala Sitharaman during her Budget speech, on July 23, had made a slew of announcements on these issues, and had mentioned that taxpayers are opting for a simpler and transparent tax system. This is perhaps why 72% of taxpayers opted for the new income tax regime in 2023-24.
Ayush Mehrotra, partner, Khaitan & Co said that the recent amendments made to the tax laws reflect the government’s intent to facilitate trade and ease the burden on common man. “This is evident from the rate rationalisations, the amnesty scheme and the clarification issued regarding the cross-border transaction amongst related entities,” he added.
The government’s intent to rationalise the tax framework and encourage quicker resolutions through technology-driven processes will likely improve ease of compliance, reduce business costs, and bring greater predictability for taxpayers, said experts.
That said, going forward, the government should prioritise addressing the complexities in the capital gains tax regime, expand efforts to curb tax evasion through digital tools and ensure more robust relief for middle-income groups, said Prateek Bansal, partner-taxation, White & Brief.
“A focused push on international taxation and transfer pricing mechanisms could further strengthen India’s global economic positioning while ensuring domestic taxpayers benefit from a more efficient, transparent system,” he added.
Last month, Sitharaman had said that the Income Tax Department will have “a lot to contribute” in terms of negotiations regarding the two-pillar tax package–currently undergoing with other countries; and be ready for the execution of the same, once the negotiations are concluded.
Pillar 1 and Pillar 2 tax packages are part of the Organisation for Economic Co-operation and Development (OECD) GLoBE rules. Pillar 1 is focused on the reallocation of (a portion of) the consolidated profit of a multinational enterprise to jurisdictions where sales arise; and Pillar 2 introduces a global minimum effective tax rate of 15 % for the MNEs.