The panel is headed by CBDT chief Akhilesh Ranjan
The suggestions were submitted to finance minister Nirmala Sitharaman
The suggestions include use of artificial intelligence in the tax-compliance
After the union finance minister Nirmala Sitharaman expanded benefits for individuals as well as corporations during the Union Budget, formal recommendations for altering Income Tax Act 1961 have been tabled by the direct tax panel.
The panel, headed by CBDT chief Akhilesh Ranjan, has reportedly suggested incentives to startups and a new concept of settling disputes through mediation between the taxpayer and a collegium of officers. The suggestions were submitted to finance minister Nirmala Sitharaman on Monday (August 19). The government is also speculated to release the report of the panel in the public domain for consultations after examining the recommendations.
The panel has suggested an across-the-board 25% tax rate for both domestic and foreign companies along with changes in personal tax slabs to benefit middle and upper middle class population.
The proposed corporate tax reduction will apply to both large domestic as well as foreign companies that are present in India without a subsidiary and are taxed at 40%. While the new direct tax law will bring to force new taxation concepts as well as schemes to reduce litigation, the actual tax rate reduction may be executed as part of annual Finance Bills, depending on the revenue buoyancy of the government from time to time.
Further, the draft proposes a “branch profit tax” for such entities on the earnings that they repatriate to their overseas parent. Further, it is also recommended that assessment proceedings be made faceless, and an option be allowed to the public to seek clarifications on tax matters from CBDT.
The panel has reportedly suggested use of artificial intelligence (AI) in the tax-compliance and administration process. This would reportedly compel an income bearer and a potential taxpayer to be a part of the tax net, thereby improving the tax base and compliance.
The panel has also proposed to introduce collaborative compliance in direct tax administration, which would integrate data from banks, financial institutions and the goods and services tax (GST) network to ensure that the scope of taxable income increases.
With India’s complicated laws, the clarification and better income tax laws will be a welcome move to address ease of doing business plans and to support the middle class Indians.
