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Income Tax task force report suggests complete rejig of tax slabs, saving govt Rs 55,000 crore Read.

Date: 11-11-2019
Subject: Income Tax task force report suggests complete rejig of tax slabs, saving govt Rs 55,000 crore Read
New Delhi: The government could boost its revenues by more than Rs 55,000 crore if it implements a task force report that calls for a complete rejig of income tax slabs and capital gains tax regime, two persons familiar with the content of the report said.

“There could be an overall gain in revenues if the recommendations are implemented in full,” one of the persons said. The government has begun examining the report of the task force on direct taxes, and it is expected that some its recommendations may find place in the upcoming budget.

The report, which is yet to be made public, has suggested a radical shift to taxation approach by suggesting no prosecution or reopening of assessment for people who declare and pay higher income tax for a past period of up to six years with interest and 50 per cent penalty.

“It has been seen that taxpayers do not pay higher tax for a past period for fear of reopening of assessment and prosecution,” said the second person cited earlier. It would give a boost to revenues, the person said.

The report has also suggested new income-tax slabs of 10 per cent for people earning up to Rs 10 lakh per year, 20 per cent for those with incomes of over Rs 10 lakh and up to Rs 20 lakh, 30 per cent for incomes of over Rs 20 lakh and up to Rs 2 crore, and 35 per cent for individuals earning more than Rs 2 crore. It has not suggested any change to current income tax exemption limit.

The current IT rates are 5 per cent plus 4 per cent cess for people earning between Rs 2.5 lakh and Rs 5 lakh, 20 per cent plus 4 per cent cess for incomes of more than Rs 5 lakh up to Rs 10 lakh, and 30 per cent plus 4 per cent cess for those earning over Rs 10 lakh.

The task force has suggested removal of surcharge that ranges between 15 per cent to 37 per cent . It has also proposed restricting deductions available to individuals to provident fund, medical and education expenses, housing loan and charity to bring efficiency gains. Currently, individuals can avail a host of deductions in lieu of interest on savings in fixed deposits, equity-linked savings schemes and insurance. The task force has suggested removal of deduction available in lieu of interest and rentals.

On the capital gains tax regime, the task force has suggested three categories: equity, non-equity financial assets, and all others including property. Indexation benefits is proposed to be restricted to non-equity financial assets and all other assets categories.

Along-term capital gains (LTCG) tax of 10 per cent is proposed for gains on sale of equity assets held for more than 12 months. For equities held for a shorter period, 15 per cent short-term capital gains tax has been proposed.

For non-equity financial assets held for over 24 months, a LTCG of 20 per cent with indexation has been proposed for gains on sale. In case of all other assets, a 20 per cent tax with indexation on gains on sale post holding a period of 36 months has been proposed.

At present, equities, preference shares, equity-based mutual funds, zero coupon bonds, Unit Trust of India units are considered long-term assets if held for a period of over 12 months. Debt-oriented mutual funds, jewellery held for a period of over 36 months are treated as long-term. Real estate held for over 24 months is treated as a long-term asset.

The task force has not suggested discontinuation of securities transaction tax levied on equities. It has suggested changes to taxation of employee stock option plans to incentivise startups.

The report has suggested 25 per cent tax for foreign companies and a branch profit tax rate of 15 per cent if these are repatriated. It suggested scrapping of dividend distribution tax, and instead tax dividends in the hands of recipient. It has also suggested widening of presumption taxation to enhance tax base.

The report called for public rulings. The task force, with Central Board of Direct Taxes member Akhilesh Ranjan as convenor and chief economic advisor KSubramanian as member, had submitted its report on August 19.

Source: economictimes.indiatimes.com

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