New Delhi: The much-awaited report on the new direct tax code (DTC), which will replace the existing income tax act of 1961, will be submitted to finance minister Nirmala Sitharamanon Monday, said one person privy to the development, requesting anonymity. The finance ministry-appointed task force, headed by central board of direct taxes (CBDT) member Akhilesh Ranjan, was expected to submit the report on 31 July but was given a 15-day extension to incorporate the views of new members. Now, it plans to hand over the report on 19 August.
The development comes at time when the government is in a huddle to find ways to arrest the economic slowdown. It has already consulted captains of industry, including those from the auto sector, public and private banks, realty, non-banking financial companies, and other financial sector firms. The direct tax code will try to simplify tax law provisions, improve certainty and predictability of the law, besides addressing issues to minimize litigation. Sitharaman had already indicated that once the government’s revenue position improves, corporate tax rate will be cut to 25% for all companies.
The Finance Act, 2019, had raised the revenue threshold for companies in the 25% corporate tax bracket from the earlier?250 crore to ?400 crore. The move is aimed at making India an investor-friendly country. Those with higher revenue are still taxed at 30%, excluding surcharge and cesses. The expert panel is trying to make the direct tax law more sophisticated and capable of dealing with new business models in a digital economy.
Evolution of the digital economy has allowed companies to offer their services despite not having physical presence in a country. The code will also strive to expand the tax base. Despite being a country of over 1.3 billion people, there are only 74 million effective tax payers in India as per the last count. An overhaul of the tax law will make it more advanced, simpler, easy to comprehend and, at the same time, help widen the tax base in a country where tax compliance has historically been low.
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