Economy

Budget could set stage for a new-look Income-Tax Act

Surabhi Mumbai | Updated on June 18, 2019 Published on June 18, 2019

The task force is expected to present its final report on July 31   -  designer491

Panel on overhauling tax regime to present final report soon

The long-pending overhaul of the country’s direct tax laws could finally gain traction later this year with the Goods and Services Tax (GST) now in place and the Union government sitting pretty with an overwhelming majority.

According to informed sources, the Union Budget 2019-20 could spell out the government’s intent to this effect.

“There has been a move to redraw the Income Tax Act for some time and a committee was also set up. With the government now having a clear five-year mandate and the transition to GST almost complete, the focus will shift to the direct tax laws this fiscal,” said a person familiar with the development, adding that the Union Budget on July 5 could make a mention of this move.

The Finance Ministry had, in November 2017, set up a Task Force to draft an appropriate direct tax legislation keeping in mind the international best practices and economic needs of the country. It was expected to submit its report within six-months or by April 2018. In November 2018, it was reconstituted under Akhilesh Ranjan, Member (Legislation), Central Board of Direct Taxes.

On May 27, it was given another two-month extension and it is now likely to present its final report on July 31, 2019.

“Much of the work of the committee is now over, including holding discussions with the stakeholders. It is likely to submit its report within the time frame,” said the source.

Review and discussion

However, the process is expected to be time-consuming and the report is expected to require much review and discussion.

“The process of redrafting the income-tax law will take some time, as it was the case with the GST. A start may be made later this year, but it could take time to be completed,” said the source, adding that with a clear five-year mandate, it is now possible for the government to draw a roadmap for the overhaul.

Significantly, at the Rajaswa Gyan Sangam in September 2017, Prime Minister Narendra Modi had highlighted the need to re-draft the Income Tax Act, pointing out that it was over 50 years’ old.

Even earlier, the UPA government had initiated a review of the income-tax law and had proposed a Direct Taxes Code. Though it was later abandoned, certain provisions, especially those pertaining to international taxation, were introduced in the IT Act, 1961, through amendments to cater to the changing economic situation.

Published on June 18, 2019
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