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The Centre has embarked on re-writing the decades-old Income Tax Act, 1961.
To this effect, the Finance Ministry on Wednesday announced the setting up of a task force to draft a new direct tax legislation.
“During the Rajaswa Gyan Sangam held in September this year, Prime Minister Narendra Modi had observed that the Income Tax Act, 1961 was drafted more than 50 years ago and needs to be re-drafted. Accordingly, to review the Act and to draft a new Direct Tax Law in consonance with economic needs of the country, the government has constituted the task force,” a Finance Ministry statement said.
The new legislation will be drafted keeping in mind the direct tax system in other countries, international best practices and the economic needs of the country, it added.
“The task force shall set its own procedures for regulating its work and shall submit its report to the government within six months,” said the Ministry.
Sources said the recommendations of the task force would have to be examined in detail and are unlikely to take a final shape before 2019.
The UPA government had also undertaken a re-write of the I-T Act and had also finalised the Direct Taxes Code. The Direct Taxes Code (DTC) Bill was introduced in Parliament in 2010 but lapsed with the dissolution of the 15th Lok Sabha.
The convenor of the eight-member committee will be Arbind Modi, Member, Central Board of Direct taxes (CBDT).
Arvind Subramanian, Chief Economic Advisor to the Finance Ministry will be a permanent Special Invitee in the Task Force.
Other members of the new task force include Girish Ahuja, non-official director of State Bank of India and Chartered Accountant, Rajiv Memani, Chairman and Regional Managing Partner, EY, Mukesh Patel, tax advocate, Ahmedabad, Mansi Kedia, Consultant, ICRIER and G.C. Srivastava, retired IRS Officer.
What the experts say
Surprisingly, most tax experts were of the view that the IT Act is now well settled.
“While the stated objective of this proposal is laudable, the present IT Act already contains most of the international best practices such as GAAR, transfer pricing, BEPS, etc. It would be helpful if the new tax law emphasises on more reasonable and fair administration of the tax laws to address the concerns of uncertainties and needless tax litigations,” said Sanjay Sanghvi, Partner, Khaitan & Co.
“Instead of changing the entire law, the government should consider modifying the existing law so that the disputable provisions and litigations could be minimised. DTC advocated removal of profit-linked deductions, which have already been announced under I-T Act,” said Naveen Wadhwa, DGM, Taxmann.com.
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