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June 5, 2021

Know 8 tax reforms govt has taken for ease of Taxpayers

by CA Shivam Jaiswal in Income Tax

Know 8 tax reforms govt has taken for ease of Taxpayers

1. Key Reforms Easing Lives of Taxpayers

  • Pre-Filing of Income-Tax Returns: ITR form now contains pre-filled details of certain incomes reducing time & effort required to fill the ITR
  • Electronic verification of IT Return & Appeals allows real time verification and eliminates the need to submit a signed copy of verification form
  • All communication of IT Department are generated electronically with a unique Document Identification Number (DIN) bringing greater transparency in tax-administration & improvement in service delivery
  • Amendment in form 26AS of the IT Rules to provide information on deduction or collection of tax, etc. electronically
  • Abolition of Dividend Distribution Tax (DDT) wef 1 April 2020.

Easing Lives of Taxpayers: Personal Income Tax

The Finance Act, 2020 provides an option to individual taxpayers to pay income-tax at lower slab rates if they do not avail specified exemptions & incentives

  • Complete relief from payment of income-tax to individuals earning taxable income up to 5 lakh
  • Exempt an individual taxpayer with taxable income up to 5 lakh by providing 100% tax rebate
  • Standard deduction enhanced from 840,000 to 850,000

The Act also provides an option to co-operatives to pay taxes at concessional rates without claiming any specified deduction or incentive

2. Easing Lives of Taxpayers: Corporate Tax

India has one of the lowest corporate tax rates in the world making it an attractive destination for foreign investment

Taxation Laws (Amendment) Act, 2019 provides an option to corporates to pay:

  • Tax at a concessional rate of 22% for existing domestic companies
  • 15% for new manufacturing companies set up after 01.10.2019 & commence production by 31.03.2023

The initiative attracts fresh investment, creates jobs, stimulating the overall economy

3. Legislative Measures Furthering Ease of Doing Business

  • Insolvency and Bankruptcy Code 2016 (IBC) and further amendments removed certain difficulties in insolvency resolution process & strengthened Corporate Insolvency Resolution Process (CIRP)
  • Increasing the threshold of default under the IBC, 2016 from 1 lakh to 1 crore for corporates in the light of COVID-19 under PM Garib Kalyan Package
  • IBC (Amendment) Act 2020 provides temporary suspension of initiation of CIRP & brings relief to companies affected by COVID-19
  • Creation of Institutions – NCLT, NCLAT, NFRA, IBBI and IEPFA as specialized/appellate tribunal for corporate dispute resolution & discharge of a several of duties for expeditious disposal of cases
  • Companies (Amendment) Act 2019 strengthens enforcement Agencies & de-clogging of National Company Law Tribunal and special courts
  • Decriminalization of technical & procedural violations under Companies Act, 2013 & reducing the burden on criminal courts & NCLT
  • For Small Companies, Threshold for paid up capital revised from not exceeding q50 lakh’ to not exceeding q2 crore’ & Turnover revised from not exceeding 2 crore’ to not exceeding X20 crore’
  • One Person Companies (OPCs) rules amended: OPCs to grow without any restrictions on paid up capital & turnover; residency limit to set up an OPC reduced from 182 to 120 days; allowing NPIs to incorporate OPCs in India

4. Enabling Legislative Measures to Curb Corruption

  • The Fugitive Economic Offenders Act, 2018 provides for expeditious confiscation of proceeds of crime & properties owned by a fugitive economic offender in India or abroad
  • The Black Money (Undisclosed Foreign Income and Assets) & Imposition of Tax Act, (wef 1 July 2015) to curb the flow of black money stashed abroad
  • Benami Transactions (Prohibition) Amendment Act, 2016 provide specific provisions for confiscation of benami property & prosecution of the benamidar(s), and/or abettor to such benami transactions
  • An Inter-Governmental Agreement between India and USA was signed for implementation of Foreign Account Tax Compliance Act (FATCA)
  • Country-by-Country Reporting (CbCR) Standards (wef Sept. 2017) enables tax transparency in international transactions & IT dept to have comprehensive database of activities undertaken by a multinational enterprises
  • India joined the Multilateral Competent Authority Agreement (MCAA) to curb black money through Automatic Exchange of Information as per Common Reporting Standard (CRS)
  • Income Declaration Scheme, 2016 provides an opportunity to all persons who had not declared income correctly in earlier years to declare such undisclosed income
  • Operation Clean Money launched to very cash transaction status of taxpayers during demonetization &take tax enforcement action if transactions doesn’t match the tax status

5. Ushering in Transparency in Tax System, Empowering Taxpayers

Pioneering an ecosystem of assessments and appeals based on data analytic and Al, eliminating physical interface between the taxpayer & tax officers

  • The Faceless Assessment Scheme 2019
    • No need for taxpayer to visit IT off ice or the officer
    • No fixed territorial jurisdiction & cases assigned by the system in a randomized manner
  • Faceless Appeal Scheme 2019
    • Conducted of appeal proceedings in electronic mode; applicable to all pending appeals as well as new appeals filed before the Commissioner of IT
    • National Faceless Appeal Centre (NFAC) at Delhi &4 Regional Faceless Appeal Centers (RFACs) with 293 Appeal Units created across the country

6. Direct Tax Vivad Se Vishwas: Settling the Unsettled (wef 17 March 20)

  • The scheme established a resolution process by which tax disputes are settled in speedy manner
  • Subject to certain exclusions, taxpayers whose appeal was pending as on 31st Jan, 2020 are eligible by paying only the disputed tax & getting waiver from payment of interest and penalty
  • Taxpayers who have pending writ petitions filed before High Court or Supreme Court, revision application filed under section 264 or application filed before Dispute Resolution Panel are also eligible
  • Reduce tax litigation and immunity from penalty, interest and prosecution of taxpayers

7. Unprecedented Growth of Income Tax Returns Filed in Last 7 Years

YearsNumber of Return FiledNumbers of Person File Returns
2013-143.79 Crore3.31 Crore
2020-217.38 Crore6.72 Crore

8. Higher Tax Compliance Over the Last 6 Assessment Years

YearsNumber of Return FiledNumbers of Person File Returns
2013-1426.92 Lakh Crore88.6 K
2020-21 (up to 20th May 2021)62.11 Lakh Crore1.93 Lakh

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