In November, 2017, the Government had constituted “Task Force for drafting a New Direct Tax Legislation” in order to review and replace the existing Income-tax Act, 1961 and to draft a new direct tax law in accordance with economic needs of the country.
The deadline of submitting the report was by 31st of July, 2019. However, the new Members of the Task Force requested for more time to provide further inputs.
Hence, the Government has given extension of 16 days and allowed the Task Force to submit its report by 16th of August, 2019.
The panel, led by Central Board of Direct Taxes member Akhilesh Ranjan, was earlier required to submit its recommendations on Friday.
But now, the task force will submit its report to finance minister Nirmala Sitharaman on Monday.
Last months, the government had expanded the scope of the task force to look into five more areas along with nominating two new members — Chief Economic Advisor Krishnamurthy Subramanian and Joint Secretary (Revenue) Ritvik Pandey.
The new direct tax code will try to simplify tax law provisions, improve certainty and predictability of the law and reduce litigation.
Sitharaman had already indicated that once the government’s revenue position improves, corporate tax rate will be cut to 25% for all companies.
Hence, Finance Act of 2019 had raised the revenue threshold for 25% corporate tax rate to ₹400 crore from ₹250 crore, with an aim of making India an investor-friendly country. Those with higher revenue are taxed at 30%, excluding surcharge and cess.
The expert panel is trying to make the direct tax law more sophisticated and capable of dealing with new business models in the digital economy.
The code will also try to expand the tax base. Despite being a country of over 1.3 billion people, there are only 7.4 crore 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 to widen the tax base in a country.
This comes at a time when the government is in a huddle to find ways to arrest the economic slowdown.
It has already consulted captains of industry, including auto sector, public and private banks, non-bank finance companies and other financial sector players.