New Delhi – Post the successful implementation of the goods and services tax, which comes under the indirect taxes, the government has set its sight on the direct taxes. The government plans to bring some changes to the 56-year-old direct tax laws and thus seeks to make the Indian tax reforms as per the modern era.
Some senior government officials said that the finance ministry was in the process of setting up a team who would write the new tax law. An attempt was made earlier as well by the previous government in 2009. It was released by Pranab Mukherjee and was prepared by P Chidambaram and his team but was diluted a few years later.
The bill was never passed as the Modi government got busy in clearing the mess and implementing the GST. But with Modi himself bringing this up during the Rajaswa Gyan Sangam and saying that the direct tax laws are outdated, the finance ministry has started the review the direct tax laws.
As per the sources, the expected plan is to have the bill ready by the next budget and then it would be put out for the public comments. As the elections are due in 2019, the government might not implement this, but the ground work is expected to be in place till that time.
The proposals expected are quite encouraging with an exemption of up to ₹3 lakh, and the maximum tax slab of 30% would be applied only to those who have an annual income above ₹ 25 lakh. People who would be earning between ₹ 10 Lakh to ₹25 Lakh would face anywhere close to 20% as the tax rate. For the companies as well it is expected that several exemptions might be withdrawn.
Sudhir Kapadia, who is the national tax leader at Ernst & Young said that the government should give some breather to the Indian companies as they are already dealing with several changes such GST, the companies’ law and the new accounting standards that have been put in place.
Rahul Garg who leads the direct tax division at PwC had the opinion that the government should start from the scratch so that it can align the tax system of India with global standards.