Govt sets up panel to review income tax laws

Eight years after he first helped draft a new direct tax code for India, top taxman Arbind Modi has been asked to do the task again to meet the contemporary economic needs of the country.

Modi, Member, Central Board of Direct Taxes (CBDT), will steer a six-member panel on the issue, an official press statement said. Arvind Subramanian, chief economic advisor will be a permanent special invitee on the panel.

The move, which is aimed to make direct taxes - income and corporate - simple, comes ahead of BJP-led government's last full Budget.

It comes within months of the launch of Goods and Services Tax (GST) that overhauled the indirect tax regime by unifying more than a dozen central and state levies, including excise duty, service tax and VAT.

Prime Minister Narendra Modi, during the annual conference of tax officers in September, had observed that the Income-tax Act, 1961 was drafted more than 50 years ago and it needs to be redrafted.

"Accordingly, in order to review the Act and to draft a new direct tax law in consonance with economic needs of the country, the Government has constituted a task force," a finance ministry statement said.

Other members of the task force include Girish Ahuja (chartered accountant), Rajiv Memani (Chairman and Regional Managing Partner of EY), Mukesh Patel (Practicing Tax Advocate), Mansi Kedia (Consultant, ICRIER) and G C Srivastava (retired IRS and Advocate).

The task force, which will submit its report to the government within six months, would draft direct tax laws in line with tax laws prevalent in other countries, incorporating international best practices, and keeping in mind the economic needs of the country.

Former finance minister P Chidambaram had in 2009 proposed the original direct taxes code to replace the cumbersome IT law with a clean new law and to embody the principle of keeping taxes low and removing exemptions.

Modi had assisted the former finance minister in preparing the code. However, the bill, that underwent many changes subsequently was not passed by Parliament. The Direct Taxes Code (DTC) Bill, 2010, which was introduced in Parliament in 2010, lapsed with the dissolution of the 15th Lok Sabha.

The Bill had proposed annual I-T exemption limit at Rs 2 lakh, and levying 10 per cent tax on income between Rs 2 lakh and Rs 5 lakh, 20 per cent on Rs 5-10 lakh and 30 per cent above Rs 10 lakh. For domestic companies, it suggested tax rate of 30 per cent of business income. The NDA government, since coming to power in 2014, has already implemented general anti-avoidance rules GAAR. In 2016, Finance Minister Arun Jaitley also promised to lower corporate tax rate to 25 per cent in 5 years.

Currently, income up to Rs 2.5 lakh per annum is exempt from tax for individuals.

Terming the move as an interesting development, Sanjay Sanghvi, Partner, Khaitan & Co, said, "While the stated objective of this proposal is laudable, the present Income Tax Law in the country already contains most of the international best practices such as GAAR, transfer pricing / CBCR, BEPS and so on".

"It would be helpful if the new tax law emphasises more reasonable and fair administration of the tax laws to address the concerns of uncertainties and needless tax litigations. It is heartening to note that the new law will be drafted keeping in view the economic needs of the country," he said.

New Delhi: The government will come out with an ordinance to make certain amendments to the Insolvency and Bankruptcy Code, Corporate Affairs Minister Arun Jaitley said on Wednesday.

The Code, which became operational in December last year, provides for a market-determined and time-bound insolvency resolution process. It is implemented by the corporate affairs ministry.

The Cabinet on Wednesday approved bringing in an ordinance to make "some changes" in the Code, Jaitley told reporters here.

Details about the proposed changes could not be immediately ascertained.

The move also comes at a time when there are concerns in certain quarters about various aspects of the law, including the possibility of promoters wresting back control of a company under the insolvency process.

The ministry has already set up a 14-member committee to identify and suggest ways to address issues faced in implementation of the law.

The Insolvency Law Committee, chaired by Corporate Affairs Secretary Injeti Srinivas, will take stock of the implementation of the Code.

More than 300 cases have been admitted for resolution under the Code by the National Company Law Tribunal (NCLT).

A case is taken up for resolution under the Code only after receiving approval of the NCLT for the same.

New Delhi: The Union Cabinet on Wednesday approved India's membership for European Bank for Reconstruction and Development (EBRD), a move which will help it obtain funding in various areas including services and manufacturing.

Steps will be initiated by the Department of Economic Affairs to acquire the membership, Finance Minister Arun Jaitley said after the Cabinet meeting. The membership will increase the scope of cooperation between India and the multilateral institution through co- financing opportunities in manufacturing, services, information technology and energy.

"Initially, we will take 100 shares," Jaitley said, adding that the finance ministry will decide on increasing its shareholding through negotiations.

An official statement said that the membership will increase India's investment opportunities and enhance its international profile as well as promote its economic interest.

"EBRD's core operations pertain to private sector development in their countries of operation. The membership would help India leverage the technical assistance and sectoral knowledge of the bank for the benefit of development of private sector," it added.

It will also help enhance the competitive strength of Indian firms and provide an greater access to international markets in terms of business opportunities, procurement activities and consultancy assignments.

"This would open up new vistas for Indian professionals on the one hand, and give a fillip to Indian exports on the other, it said.

The membership will also enable employment opportunities at the bank for Indians, it added. About financial implications, the statement said the minimum initial investment towards the membership will be about 1 million euro (Rs 7.63 crore).

"However, this assumption is based on India deciding to buy the minimum number of shares (100) required for obtaining the membership. If India were to buy a higher number of bank shares, the financial implications could be higher," it added.

In-principle approval of the Cabinet at this stage is being obtained for joining the Bank.

New Delhi: The Cabinet on Wednesday approved the setting up of the 15th Finance Commission which will assess the tax resources of the nation and suggest a formula for their devolution among states.

The members of the Commission and its terms of reference will be notified in the due course of time, Finance Minister Arun Jaitley said after the Union Cabinet meeting.

Its recommendations will have to be in place before April 1, 2020, he said. "Normally, it takes 2 years for Finance Commission to give its recommendations."

As per Article 280 of the Constitution, the Commission is required to make recommendations on the distribution of the net proceeds of taxes between the Centre and the states.

The Commission also suggests the principles which should govern the grants in aid of the revenues of the states out of the Consolidated Fund of India.

This time it will have to take into account the impact of the Goods and Services Tax, which kicked in from July, on the resources of the central as well state governments.

On who will head the 15th Finance Commission, Jaitley said: "The members of Finance Commission will appointed very very soon."

When asked whether the 15th Commission will also allocate more resources to the states, he said: "I think let us not pre judge the situation. India is a Union of states, the Union also has to survive."

The 14th Finance Commission was set up on January 2, 2013. Its recommendations cover the period from April 1, 2015 to March 31, 2020.