A senior Finance Ministry official on Monday said the aim of the proposed Income Tax law is to cut the tax disputes and consequent litigations by simplifying the language.
K Balasubramanian, joint secretary at the department of revenue in the finance ministry, said the government had been working to make the I-T laws taxpayer friendly.
Finance Minister Nirmala Sitharaman had, during her budget speech, said she would present a new I-T bill which will carry forward the same spirit of “Nyaya”. “The new bill will be clear and direct in text with close to half of the present law, in terms of both chapters and words. It will be simple to understand for taxpayers and tax administration, leading to tax certainty and reduced litigation.”
The Finance Ministry official clarified that ending the old tax regime or withdrawing deductions and incentives were not within the scope of this exercise, speaking at a post-budget analysis hosted by Bangalore Chamber of Industry and Commerce (BCIC) and audit and consulting firm Deloitte on Monday. The Revenue department received over 10,000 suggestions many of which have been incorporated into the bill that will be tabled in Parliament, he added.
Speaking about the need for added incentives for different sectors in the I-T Act, the secretary explained that the government is moving away from a regime of incentives.
“It is not practical to introduce new sector-specific incentives, whether for healthcare or infrastructure, as the corporate tax rate has already been reduced from 30% to 22%. The idea is that this lower headline rate should replace the need for incentives, which previously led to litigation and misuse.”
On the Finance Bill and acknowledging the pendency of litigation at the Commissioner of Appeals level, the joint secretary said, “We have made a lot of changes both in the provisions of the Act and in administrative actions to speed up case resolution,” adding that the government would observe how things would go over the next 6-9 months before taking a call on further action.
When asked about the proposed Transfer Pricing (TP) assessment model in India differing from the global block assessment approach, Balasubramanian said the intent is to move towards it but India may not be mature enough to implement it immediately. He said that TP assessments in the country are closely linked to regular tax assessments and are not easy to separate
“As a first step, by the time the assessment for one year is complete, two more years of returns would be filed. This allows us to apply the same TP principles from the first year to the next two years, reducing the need for reassessments,” Balasubramanian added. He explained that 50% of the cases have identical issues year-on-year.
The government will also shift from a random selection of TP cases to a risk-based TP assessment approach. “Instead of evaluating 4,000 cases annually in isolation, we aim to cover a larger number of assessees over a three-year cycle, reaching at least 7,000–8,000 entities. This will help provide early certainty to more taxpayers, allowing them to plan their compliance better,” the secretary said during his address.
On the demand for exempting GST from health insurance premiums, Balasubramanian said the government is deliberating on it. “Insurance companies themselves have concerns about losing input tax credits which could lead to higher premiums. Our intent is to ensure a balanced approach where the exemption benefits all stakeholders, insurers, healthcare providers, and consumers.”
