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THE FINANCIAL EXPRESS: Simplifyingसरल बनाना the income tax regimeव्यवस्था
The existing मौजूदा Indian income-tax regime provides for complexजटिल provisions प्रावधानों for computationगणना of business income and tax. These provisions include a wide gamutदृष्टिकोण of incentives and ‘disallowance’ (adjustments) in respect of deductibility of expenses, weighted deductions, tax holidays, tax deferrals, specific deductions, etc.
Implementationकार्यान्वयन of such provisions often results in disputesविवादों in interpretation, leading to widespread litigationमुकदमेबाजी and a lengthy tax resolution and recovery process. An analysis of data for the past 10 years indicates that more than 37% of reported jurisprudenceन्यायशास्त्र pertainsसंबंधित to issues relating to tax adjustments in computationगणना of business income.
Taxable income computed as per these provisions is taxed at the prescribedनिर्धारित basic rate of 30%. Interestingly, the effective tax rate for the year ended March 31, 2014, was 23.22%, on account of various adjustments. Therefore, though it is perceived यह माना जाता है that the income-tax rates are uncompetitive अप्रतिस्पर्धी as they are higher than that in most Asian countries, in reality, there is a significant variation—of nearly 7%, in the prescribed tax rate and the effective tax rate.
In order to achieve lower tax rate and to reduce disputes विवादों को कम करने के लिए, it is imperativeआवश्यक to deviseप्रणाली a tax system which is preciseसटीक and transparentपारदर्शी . Such simple tax laws would contribute to ease of doing business in India, as these laws—as well as the compliancesअनुपालन prescribed under them—would be both taxpayer- and revenue/administration-friendly and transparent.
In view of the above objective, India could have a tax regime, wherein income-tax is imposedलगाया गया directly on book profits, computed as per the profit-and-loss account (as reduced by unadjusted book loss) without any further adjustments. This would lead to abolitionउन्मूलन of computational provisions of business income, including incentives, tax holidaysExisting provisions on taxation of unexplained investments, expenses, credits and transfer-pricing are recommended to be continued to safeguardरक्षा the interest of revenue and to act as a deterrent निवारक for any under-reporting of taxable income and other adjustments.
The rate to be prescribed under the new scheme may be the effective tax rate as on date, calibrated जांच करना for a class of industry. Where the government wishes to further incentivise any specific class of industry, it can calibrate जांच करना the rates or provide direct subsidies. Further, the regime may be applied to taxpayers mandated अनिवार्य to maintain books of accounts in India and get them compulsorily audited as per the provisions of the Income-Tax Act, as most of the tax revenue is generated through such businesses.
During the transition परिवर्तनकाल phase from incentive (current) regime, the government could impose income-tax at reduced calibrated rates, catering पूर्ति के लिए to the requirements of specific classes of taxpayers and also ensuring सुनिश्चित that they remain revenue-neutral.
Existing provisions on taxation of unexplained investments, expenses, credits and transfer-pricing are recommended to be continued to safeguard रक्षा the interest of revenue and to act as a deterrent बचाव का for any under-reporting of taxable income. This would address the issue of India having an uncompetitive tax rate without causing a loss of revenue and also significantly reduce disputes विवादों .
The concern that due to flexibility permitted in the accounting system, the tax base of companies may not be precisely determined may arise. In this regard, it is important to understand that the impact of such flexibilities in accounting standards are mere मात्र timing differences which consequently result in tax deferrals. Therefore, over an economic cycle of a business (5-7 years), typically, all the income and expenses are recognised, even where differing accounting policies, due to flexible accounting treatment, are followed.
Also, there are various taxpayers contributing to the revenue in numerousविभिन्न business cycles qua different industries, and even the business cycles of taxpayers within an industry are seen simultaneously एक साथ complementing पूरक and supplementing each other. Hence, if for some, it is tax deferrals, for others it would be reversal of tax deferrals, thereby mitigating कम करने any loss in collections.
Another concernचिंता may be that income not accounted for in the books of accounts would escape taxation. Here, it may be noted that even in the current tax system, the starting point for tax computation is book profits and then numerous adjustments are to be applied.
Implementationकार्यान्वयन of these provisions would lead to widespread व्यापक transparency पारदर्शिता in the tax system and would ensure simple, easy to understand and time-saving tax compliances अनुपालन . It would result in abolishing समाप्त करने पर approximately 90 sections of the existing I-T Act, spread over nearly 200 pages. Also, abolishing of tax incentives and at the same time implementing calibrated tax rates would help in minimising tax litigation मुकदमेबाजी in India, thereby promoting a stable tax environment.
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THE FINANCIAL EXPRESS: Simplifyingसरल बनाना the income tax regimeव्यवस्था
The existing मौजूदा Indian income-tax regime provides for complexजटिल provisions प्रावधानों for computationगणना of business income and tax. These provisions include a wide gamutदृष्टिकोण of incentives and ‘disallowance’ (adjustments) in respect of deductibility of expenses, weighted deductions, tax holidays, tax deferrals, specific deductions, etc.
Implementationकार्यान्वयन of such provisions often results in disputesविवादों in interpretation, leading to widespread litigationमुकदमेबाजी and a lengthy tax resolution and recovery process. An analysis of data for the past 10 years indicates that more than 37% of reported jurisprudenceन्यायशास्त्र pertainsसंबंधित to issues relating to tax adjustments in computationगणना of business income.
Taxable income computed as per these provisions is taxed at the prescribedनिर्धारित basic rate of 30%. Interestingly, the effective tax rate for the year ended March 31, 2014, was 23.22%, on account of various adjustments. Therefore, though it is perceived यह माना जाता है that the income-tax rates are uncompetitive अप्रतिस्पर्धी as they are higher than that in most Asian countries, in reality, there is a significant variation—of nearly 7%, in the prescribed tax rate and the effective tax rate.
In order to achieve lower tax rate and to reduce disputes विवादों को कम करने के लिए, it is imperativeआवश्यक to deviseप्रणाली a tax system which is preciseसटीक and transparentपारदर्शी . Such simple tax laws would contribute to ease of doing business in India, as these laws—as well as the compliancesअनुपालन prescribed under them—would be both taxpayer- and revenue/administration-friendly and transparent.
In view of the above objective, India could have a tax regime, wherein income-tax is imposedलगाया गया directly on book profits, computed as per the profit-and-loss account (as reduced by unadjusted book loss) without any further adjustments. This would lead to abolitionउन्मूलन of computational provisions of business income, including incentives, tax holidaysExisting provisions on taxation of unexplained investments, expenses, credits and transfer-pricing are recommended to be continued to safeguardरक्षा the interest of revenue and to act as a deterrent निवारक for any under-reporting of taxable income and other adjustments.
The rate to be prescribed under the new scheme may be the effective tax rate as on date, calibrated जांच करना for a class of industry. Where the government wishes to further incentivise any specific class of industry, it can calibrate जांच करना the rates or provide direct subsidies. Further, the regime may be applied to taxpayers mandated अनिवार्य to maintain books of accounts in India and get them compulsorily audited as per the provisions of the Income-Tax Act, as most of the tax revenue is generated through such businesses.
During the transition परिवर्तनकाल phase from incentive (current) regime, the government could impose income-tax at reduced calibrated rates, catering पूर्ति के लिए to the requirements of specific classes of taxpayers and also ensuring सुनिश्चित that they remain revenue-neutral.
Existing provisions on taxation of unexplained investments, expenses, credits and transfer-pricing are recommended to be continued to safeguard रक्षा the interest of revenue and to act as a deterrent बचाव का for any under-reporting of taxable income. This would address the issue of India having an uncompetitive tax rate without causing a loss of revenue and also significantly reduce disputes विवादों .
The concern that due to flexibility permitted in the accounting system, the tax base of companies may not be precisely determined may arise. In this regard, it is important to understand that the impact of such flexibilities in accounting standards are mere मात्र timing differences which consequently result in tax deferrals. Therefore, over an economic cycle of a business (5-7 years), typically, all the income and expenses are recognised, even where differing accounting policies, due to flexible accounting treatment, are followed.
Also, there are various taxpayers contributing to the revenue in numerousविभिन्न business cycles qua different industries, and even the business cycles of taxpayers within an industry are seen simultaneously एक साथ complementing पूरक and supplementing each other. Hence, if for some, it is tax deferrals, for others it would be reversal of tax deferrals, thereby mitigating कम करने any loss in collections.
Another concernचिंता may be that income not accounted for in the books of accounts would escape taxation. Here, it may be noted that even in the current tax system, the starting point for tax computation is book profits and then numerous adjustments are to be applied.
Implementationकार्यान्वयन of these provisions would lead to widespread व्यापक transparency पारदर्शिता in the tax system and would ensure simple, easy to understand and time-saving tax compliances अनुपालन . It would result in abolishing समाप्त करने पर approximately 90 sections of the existing I-T Act, spread over nearly 200 pages. Also, abolishing of tax incentives and at the same time implementing calibrated tax rates would help in minimising tax litigation मुकदमेबाजी in India, thereby promoting a stable tax environment.
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