Tax Reforms: Step in the right direction- Business News
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Tax Reforms: Step in the right direction

The taxman will be easy on those who comply with the norms, but tough on those who try to escape the tax net.

  • March 15, 2016  
  • |  
Divya Baweja , Partner, Deloitte Haskins & Sells LLP

Finance Minister Arun Jaitley has made a conscious effort to reduce tax litigations and provide certainty in taxation. He made it clear that while compliant taxpayers can expect a supportive interface, any sort of tax evasion will be countered strongly. Here are a few welcome initiatives.

AUTOMATION OF ASSESSMENT

According to the Budget proposals, notices and documents can be issued in both paper and electronic form, and the term 'hearing' will include ecommunication of data. The scope of e-assessments will be introduced in seven mega cities. The scrutiny will be done in an e-environment, where there will be no face-to-face interface between the Income Tax Department and the assessee, unless either of the two parties wants to hear the other.

INCOME DECLARATION

Immunity will be granted to those who declare their undisclosed income and pay 45 per cent thereof - 30 per cent tax, 7.5 per cent surcharge and 7.5 per cent penalty - between the June 1 and 30 September, 2016 window.

TAX DISPUTES RESOLUTION

A new Tax Dispute Resolution Scheme was introduced for pending disputes before the appellate authorities to reduce disputes relating to two types of taxes.

Specified taxes. Any tax determined or validated by amendment with retrospective effect as on 29 February 2016, will be eligible for arbitration before concerned authorities. The declarant shall get immunity from penalty or prosecution.

Tax arrears. For appeals regarding taxes, interests or penalty that are pending before either the commissioner of income tax or wealth tax as on February 29, 2016, will be required to pay applicable taxes plus interest only up to the date of assessment. In case disputed tax exceeds `10 lakh, a minimum of 25 per cent penalty will be applicable. Declarant shall get immunity from any prosecution.

PENALTY PROVISIONS

With effect from 2016/17, the Budget proposes to substitute penalty under Section 271(1)(c) with Section 270A, wherein penalty could be imposed for under-reporting and misreporting of income. 50 per cent of tax will be payable for under-reporting and 200 per cent in case of misreporting. The new provisions have also substantially reduced the discretionary powers of the tax offi cers for levying penalty.

FILING OF TAX RETURN

The time limit to file a belated return for a particular tax year has been preponed by one year. It has also been proposed that belated tax return can now be revised on or before the expiry of two years from the end of the relevant tax year or before the completion of assessment, whichever is earlier.

Also, return of income would not be regarded as defective merely because self-assessment tax and associated interests have not been paid within the statutory time limits.

COMPLETING ASSESSMENTS

The timeline for completing assessment proceedings has been reduced from 36 months to 33 months from the end of the relevant tax year. Similarly, the time limit for completion of reassessment proceedings has been reduced from 12 months to 9 months. As far as Budget 2016 goes, many of these tax reforms appear to be a step in the right direction.

Written by  Divya Baweja , Partner, Deloitte Haskins & Sells LLP