In an effort to improve ease of doing business and making tax administration non-adversarial, an expert committee has made a slew of recommendations including tax relief for new businesses in the first year of operations, doubling the eligibility for the presumptive income scheme for small businesses and rationalisation of tax deducted at source.
The first draft of the Justice RV Easwar committee to simplify the Income Tax Act, 1961, has called for doubling the turnover limit for the presumptive income scheme for individual, Hindu Undivided Family or a partnership firm to ₹ 2 crore annually from the current ₹ 1 crore. It has also suggested introducing the scheme for professionals whose total receipts do not exceed ₹ 1 crore during the financial year.
“This scheme is quite popular among small businessmen who declare their income at 8 per cent of the total turnover or gross receipts of the previous year,” said the report.
Significantly, in a big relief to entrepreneurs and businesses in their first year of operations, the committee has also recommended amendments to Section 234C so that there is no liability for interest when they declare income from business for the first time after the first or second instalment of advance tax is due and they have discharged his liability for payment of advance tax in the instalments to follow.
The committee has also called for rationalisation of the threshold and reduction of the rates of TDS. “TDS rates for individuals and HUFs to be reduced to 5 per cent as against the present 10 per cent,” it noted.
The committee, which was set up last year by Finance Minister Arun Jaitley, has also suggested that non-residents should be allowed to furnish their tax identification number or any other unique number from their resident company in lieu of the Permanent Account Number (PAN) from applicability of tax deduction at source at a higher rate. “This provision has proved to be an impediment in terms of ease of business, as many non-residents prefer not to do business with Indian residents, if obtaining of PAN is insisted from them,” it noted.
The panel has also called for timely refund with interest and also providing for payment of higher interest in case of delayed refunds and has also made a case for streamlining the process of recovery of disputed demands “with a view to balancing the need to meet revenue targets and fair treatment to the taxpayer. It has also called for allowing taxpayers to get an automatic stay of demand on payment of seven and one-half percent of the demand until the first appellate order is passed.
On the issue of Sec 14A disallowance, it has proposed that dividend received after suffering dividend-distribution tax as also share income from firm suffering tax in the firm’s hands will not be treated as exempt income and no expenditure will be disallowed as relatable to them.