Easwar committee recommends friendly tax laws

19 Jan 2016 Evaluate

In order to improve the ease of doing business, reduce litigation and accelerate the resolution of tax disputes, the committee, headed by retired high court judge R.V. Easwar, has suggested several taxpayer-friendly measures. The committee which was set up by the government to change direct tax laws, has recommended raising the threshold limits for deduction of tax at source as also slashing the rate of withholding tax, considering the importance of the long overdue revision of these puny limits.

The committee in its report, recommended enhancement and rationalization of the threshold limits and reduction of the rates of TDS (tax deducted at source). It proposed that 'TDS rates for individuals and HUFs (Hindu undivided family) to be reduced to 5 percent as against the present 10 percent. It has proposed raising the threshold for TDS to Rs 15,000 from Rs 2,500 annually and reducing the tax rate to 5 percent for interest on securities. Besides, for other interest earnings it recommended raising the limit to Rs 15,000 from the present Rs 10,000 for bank deposits, and Rs 5,000 for others. For payments to contractors, the panel has proposed raising the TDS limit from the current Rs 30, 000 for single transaction and Rs 75,000 annually, to Rs1 lakh limit per annum. The TDS threshold limit on rent income has been proposed to be raised from Rs 18 lakh annually to Rs 2.4 lakh. The threshold for fees for professional or technical services is recommended to be raised to Rs 50,000 from Rs 30,000, but it said the TDS rate here may be retained at 10 percent.

The committees in its 78 page draft report has said that nearly 65 percent of the personal income-tax collected in India was through TDS, whose provisions need to be made more friendly and less 'tedious', as they have remained over the years.

Furthermore, the committee also recommended deferring implementation of Income Computation and Disclosure Standards (ICDS) and making the process of refunds faster, to provide more time to taxpayers to deal with changes in law such as to the Companies Act, 2013, and the proposed Goods and Services Tax (GST) Act. Besides, it suggested an increase in turnover limit for tax audit applicability from Rs. 1 crore to Rs.2 crore for business and Rs.1 crore for professionals.

In order to minimize human interface, the committee recommended that most of the processes of the income-tax department should be conducted electronically. Accordingly, it suggested that processes such as filing of tax returns, rectification of mistakes, appeal, refunds and any communication regarding scrutiny including notices, questions and documents sought should be done electronically.

Some of these recommendations that require amendments to the income-tax act are likely to be a part of the Union budget to be presented on 29 February, while some other changes in administrative procedure can be implemented through official notifications by the income tax department The committee has invited comments from the public till January 23, following which it will finalise the report's first part by January 31.

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