Easwar committee to examine salary deductions, tax treaties issues in its second report

03 Feb 2016 Evaluate

Easwar committee, which is headed by retired high court judge R.V. Easwar, will examine vexed issues such as salary deductions, general anti-avoidance agreement and tax treaty interpretations in its second report, expected in October this year. The recommendations will be aimed at making a predictable and non-adversarial tax regime in the economy. Examining the issue of salary deductions, the high-level panel will take a re-look at exemption limits and medical reimbursements, among other things. These recommendations will be considered only in the Budget for 2017-18. The focus will be to ensure simplicity, certainty and predictability in the income tax regime and cut litigation.

Besides, the panel will also make efforts to bring in some standards for the interpretational issues in the double-taxation avoidance (DTAA) treaties. The committee will also recommend simplification of rules for computation of income for charitable trusts. R.V. Easwar said that 'We will also look at the non-resident tax issue, of Section 9 with respect to Section 195, which forms a major chunk of litigation'. Moreover, the committee will deliberate on if there is a need for standard deduction. The panel will invite suggestions from experts and stakeholders on the complex matter.

The committee will deliberate on incorporation of limitation of benefits clause in India's tax treaties. However, the committee will not make any recommendations on the tax slabs as this might impact tax base and revenue which will be contrary to the terms of reference of the committee, set up by Finance Minister Arun Jaitley in October last year.

Earlier, the Committee had submitted its first report in January in order to improve the ease of doing business, reduce litigation and accelerate the resolution of tax disputes. It 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.

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