Tax Reforms

Budget 2018-19: To cut graft, govt plans to take tax assessment beyond state borders


Mains Paper 3: Economy | Mobilization of resources

From UPSC perspective, the following things are important:

Prelims level: Income-Tax Act, Finance Bill, 2018,  Central Board of Direct Taxes (CBDT)

Mains level: Tax laws in India and need to revamp them

Jurisdiction-free assessment to be implemented

  1. The government is focusing on minimising human interaction in the direct tax
  2. This will be done by faceless and jurisdiction-free assessment, and online feedback
  3. It is likely to be announced in the upcoming Budget for 2018-19

Working of the new system

  1. A jurisdiction-free assessment implies that a taxpayer in Delhi, for instance, could be assessed by a tax officer randomly selected by the online system of the tax department and located in any other part of the country
  2. The entire process may not be nameless but would enable a more technology-driven interaction between the tax department and the taxpayer, with the assessment not being restricted to one officer
  3. Such an assessment is aimed at minimising the scope for corruption and discretion by the tax officers
  4. This will, in turn, reduce the harassment for the taxpayers

What needs to be done to implement the new system?

  1. The government needs to amend the Income-Tax Act to facilitate a common jurisdiction region for all taxpayers
  2. Suggestions from the field officers have been incorporated in the draft Finance Bill, 2018, by the Central Board of Direct Taxes (CBDT)

More transparency in tax assessment

  1. Functional specialization is expected to be a key feature of the new system
  2. One tax official will not handle all stages of assessment
  3. Also, one tax official won’t have complete power over a taxpayer of his/her jurisdiction
  4. The roles of tax officials are likely to be split into different functions of assessment, verification, tax demand, recovery, and orders


Finance Bill

  1. A Finance Bill is a Money Bill as defined in Article 110 of the Constitution
  2. The proposals of the government for levy of new taxes, modification of the existing tax structure or continuance of the existing tax structure beyond the period approved by Parliament are submitted to Parliament through this bill
  3. The Finance Bill is accompanied by a Memorandum containing explanations of the provisions included in it
  4. The Finance Bill can be introduced only in Lok Sabha
  5. However, the Rajya Sabha can recommend amendments to the Bill
  6. The bill has to be passed by the Parliament within 75 days of its introduction
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