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• Expert Committee to simplify income tax laws headed by Justice (retired) R.V. Easwar has submitted its report to Union Finance Ministry
• The 10 member committee has recommended simplifying provisions related to tax deduction at source (TDS), tax refunds and claims of expenditure for deduction from taxable income
• It also has suggested several taxpayer-friendly measures to improve the ease of doing business in the country, accelerate process of tax dispute resolutions and reduce litigation

Recommendations:

• Deferring the contentious Income Computation and Disclosure Standards (ICDS) provisions and making the process of tax refunds faster
• Deletion of a clause in IT Act, 1961 that allows the IT department to delay tax refund due beyond six months in case of delay in refunds levying higher interest
• IT department should stop the practice of adjusting tax demand of a taxpayer against legitimate refunds due whose tax return is under assessment
• Treat stock trading gains of up to Rs. 5 lakh as capital gains and not business income
• Tax Deducted at Source (TDS) rates for individuals must be reduced to 5 per cent from current 10 per cent. Dividend income should be treated as part of total income
• Exempting non-residents not having a Permanent Account Number (PAN), but seeking to provide their Tax Identification Number (TIN) for the applicability of TDS at a higher rate
• Most of the working processes of the IT departments should be conducted electronically in order to minimize direct human interface
• Eligibility criteria under the presumptive tax scheme to be increased to Rs. 2 crore from Rs. 1 crore rupees to make it easy for small businesses
• Such scheme should be also for professionals

Background:

• Union Government had constituted this committee in October 2015 by following up on a promise to provide a fair and predictable tax regime
• The committee was tasked to suggest recommendations to overhaul the IT Act, 1961 to remove ambiguities that cause unnecessary litigation and update the laws based on various judgements

What is ICDS?

• The Central Government had notified 10 Income Tax Computation & Disclosure Standards (ICDS) effective financial year 2015-16
• Objective: To minimising tax related disputes by bringing greater consistency in the application of accounting principles governing the computation of Income
• These standards were developed using the old Indian General Audit and Accounting Practices (GAAP)
• Main Features:

1. In case of conflict between the provisions of the Income Tax Act, 1961 and ICDS, the provisions of the Income Tax Act would prevail
2. No need to maintain separate books of accounts for ICDS. Maintain book only for income computation

Revising the most important facets of reforms proposed by the Bibek Debroy committee & highlighting the pain points of Indian railways –

#1. The process of accounting in Indian Railways is “very complicated”. “It is impossible to figure out what the rate of return on a project is”

The financial statements of Indian Railways need to be re-drawn, consistent with principles and norms nationally and internationally accepted.

#2. Streamline recruitment & HR processes

Remove the multiplicity of channels of recruitment and consolidate the process. At present there are 8 organized Group ‘A’ services in Indian Railways. Deployment to these services is by direct recruitment from UPSC (Civil Service and the Engineering examinations) and also by promotion of Group ‘B’ officers of the department.

The eight services can be broadly categorized in two bigger groupings viz. technical and non-technical services.

#3. Indian Railways should focus on core activities to efficiently compete with the private sector

It should distance itself from non-core activities, such as running a police force, schools, hospitals and production and construction units.

#4. Deploy an independent regulator

Shift regulatory responsibility from the government to an independent regulator as the private sector will only come in if there is fair and open access to infrastructure.

The report recommends setting up a Railway Regulatory Authority of India (RRAI) statutorily, with an independent budget, so that it is truly independent of the Ministry of Railways.

#5. Merge Railway budget with Central government budget

“End gross budgetary support, end this system of paying dividends and therefore you effectively end the railway budget. You not only end the railway budget, you eventually also end the Ministry of Railways and integrate it into a Ministry of Transport.”

Now that’s quite ambitious!

Source: ET

Want to read more?

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• Government-constituted expert committee to examine the Possibility of Replacing Multiple Prior Permissions with Pre-Existing Regulatory Mechanism had submitted its recommendations
• The 11 member committee was headed by Ajay Shankar, Former Secretary of Department of Industrial Policy and Promotion (DIPP)
• The expert committee was constituted by DIPP in April 2015

It was tasked to:

1. Examine the possibility of replacing multiple prior permissions with a pre-existing regulatory mechanism
2. Recommend a framework of the proposed regulatory mechanism and draft proposed legislation
3. Identify safeguards for replacing the system of prior permission and integrating them in the proposed regulatory mechanism

Recommendations:

• Introduction of credible third-party certification in most areas of regulation to cut down on multiple permissions needed by investors
• Adopting global best practices for emission norms in order to promote ease of doing business in the country
• Need for a standing institutional mechanism within the government for an independent regulatory impact assessment

For start-ups:

• Steps like Greenfield development and earmarking of mixed land use redevelopment should be undertaken
• Start-ups must be exempted from the requirement of seeking building plan approvals would give a boost to the ecosystem
• Any inspection of a start-up in cases of actionable complaints should be done only with the permission of an officer at a sufficiently higher level

Environmental Issues:

• Ministries of environmentally sensitive sectors should join with the Ministry of Environment and Forests to prepare a 20 year perspective geographical plan
• This plan must indicate preferred locations in prioritised categories for their anticipated projects in order to minimise the negative impact of environment