Transparent Taxation Platform
The 'Transparent Taxation' platform aims at bringing more transparency in official communication through the newly introduced Document Identification Number.
• In the past few years, the Central Board of Direct Taxes (CBDT) has carried out major tax reforms in the country in the direct taxes.
• In 2019, the Corporate Tax rates were reduced from 30 per cent to 22 per cent and for new manufacturing units; the rates were reduced to 15 per cent. Dividend distribution Tax was also abolished.
• India is one of the lowest tax consuming countries in the world when it comes to corporate taxes.
• In 2019 there was a reduction in Minimum Alternate Tax (MAT) rate from 18.5% to 15% to provide relief to the companies which continue to avail exemption and pay tax under MAT.
• Government in 2019 provided exemption from income-tax to individuals earning income up to Rs. 5 lakh and increase in standard deduction from Rs. 40,000 to Rs. 50,000.
• The Dividend Distribution Tax (DDT) was also abolished in 2019.
• The Finance Act, 2020 has provided an option to individuals and co-operatives for paying income-tax at concessional rates if they do not avail specified exemption and incentive.
• The Finance Act, 2020 removed the Dividend Distribution Tax in order to increase the attractiveness of the Indian Equity Market.
• The Income Tax Department has also introduced 'Vivad se Vishwas Act, 2020' for settling pending tax disputes. To reduce taxpayers’ grievances, monetary thresholds for filing of departmental appeals in various appellate Courts have been raised. Also, digital transactions and electronic modes of payment are promoted.
The 'Transparent Taxation' platform is aimed at bringing more transparency in official communication through the newly-introduced Document Identification Number (DIN).
Every communication with the Department will now carry a unique document identification number.
Transparent Taxation- Honoring the Honest will have faceless assessments, faceless appeal and taxpayer charter. The faceless assessments and taxpayer charter came in effect on the day of announcement while the faceless appeal will come into effect from September 25.
Faceless assessment: The aim of this scheme is to eliminate the face-to-face interactions between taxpayers and Income Tax Department officers.
o Under faceless assessment, a central computer picks up tax returns for scrutiny based on risk parameters and mismatch and then allots them randomly to a team of officers.
o This allocation is reviewed by officers at another randomly selected location and only if concurred, a notice is sent by the centralised computer system. All such notices need to be responded to electronically.
o Income tax surveys to collect information for scrutiny assessment will be undertaken only by the investigation wing.
Faceless appeal: It will be launched as part of the process to reduce physical interface between tax officers and taxpayers.
o Appeals will be allotted at random to officers, taxpayers will not need to visit offices or meet any officials, the identities of the officers deciding the appeal will remain unknown, and the appellate decision will be team-based and reviewed.
Taxpayer charter: The charter, listing the Income Tax Departments' duties to taxpayers and in turn highlighting the taxpayers' responsibilities, commits to providing fair and reasonable treatment, treating the taxpayer as honest, setting up a mechanism for appeal and review, reducing cost compliance and making timely decisions.
Direct Tax Issues
The tax rate in India is quite high for both individuals as well as corporate.
In India, the assessment process is physical which leads to the allegation of harassment by tax officials often referred to as tax terrorism.
In the taxation system, there have been a huge number of tax litigations, which makes the whole tax dispute resolving mechanism unviable.
There are a plethora of exemptions in direct tax code which makes the filling process more complex and reduces the effective tax rate.
Low tax collection and less population in tax giving slab.
Reasons for low taxation
According to the Central Board of Direct Taxes (CBDT), the gross direct tax collections for the financial year (FY) 2019-20 fell by almost 5% compared to FY 2018-19. Reasons for low taxation in India are:
Recent reduction in corporate tax rate.
High Refunds: In FY 2019-20, the total refunds given was Rs. 1.84 lakh crore as compared to Rs. 1.61 lakh crore in FY 2018-19 which is a 14% increase year-on-year.
Low tax buoyancy