A committee formed to look into direct tax law reform submitted its report to Union FM Nirmala Sitharaman. The panel was headed by Akhilesh Ranjan, a member of Central Board of Direct Taxes. The aim of the exercise is to make direct tax laws modern and simpler, as well as widen the tax base

1. New
Direct Tax
Code in
India
To replace existing Income
Tax laws

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 Task Force constituted by the Govt. to
draft new Direct Tax Law, under the
convenorship of senior IRS officer Mr.
Akhilesh Ranjan submitted its report to
Finance Minister Mrs. Nirmala
Sitharaman on 19th August, 2019
 Report submitted along with a draft of
the new Income Tax Act.

3. Key
Recommendations
in the Report
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Report running into over 300 sections – with intent of
Simplification and removal of ambiguity.
2. A SHORTER, CRISPER AND EASIER TO COMPREHEND INCOME
TAX ACT
The current Income Tax Act has over 700 sections when one
includes the series of sub-sections in various Chapters. The draft
of the new income tax law, containing around 350-400 sections,
with every attempt being made to word it in a simple, lucid
manner and keeping the Provisos and Explanations that dominate
the 1961 Act, at a bare minimum in the new law.

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3. Big Relief to Individual Taxpayers
Significant tax relief for middle class and upper middle class,
i.e. those earning up-to Rs. 45 - 55 lacs per annum.
4. Common Corporate Tax Rate for Foreign &
Domestic Companies
25% Corporate tax rate recommended by the Task Force for
both Domestic as well as Foreign Companies, that's a big
slash in corporate tax rate for the foreign companies that
currently are taxed at 40%.

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5. Branch Profits Tax
In addition to the corporate tax, foreign
companies will have to pay branch
profits tax on the amount repatriated to
their foreign headquarters.

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The Task Force suggested big changes to the current process
and methodology of assessments. Concept of "Assessing
Officer“ be replaced by "Assessment Units." The big change
in the new law however is the primacy being given to
"Functional Units" that will be made up of IRS officers with
Sectoral/Industry knowledge and expertise. Also envisages a
Separate Technical Unit of IRS officers to assist the
Functional/Assessment Units. Anonymous & faceless
assessments where scrutiny cases will be centrally &
randomly allotted by the system. Interaction with the tax
department is likely to get a boost and facelift with the
possible introduction of video-conferencing in certain areas.

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7. Litigation Management Unit
Task Force recommended Separate Litigation
Management Unit to manage the entire tax
litigation process, right from deciding in
which cases the appeals ought to be filed, to
devising the strategy to defend a case. In
essence the officer who drafts the
assessment order, will no longer be the one
filing appeals.

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8. Settlement Through 'Mediation’
Introduction of the concept of 'mediation' for the first time
in Indian tax law. Taxpayers will now be able to opt for a
negotiated settlement before a Collegium of Commissioners
once they receive the draft order. Assisting the negotiations
will be mediators on both sides, that will be drawn from a
panel. The Task Force hopes this landmark proposal will
substantially reduce tax litigations with appellate
authorities.
The Settlement Commission going to be scrapped.

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9. Public Ruling Option for Taxpayers
For the first time again a concept of 'public
ruling' is being introduced wherein the
taxpayers will have the option of
approaching the CBDT for clarification on any
important point of law, that shall not be case
or fact specific.

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10. Transfer Pricing Assessments De-
linking
De-linking of Transfer Pricing assessments from
regular assessments. The TP assessments under the
new income tax regime will be carried out by a
separate functional unit and they will be done for a
block of 4 years, as is prevalent in some other
countries. While there may be fewer TP audits
based on risk profile of the MNE entities, they are
likely to be more intense.

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11. Dividend Distribution Tax
Elimination
Its a tax that has created much consternation
among corporates. From the looks of it, DDT
may soon be scrapped as the Task Force is
learnt to be in favour of taxing the dividends
in the hands of shareholders.

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12. Other Highlights
• No major changes in the key definitions in the draft new law
vis-a-vis the existing Income Tax Act, but some element of "re-
drafting" for more clarity as also to draw from the experience
of current Act that has been a source of litigations.
• For millions of taxpayers who are troubled by compliance
requirements, new regime may come out with ease of
compliance for taxpayers in general and small businesses in
particular.
• Incentives for the start-ups.
• Less corporate tax exemptions.
• No levy of Inheritance Tax.

14. Another
historic
occasion on
the way after
GST just 2
years ago
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Pradeep Goyal
FCA India | ACPA Australia
pradeep@pgaa.in
9811777103