RV Easwar committee on simplification of provisions of IT act

Motto of the Committee: The committee was set up to make recommendations for simplification of direct tax laws.

The committee has suggested several taxpayer-friendly measures to improve the ease of doing business, reduce litigation and accelerate the resolution of tax disputes. Recommendations:

It proposed deferring the contentious Income Computation and Disclosure Standards (ICDS) provisions and making the process of refunds faster.

The report made following observation pertaining to ICDS – “Taxpayers are already grappling with regulatory changes of the Companies Act, 2013, Ind-AS (Indian accounting standards) and the proposed GST (goods and services tax).

Industry should be allowed more time to deal with another change of this nature. The committee understands that the taxpayers feel that many of the provisions of the ICDS are capable of generating a legal debate about which at present there is no clarity,”

The committee has asked the income-tax department to desist from the practice of adjusting tax demand of a taxpayer whose tax return is under assessment against legitimate refunds due.

It has also proposed deletion of a clause that allows the tax department to delay the refund due to a taxpayer beyond six months and suggested a higher interest levy for all delays in refunds.

The panel also proposed that stock trading gains of up to Rs.5 lakh will be treated as capital gains and not business income, a move that could encourage more retail investments in the stock market.

The committee has recommended that Tax Deduction at Source (TDS) rates for individuals be reduced to 5% from 10%.

It also sought to provide an exemption to non-residents not having a Permanent Account Number (PAN), but who furnish their Tax Identification Number (TIN), from the applicability of TDS at a higher rate.

The committee also recommended that most of the processes of the income-tax department should be conducted electronically to minimize human interface. To this effect, it suggested that processes such as filing of tax returns, rectification of mistakes, appeal, refunds and any communication regarding scrutiny including notices, questions and documents sought should be done electronically.

To make it easy for small businesses, the committee recommended that the eligibility criteria under the presumptive scheme be increased to Rs.2 crore from Rs.1 crore. It also recommended launching a similar scheme for professionals.

Important Abbreviations Used,

ICDS – Income Computation and Disclosure Standards

TDS – Tax Deduction at Source

TIN – Tax Identification Number

PAN – Permanent Account Number