India’s tax system has become very cumbersome, more prone to litigation, is badly designed and needs to improve service standards, according to a report by Bangalore Chamber of Industry and Commerce (BCIC) on Direct Tax Administration Reforms.
The biggest change needed is ensuring that taxpayers are respected for paying taxes. In order to bring tax evaders to book, honest taxpayers should not be vilified.
“Today, with the greater use of information technology and data repository, it is easy to verify data and reduce the pain caused to taxpayers. India has moved in this direction, but the mindset of our legislators and the tax officials needs to change too,” according to the report.
In order to bring more people into the tax bracket, the tax administration has adopted various ways to expand its tax base. However, it is important that the tax administration undergoes reformatory exercises to bring in a professional outlook, improve efficiency and also turn taxpayer-friendly.
K.R. Sekar, president, BCIC said the report deals with a range of issues around direct tax and provids recommendations on what could be done for making tax administration efficient and tax-payer friendly.
The report recommends that all functions relating to assessment be categorically delinked from revenue targets. Taxpayers who are unable to make e-filing on the portal because of technical issues should be given another opportunity to pay taxes and furnish responses.
On the capital gains regime, BCIC report recommends, in order to extend the benefit to all capital gain investments and incentivise investment based on risk and reward rather than on exemptions, the surcharge payable on all capital gains from transfer of securities, digital and physical gold, and real assets should be limited to 15%.
The report covers key aspects of direct tax reforms, such as prevention of disputes, improving faceless assessment and appeal process, search and seizure process, repeal of redundant provisions from income tax law and improvement of capital gains tax regime.
