As per the report of a panel set up by the government to review the Direct Tax Code (DTC), India is likely to witness the much-awaited changes in its income tax rules by the upcoming fiscal year. Upon implementation, their recommendations are expected to supplant the existing Income Tax Act of 1961.
However, the news is yet to be made public, but the media reports have highlighted a major relief in tax rates for individual taxpayers, simplified assessment process and a decrease in corporate tax rate for large firms.
The proposed replacement of “assessing officers” with “assessment units”, as reported, has garnered great attention. Likewise, there has been a lot of emphasis on adopting a new mediation process for settling tax disputes. All these moves are likely to keep a check on the harassment of taxpayers. Apparently, the rationalization of corporate taxation is said to be highly effective from the viewpoint of Indian economy.
A 25% corporate tax rate has been proposed by the DTC panel, presently levied to firms with turnovers of up to Rs 400 crore. Though, majority of the corporate are already in the 25% bracket, as highlighted by the finance minister Nirmala Sitharaman in her budget speech.
The average global corporate tax rate is around 23%. However, the large-scale companies based in India pay a base rate of 30%, with add-on cesses and additional costs taking the effective rate to around 35%.
As per the industry experts, a decreased tax burden on India is likely to deprive the country’s exchequer of some funds. However, it could lead to a favourable impact, compensating for this loss in the long run. It would further boost the dividend yields, encouraging equity ownership among the people preferring slivers of business profits as compared to capital gains on stock trading.