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Several new measures have been taken by the Government related to the direct tax regime of the country. The Direct Tax Code 2013 was fully complied with during 2016-17 which replaced the five decade old archaic direct tax law of India. The new tax law is aimed at equitable and effective tax regime, voluntary compliance and dispute reduction. The overarching vision has been of progressively taxing higher income, bringing greater clarity on applicability of tax provisions, broadening the tax base and improving tax administration.
Meanwhile, the Union Budget 2017-18, furthering the process of reforms, has announced the following new measures:
• Existing rate of taxation for individual assesses between income of Rs.
2.5 lakhs to 5 lakhs reduced to 5 per cent from the present rate of 10 per cent (estimated revenue loss of Rs. 15,000 crore).
• Surcharge of 10 per cent of tax payable on categories of individuals whose annual taxable income is between Rs. 50 lakhs and Rs. 1 crore (to make up the Rs. 15,000 crore loss estimated to take place as the ‘slab’ has been restructured).
• Simple one-page form to be filed as Income Tax Return for the category of individuals having taxable income upto Rs. 5 lakhs other than business income.
• Profit linked deduction available to the start-ups for 3 years out of 5 years is being changed to 3 years out of 7 years.
• Exemptions given on MAT (Minimum Alternate Tax) will be phased out starting from April 2017.
• Corporate tax which stands at 30 per cent has already been cut down to
25 per cent for those companies which do not avail any exemption. Those which have turnover less than Rs. 5 crore have to pay 29 per cent (the process of cutting it down to 25 per cent has not been pushed this year).
• Income tax rate for smaller companies with annual turnover of upto Rs. 50 crore is fixed at 25 per cent (from the effective rate of above 30 per cent)—benefiting 96 per cent of MSMEs. This measure has been taken to make them more viable and encourage to migrate to company format (formalisation). The Government is estimated to forgo a revenue of Rs. 7,200 crore due to it.
In the process of modifying human behaviour, the Budget specially appealed all citizens of the country to contribute to ‘Nation Building’ by making a small payment of 5 per cent tax if their income is falling in the lowest slab of Rs. 2.5 lakhs to 5 lakhs.