New Delhi: After the indirect tax regime was transformed by the implementation of the goods and services tax (GST), the 56-year-old Income Tax Act is now set for an overhaul. On Wednesday, the finance ministry sets up a six-member task force to draft a new direct tax law that will better serve the country’s economic needs by widening the tax base, improving compliance and ease of doing business. Prime Minister Narendra Modi observed at a tax officials’ conference in early September that the Income Tax Act of 1961 was over half-a-century old and needed to be re-drafted.
Arbind Modi, member, Central Board of Direct Taxes, was named convener of the six-member panel that has been tasked to draft a new law. Modi was also a key contributor to the direct taxes code proposed by the previous United Progressive Alliance government. Almost all the ideas in the proposed direct taxes code—including General Anti-Avoidance Rules meant to crack down on complex corporate arrangements aimed at tax evasion and provisions to tax offshore transfer of assets located in India—have already been adopted in the existing Income Tax Act. Also, a key proposal in the erstwhile direct taxes code of phasing out corporate tax exemptions and lowering of the tax rate to 25% from 30% is being implemented in stages.