New Delhi: Ahead of the Union Budget 2020, the Central Direct Tax Committee has prepared a report to suggest changes in the current direct tax system.
Here are the top three recommendations according to a report by Bloomberg Quint:
Personal Income Tax Rates
The committee concluded that the personal income tax slabs needs an overhaul. Those earning between Rs 2.5-10 lakh annually need to pay 10 percent income tax with a full rebate up to Rs 5 lakh a year. Individuals making Rs 10-20 lakh in a year need to pay tax at 20 percent per annum.
Taxable income between Rs 20 lakh-2 crore a year should be taxed at 30 percent, as per the recommendation. The committee further proposed that those earning more than Rs 2 crore a year should be taxed at 35 percent.
The task force, in its report, strongly recommended doing away with the levy of surcharge.
Taxation System: Territorial, Residence Based Or Hybrid?
The DTC report discusses pros and cons of both models of taxation, namely territorial and residence-based.
The report also talks about the benefits of the territorial system, namely, higher incentive to repatriate offshore profits, enhanced competitiveness of Indian corporates in overseas markets, fewer disputes over residential status, interpretation of tax treaties and easier compliance.
Having noted that, the report also talks about the limitations of a territorial system of taxation. Tediousness of defining the scope of 'domestic source' and ' deemed domestic source', which the report believes might lead to more litigation.
Defining 'Source' Rule And 'Income'
The DTC report bats against introducing any additional source rule since the current definition of the term 'income deemed to accrue or arise in India' is quite sufficient.
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