Tax simplification measures for settling direct tax disputes

Source- This post on the Tax simplification measures for settling direct tax disputes has been created based on the article “Govt decriminalises late payment of TDS, to reduce litigation with Vivad se Vishwas scheme” published in “Indian Express” on 24 July 2024.

About Tax Simplification Measures:

1. A new version of the dispute resolution scheme, Vivad se Vishwas 2.0, will be introduced to provide a mechanism for the settlement of direct tax disputes and reduce litigation.

2. Decriminalisation Initiatives:

i)  Non-reporting of small foreign assets will be decriminalised.

ii) A simplified tax regime for charities will be introduced.

iii) Limits for reassessments will be adjusted to reduce disputes.

3. Legislative Changes for Benami Transactions: The Budget proposes legislative changes to grant immunity to benamidars or any person other than the beneficial owner who turns approver under the Benami Transactions (Prohibition) Act, 1988.

4. Simplification of Tax Regime:

i) The Finance Bill will simplify the tax regime for charities, TDS rate structure, reassessment provisions, search provisions, and capital gains taxation.

ii) Two tax exemption regimes for charities will be merged into one.

5. Transition for Charitable Trusts:

i) The current two main regimes for trusts, funds, or institutions to claim exemption under the Income Tax Act will be merged.

ii) The process will involve the gradual transition of trusts from the first regime to the second, along with rationalising application procedures and timelines for registration and approval of benefits.

6. Decriminalisation of Non-Reporting of Small Foreign Assets:

i) Indian professionals working in multinationals who receive ESOPs and invest in social security schemes and other movable assets abroad face penal consequences under the Black Money Act for non-reporting.

ii) Non-reporting of movable assets up to ₹20 lakh will be de-penalised.

7. Decriminalisation of Late Payment of TDS:

i) Late payment of TDS will be decriminalised if payment is made before the prescribed time for filing the TDS statement.

ii) Time limits for reassessment will be reduced from ten years to five years, with rationalisation of reassessment procedures.

iii) Assessments can be reopened beyond three years from the end of the assessment year only if the escaped income is ₹50 lakh or more, up to a maximum period of five years.

iv) For search cases, the time limit will be reduced from ten years to six years before the year of search.

8. Adjustments to TDS Rates:

i) The 5% TDS rate will be reduced to 2% for several transactions, including payment of insurance commission, life insurance policy payments, commission on sale of lottery tickets, brokerage payments, and rent payments by certain individuals or HUF. These changes will be effective from October 1.

ii) The 20% TDS rate on repurchase of units by mutual funds or UTI will be withdrawn.

iii) The TDS rate on e-commerce operators will be reduced from 1% to 0.1%.

9. Increased Monetary Limits for Appeals: Monetary limits for filing appeals related to direct taxes, excise, and service tax will be increased to ₹60 lakh for tax tribunals, ₹2 crore for high courts, and ₹5 crore for the Supreme Court. Current limits are ₹50 lakh, ₹1 crore, and ₹2 crore, respectively.

UPSC Syllabus: Indian Economy