Existing Income Tax Act to be replaced? What we know so far

The task force set up to draft a new direct tax law to replace the existing Income Tax Act has sought 2-3 months extension from Finance Minister Arun Jaitley to submit its report. The task force was scheduled to submit the report by February 28. The Finance Ministry in November last year appointed Akhilesh Ranjan, Member (Legislation), CBDT, as convenor of the task force after the retirement of Arbind Modi.

"The task force apprised the Finance Minister on progress made by the panel so far. It sought an extension of 2-3 months for submission of report," an official said. Other members of the task force include Girish Ahuja (chartered accountant), Rajiv Memani (Chairman and Regional Managing Partner of EY), Mukesh Patel (Practicing Tax Advocate), Mansi Kedia (Consultant, ICRIER) and G C Srivastava (retired IRS and Advocate).

Even with a 3-month extension, the report of the task force would come well before the final budget for 2019-20 fiscal ? which will be presented sometime in July after the general elections. Prime Minister Narendra Modi, during the annual conference of tax officers in September 2017, had observed that the Income-tax Act, 1961 was drafted more than 50 years ago and it needs to be redrafted.

The task force was assigned to draft direct tax laws in line with the norms prevalent in other countries, incorporating international best practices, and keeping in mind the economic needs of the country. The ministry had in November 2017, set up a 6-member task force to rewrite the over 50 year old Income Tax laws.

The panel was initially supposed to submit its report to the government, within 6 months, by May 22, 2018. On May 22, the Finance Ministry extended the term of the task force by another three months till August 22. The committee did not submit report within that deadline as well.

The then convenor of the panel, Arbind Modi, retired on September 30, which left the report of the task force in limbo. Following this, Ranjan was appointed as the convenor of the panel in November, last year.

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Former finance minister P Chidambaram had in 2009 proposed the original direct tax code to replace the cumbersome IT law with a clean new law and to embody the principle of keeping taxes low and removing exemptions.

The NDA government, since coming to power in 2014, has already implemented general anti-avoidance rules GAAR. In 2016, Jaitley had promised to lower corporate tax rate to 25 per cent in 5 years.