Thursday, December 30, 2010

Pranab Mukherjee to make big Budget change in direct tax laws

NEW DELHI: Saddled with huge tax arrears of Rs 2,50,000 crore -- more than half of the total tax collection projected for 2010-11 -- finance minister Pranab Mukherjee is likely to introduce in the forthcoming Budget some major changes in direct tax laws that could help in swift recovery of a significant portion of the arrears.

The changes proposed include reducing the limits to approach Income Tax Settlement Commission (ITSC), allowing those who have faced I-T raids to approach the commission even if the demand raised against them is not hefty.

Till last year, search cases were debarred from approaching the ITSC for settling their tax demand cases. The FM had in his 2010-11 Budget allowed these cases but the bar was kept at Rs 50 lakh and above, the tax demand raised. However, from this year, the government may reduce this and restore it to pre-2007 level of Rs 3 lakh in cases of search and survey cases and Rs 1 lakh for others.

Other changes proposed include measures to improve the functioning of the settlement mechanism under direct tax laws -- bringing all types of cases within the ambit of the ITSC and giving a security of tenure to the members of the commission. These changes may reflect in the forthcoming budget, sources said.

The matter was discussed by the FM in a pre-Budget review meeting with senior officials of the Central Board of Direct Taxes (CBDT) last week. The CBDT is working on the details to be incorporated in the Budget.

The FMs directive is to streamline the ITSC and make it a preferred mode of resolution for tax disputes, a senior CBDT official said. Mukherjee acknowledged the role of the settlement commission in reducing litigation with taxpayers and its potential for reducing tax arrears.

Out of the nearly Rs 2.50 lakh crore arrears, nearly Rs 99,000 crore is locked in tax disputes between the I-T department and taxpayers. The options were further squeezed when former FM P Chidambaram disempowered the ITSC in 2007 to take up search and survey cases.

Till March 31, 2010 the total arrears were Rs 2.30 lakh crore, and in the new fiscal year another Rs 20,000 crore has been added to this figure. Last year, the department had managed to recover nearly Rs 12,000 crore while the target set for this year has been fixed at Rs 14,000 crore.

To speed up the recovery process, the I-T department has circulated details of at least 550 high net worth individuals and entities -- who have willfully defaulted or have unpaid tax of Rs 25 crore and above -- to field officers for recovery, sources said. The tax arrears have doubled in the last two years to Rs 2.50 lakh crore, almost 66% of the total direct taxes collection of 2009-10.

Box
1. FM may modify tax laws to accommodate more I-T raid cases for settlement
2. Details of 550 high net worth willful defaulters put on priority
3. Dossiers have details of properties, bank transactions & investments
4. IT Officers have been asked to initiate attachment of assets if necessary
5. Individual Transaction Statement (ITS), special tool to help track related assets of defaulters


Read more: Pranab Mukherjee to make big Budget change in direct tax laws - The Times of India http://timesofindia.indiatimes.com/business/india-business/Pranab-Mukherjee-to-make-big-Budget-change-in-direct-tax-laws/articleshow/7187426.cms#ixzz19fGKMIuW

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