Tax Reforms recommended by TARC

Any statistics related to India’s tax filing are shockingly disappointing. Abysmally less number of people file their returns and the lesser said about the tax collections the better. One after the other government is always aiming to change this scenario about tax collections in India.

TARC (Tax Administration and Reforms Commission) had been set up by the erstwhile finance minister PC Chidambaram and has a bunch of illustrious people from finance background. Here are the important recommendations they gave recently to the current finance ministry.

The TARC has recommended the government must aim to double the number of tax payers in the next 3 years.

Why you need know these recommendations – our Finance Minister has already started to work on the Budget for 2015 and it will be interesting to see how many of these reach his budget announcements.

  • Bringing back FBT (Fringe Benefit Tax) and BCCT (Banking Cash Transaction Tax) – If you have ‘employees’ who work for you and if you have a distant memory of FBT you must be cringing at this recommendation. FBT made things complicated – this aimed to tax employer’s expenses on entertainment, travel, transportation for employees and a host of other expenses. This made some corporate cut back on ‘other’ expenses on employees. Not to forget the additional amount of tax calculation and related work it brought along. BCCT was yet another painful way of collecting tax on withdrawals @ 0.1% of withdrawals.
  • Bridge the gap between circle rate and market value of the property – This would certainly make a wise move. It is believed most of the black money moves in the property market. With all the commotion about black money in political corridors this may be just the right pill this government needs.
  • Review and enlarge the scope of tax on presumptive profit – It is said the maximum tax evasion in India taxes place in the middle income group, mostly the small businesses that do not maintain proper books of accounts and don’t have a person to manage the taxes for them. This would have a very positive impact on our tax collections.
  • Look up with RoC (Registrar of Companies) for companies registered with them but not filing returns – that surely seems like an easy action to take.
  • Look up non-filers using Medical Council of India’s records or Aadhaar card records – A move to bring more and more non-filers under the tax net.
  • Taxing large farmers income – Mr. Jaitley has already clarified in the Parliament that his government will not be considering this recommendation from TARC.

(Please note that this is not the exhaustive list of recommendations made by TARC.)

It will be interesting to see – how this government balances the tough task of boosting tax revenues and keeping its vote bank engaged. Stay with us as we track all their moves! Have a great week ahead!

 

 

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