Dear Readers,

Government flagship schemes/policies can be important for your IRMA exam as well as for IBPS, SSC, UPSC interviews/written exams. The expert panel
constituted under Justice RV Easwar for simplification of income tax laws was recently
in the news and can be asked in exams. 

Union Ministry
of Finance released the draft report of the committee on January 18, 2016. The
report provides recommendations to simplify provisions of the Income Tax Act,
1961. In this article, we will look into the background, objectives and key
findings of the report.


The 10-member (Retd.) Justice R
V Easwar Committee was formed on October 27, 2015, in order to change direct
tax laws, making them favourable for taxpayers.

The report comprises 27
suggestions for amendments to the Act and eight for reform through
administrative instructions.

Public comments and suggestions
will be sought till January 23, after which the committee will finalise the
first part of this report by January 31.

As it has been instituted for a
one-year period, the panel has stated that issues requiring deeper review will
be looked at in the next set of recommendations.


To study and identify the
phrases in the Income Tax Act that have resulted in litigation due to interpretative

To study and identify
provisions of the Act for simplification, in light of the existing

To devise alternatives or
amendments so as to ensure certainty and predictability in tax regulations without
majorly affecting the revenue collections or tax base.

To study and identify the
provisions of the Act that impact the ease of doing business.

Key Highlights

Nearly 65% of India’s personal
income tax collection is through tax deducted at source (TDS). The report thus recommends
that TDS provisions should be made more tax-friendly.

There should be rationalisation
and enhancement of threshold limits and decrease in TDS rates. The TDS rates
for individuals and Hindu Undivided Families should be brought down from the
current 10%-5%.

For interest on securities, the
Committee recommended increasing the threshold for TDS to Rs.15,000 from Rs.2,500
per annum and reducing the tax rate by half to 5%.

The panel suggested hiking the
TDS limit for payments to contractors from the present limit of Rs. 30,000 for
single transaction and Rs.75,000 annually to Rs.1 lakh as annual limit.

On rent income, the TDS limit
is suggested to be raised from Rs.1.8 lakh annually to Rs.2.4 lakh.

In case of fees for
professional or technical services, the threshold is advised to be raised to
Rs.50,000 from Rs.30,000. However, the TDS rate is recommended to be kept at 10%.

The Committee has recommended deletion
of a clause that lets the tax department delay refund due to a taxpayer for
over six months, and also suggested a higher interest levy for all delays in

Stock trading profits of up to
Rs.5 lakh should be considered capital gains and not business income. This could
encourage more retail investments in the stock market.

An exemption from higher rate
TDS should be provided to non-residents, who do not have a Permanent Account
Number (PAN), but can produce their Tax Identification Number (TIN).  

Major processes of the income
tax department should be done electronically so as to involve minimum human
interface. These include filing of tax returns, rectification of faults,
refunds and any other communicative task which requires scrutiny.

To make business easier for
small enterprises, the eligibility criteria under the presumptive plan should
be raised to Rs.2 crore from Rs.1 crore.

Tax authorities should not be
allowed to reopen or revise findings merely based on audit objections.

Income Computation and
Disclosure Standards (ICDS) should be deferred in order to make the refund
process quicker.

Refunds should be granted with
due interest on time and in case of delay, higher interest should be sanctioned.

These are the
major points to be remembered about the RV Easwar Income Tax Simplification
Report. If you can understand these well, you can easily attempt questions on

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