India To Rationalise Income Tax Act

by Lorys Charalambous, Tax-News.com, Cyprus

06 September 2005

The government of India has commenced its rewrite of the Income Tax Act, in an attempt to simplify and rationalise India's tax laws and bring them more into line with foreign taxation systems.

According to a report in the Financial Express, the revenue department has created four internal groups, each of which will concentrate on a particular aspect of the review. These groups will report to a committee headed by Central Board of Direct Taxes (CBDT) member (legal) MH Kherawala. It is hoped that the Act can be reformulated in time for the 2006/2007 budget.

The four areas that the review groups will concentrate on are: the simplification of penalties and offences; trimming back the amount of wording contained in the statute; the simplification of the refunds, recovery and settlement systems; and international taxation, particularly the areas of transfer pricing, taxation of foreign residents and avoidance of double taxation.

In its first stages, the review will be conducted internally by the government, although officials have revealed that a public consultation is possible in the latter stages of the project. Also, the government is planning to launch an additional exercise to increase its knowledge of foreign tax practices.

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