05 October 2009

CBDT may retain its teeth



CBDT may retain its teeth

4 Oct 2009, 0231 hrs IST, Aman Dhall & Shantanu Nandan Sharma, ET Bureau

NEW DELHI: The new direct tax code draft may drop the controversial sections which dilute powers of the income-tax department and make the apex body

on direct tax, Central Board of Direct Taxes (CBDT), a mere tax collection machinery.
The CBDT may now make some changes in the draft after finance minister Pranab Mukherjee gave a go-ahead when chairman and members of the Board met the FM on Thursday to discuss the new tax code, a senior official present in the meeting told SundayET on condition of anonymity.
The finance ministry has been taking suggestions from citizens before the draft is sent to Parliamentary standing committee. Once approved by Parliament, the new code will be come into effect from April 1, 2011.
During the meeting with FM, senior taxmen pointed out some of the major lacunae in the draft and how it would increase litigation. According to officials present in the meeting, finance minister said he wanted the new code to stand for simplicity but assured the taxmen that they would remain in charge. SundayET could not get any official version of what transpired in the meeting though CBDT spokesperson confirmed about the meeting with FM.
In fact, under Section 133 (2) of the code, CBDT is curbed of issuing certain orders, instructions, direction and circulars. Also, the Board is bound by the government’s directions on policy matters under Section 127.
Many senior taxmen are now arguing income tax department to be converted into a full-fledged government department on the line of Indian Railways with an Indian Revenue Service personnel at the helm. Currently, it comes under the revenue department of the ministry of finance where the CBDT chairman has a rank of a special secretary, a rank below the secretary.
Tax experts feel that there would be many a change in the draft code before it is sent to Parliament. Vikas Vasal, executive director at KPMG said that existing insurance policies should be grandfathered. “The code should not punish an individual who planned his investments as per then norms. It makes sense policies purchased before April 1, 2011 follow EEE model,” he said.
Pointing out another shortcoming of the draft code, he said there has to be more additions to the Rs 3 lakh deduction bracket. “As it stands, for senior citizens, the code doesn’t have financial instruments that could provide a saving mechanism for them. Bank fixed deposits or NSCs can make up for that vacuum. Even interest on home loan should form part of this bracket, at least for those who are buying their first house,” he said.
Amitabh Singh, a tax partner in Ernst & Young said that some more broad level changes in the final tax code cannot be ruled out. “As of now, there are lesser avenues to save as of now, which could have more additions,” he added.