MAT, DDT may be tweaked in new Direct Tax Code

The tax panel was initially supposed to submit its report by May 22, 2018, but this was further extended till August 22.
For representational purposes
For representational purposes

NEW DELHI: After months of deliberations and delays, the tax panel headed by CBDT member Akhilesh Ranjan on Monday submitted the draft Direct Tax Code (DTC), which will replace existing Income tax laws and simplify tax law provisions, besides addressing issues to minimise litigation and broadening the tax base.

Although the report’s recommendations were not immediately available for scrutiny, experts say that they expect the Minimum Alternate Tax (MAT) and Dividend Distribution Tax (DDT) to either be scrapped or reduced.

“Abolishing Minimum Alternate Tax as nearly all tax incentives will be eventually phased out; alternatively, reducing the MAT rate to 5-7%, in line with corporate tax rate is expected,” said Amrish Shah, Partner, Deloitte India. Abolishing DDT and reverting to taxing dividend income in the hands of shareholders is also high on the list of possibilities, experts said.

“Broadly, easing the tax and compliance burden, bringing in simplification and certainty in tax provisions and compliances, and introducing provisions facilitating merger and acquisition (M&A) activity and other restructuring will be the major asks from corporates,” said Shah. It is expected that the new DTC will also help widen the tax base in a country where there are only 74 million effective tax payers, despite a population of over 1.3 billion.

The panel was initially supposed to submit its report by May 22, 2018, but this was further extended till August 22. The finance ministry in November last year appointed Ranjan, member (legislation) at CBDT, as convenor of the task force after Arbind Modi retired.  

Meanwhile, finance minister Nirmala Sitharaman on Monday also said that corporate tax rate for companies with over Rs 400 crore turnover will be gradually cut to 25 per cent, but the minister did not give any timeline for when the reduction would be made.

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