May 16

Recent Changes in Tax Laws and Regulations in India

India's tax landscape has undergone significant changes in recent years, driven by the government's efforts to streamline tax administration, increase compliance, and boost economic growth. Understanding these changes is crucial for businesses and individuals to ensure compliance and optimize their tax positions. This article highlights the most recent updates in Indian tax laws and regulations.


Introduction of the New Tax Regime
The Indian government introduced a new optional tax regime under the Income Tax Act, 1961, applicable from the financial year 2020-21. This regime offers lower tax rates with the condition that taxpayers forego certain exemptions and deductions. Key features include:
Lower tax rates across various income slabs.
No exemptions or deductions like HRA, standard deduction, or investments under Section 80C.
Taxpayers can choose annually between the old regime (with deductions) and the new regime (with lower rates but no deductions).

Faceless Assessment and Appeals
To promote transparency and efficiency, the government launched faceless assessments and appeals:
Faceless Assessments: Income tax assessments are conducted electronically without direct interaction between taxpayers and tax officers, reducing the scope for corruption and bias.
Faceless Appeals: Similarly, appeals against tax assessments are also conducted in a faceless manner, ensuring fairness and efficiency.

Amendments in Goods and Services Tax (GST)
GST, a comprehensive indirect tax levied on goods and services, has seen several amendments:
E-invoicing: Mandatory for businesses with an annual turnover exceeding INR 50 crore, ensuring real-time invoice reporting and reducing tax evasion.
QRMP Scheme: The Quarterly Return filing and Monthly Payment of taxes scheme allows small taxpayers (turnover up to INR 5 crore) to file returns quarterly while paying taxes monthly.
Input Tax Credit (ITC): Restrictions on ITC claims have been tightened, requiring matching of invoices between suppliers and recipients.

Reduction in Corporate Tax Rates
To attract investment and spur economic growth, the government slashed corporate tax rates:
For existing companies, the corporate tax rate was reduced to 22% (plus surcharge and cess), provided they do not avail of any other exemptions or incentives.
New domestic manufacturing companies set up after October 1, 2019, and commencing operations before March 31, 2024, enjoy a lower tax rate of 15% (plus surcharge and cess).

Changes in TDS and TCS Provisions
The scope of Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) has been expanded:
TDS on E-commerce Transactions: A 1% TDS is applicable on payments made by e-commerce operators to sellers.
TCS on Overseas Remittances: A 5% TCS is levied on remittances exceeding INR 7 lakh under the Liberalized Remittance Scheme (LRS).
TDS on Professional Services: The threshold for TDS on professional services has been lowered, impacting more freelancers and professionals.

Dispute Resolution Scheme
The government introduced the Vivad Se Vishwas scheme to resolve pending tax disputes:
Taxpayers can settle disputes by paying the disputed tax amount with a waiver of interest and penalties if paid by the specified date.
The scheme aims to reduce litigation and provide a quick resolution mechanism.

Introduction of Pre-filled Income Tax Returns
To simplify the filing process and improve compliance, the government has started providing pre-filled income tax return forms:
Information related to salary, dividend income, interest from banks, and mutual fund transactions is pre-filled based on data available with the tax department.
Taxpayers need to verify the information and make necessary additions or corrections.

Expansion of the Scope of Equalization Levy
Initially applicable to online advertisements, the equalization levy has been expanded to cover e-commerce transactions:
A 2% levy is imposed on the gross value of sales/services facilitated by non-resident e-commerce operators.
This aims to create a level playing field between resident and non-resident e-commerce entities.

Conclusion
These recent changes in tax laws and regulations in India reflect the government's focus on simplifying tax compliance, reducing litigation, and enhancing revenue collection. Businesses and individuals must stay informed about these changes to navigate the evolving tax environment effectively. Consulting with tax professionals and leveraging digital tools for compliance can help in adapting to these new regulations seamlessly.

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