The Institute of Chartered Accountants of India (ICAI) has recommended that assessees, who make voluntary declaration of their income before any notice of enquiry is issued to them, should be allowed to pay tax at a rate of 60 per cent.
The same provision should be made applicable in cases when an assessee, during the course of the assessment proceedings, wants to offer any income to avoid litigation, the institute has said.
The institute has also recommended that presumptive taxation should be extended to all small businesses having sales, turnover or gross receipts less than Rs 40 lakh. The term "retail trade" should be replaced by "small business" and they should be taxed at a rate of 5 per cent on their sales turnover or gross receipts.
These suggestions were made during a workshop on pre-budget memorandum organised by the ICAI. The workshop was attended by Ravi Kant, chairman, Central Board of Direct Taxes, Asha Mehra, member (legislative), CBDT, A N Prasad and G C Srivastava, both joint secretaries of the Tax Planning Commission, among others. The institute made wide-ranging suggestions on widening the tax base and increasing tax revenue, checking tax avoidance, social welfare and monitoring of public expenditure. It also suggested rationalisation of the provisions of Direct Tax Laws.
Also, the institute said the commission payment or service charge should specifically be subjected to tax deduction at source (TDS) at 5 per cent, and there should be a compulsory permanent account number (PAN) on all air-ticket bookings. The institute has also suggested that all notified professionals should have a PAN.
Deemed dividend should be brought under the corporate dividend tax net and arrears of rent should be taxed in order to check tax avoidance. An audit of agricultural income above Rs 50,000 was called for. Assessees showing agricultural income more than this limit should be required to maintain prescribed books of account, which should be audited, the institute said.
The institute has also called for a compulsory audit of accounts of educational institutions, hospitals, newly established industrial undertakings in free trade zones, newly established 100 per cent export-oriented undertakings and others that are currently exempt from audits.
Non-competing amount paid to employees who are leaving employment, and also to others to avoid competition, should specifically be made taxable, said the institute. To rationalise the provisions of Direct Tax Laws, the institute has suggested that composite consideration may be allowed in the case of issues of shares by the resulting company to the share holders in the demerged company.
The institute said interest on money borrowed to invest in shares may be allowed to be capitalised to boost the capital market, and bonus shares should be excluded from being treated as a perquisite in stock option schemes.
