Are Direct Taxes transferable or non-transferable? Explain the recent Direct Tax Reforms undertaken in India.

Question

Ghissu Editorial · Accepted Answer

Direct taxes like income tax are non-transferable: their burden falls on the taxpayer, unlike GST, making them progressive and redistributive. Recent reforms include corporate tax cuts to 22% (15% for new manufacturing), faceless assessment, decriminalisation under the Jan Vishwas Act (2023), GAAR and the new Income-tax Act.

**Introduction**

Direct taxes are a key part of India’s fiscal system, non-transferable and based on the taxpayer’s ability to pay. Recent reforms aim to simplify laws, enhance compliance, and broaden the tax base.

**Nature of Direct Taxes**

2. **Economic Implications and Andhra Pradesh⟦2⟧⟦1⟧ Audit**: The non-transferability supports redistributive fiscal policy; ==Andhra Pradesh== CAG audit revealed ₹1,806 crore revenue impact from compliance gaps, stressing reform urgency.

**Recent Direct Tax Reforms**

1. **Simplification and Digital Transformation**: The Jan Vishwas Act⟦3⟧ (2023) decriminalizes minor tax offences, fostering trust-based governance; digitization via online filing and processing centers enhances transparency.

2. **Incorporation of DTC Proposals**: Though the Direct Tax Code bill was not enacted, GAAR and tax rationalization from it are integrated into the Income Tax Act, aiming for a simpler, elastic tax system.

3. **Progressive Rate Adjustments and Compliance**: Recent budgets cut corporate tax rates, abolished the Dividend Distribution Tax so dividends are taxed at slab rates, and introduced a simpler new regime; stricter NRI norms widen the tax base.

4. **Enforcement and Anti-Evasion Focus**: Enhanced TDS norms and scrutiny of high-value transactions combat evasion; ==Andhra Pradesh== audits show significant underassessment, underscoring enforcement needs.

**Way Forward**

1. **Taxpayer Education and Technology**: Promote awareness and use AI-driven tools to detect evasion, focusing on sectors with high non-compliance as per state audits.

2. **Broaden Tax Base and Centre-State Coordination**: Bring informal sectors under tax net without burdening vulnerable groups; align reforms with state fiscal policies, especially in ==Andhra Pradesh==.

**Conclusion**

Direct taxes remain non-transferable; reforms like the Jan Vishwas Act and digitalization enhance compliance, enforcement, and trust, strengthening India’s tax system.

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