Nirmala Sitharaman Urges Tax Reform Over Rate Cuts

Union Finance Minister Nirmala Sitharaman urged tax professionals and industry bodies to prioritize the removal of outdated tax provisions over requests for lower rates and exemptions. Speaking at the International Tax Research and Analysis Foundation's 8th International Tax Conference in Bengaluru on September 16, she requested evidence-based proposals that quantify compliance costs and revenue implications, even for provisions that currently benefit specific sectors.

Sitharaman detailed a government strategy focused on reducing tax litigation rather than merely managing backlogs. Key measures include the Vivad se Vishwas schemes, increased monetary thresholds for departmental appeals, and the replacement of the 1961 Income Tax Act with a plain-language code. She also highlighted the rationalization of Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) provisions to reduce unnecessary criminal consequences.

Addressing future reforms, the minister noted that while rate rationalization has been the priority for GST 2.0, process reforms are scheduled for discussion at the GST Council meeting on October 7. Regarding the digital economy, she suggested that commercial space operations should be taxed while research and development activities receive more lenient treatment. Internationally, she noted that India has renegotiated tax treaties with Mauritius, Singapore, and Cyprus to restore its right to tax capital gains at source.