- Growth Trajectory of Direct Tax Collection & Recent Direct Tax Reforms
- Catalyzing Online Dispute Resolution (ODR) in India
- Magnetocaloric material for cancer treatment
Focus: GS-III Indian Economy
Drop in net tax collection
The net direct tax collection for the FY 2019-20 was less than the net direct tax collection for the FY 2018-19.
This fall in the collection of direct taxes is on expected lines and is temporary in nature due to the historic tax reforms undertaken and much higher refunds issued during the FY 2019-20.
Tax reforms undertaken
I- Reduction in corporate tax rate for all existing domestic companies
Taxation Laws (Amendment) Ordinance 2019 which provided a concessional tax regime of 22% for all existing domestic companies from FY 2019-20 if they do not avail any specified exemption or incentive.
Further, such companies have also been exempted from payment of Minimum Alternate Tax (MAT).
II- Incentive for new manufacturing domestic companies
Taxation Laws (Amendment) Ordinance 2019 has drastically reduced the tax rate to 15% for new manufacturing domestic company if such company does not avail any specified exemption or incentive.
These companies have also been exempted from payment of Minimum Alternate Tax (MAT).
III- Reduction in MAT rate
Minimum Alternate Tax (MAT) has also been reduced from 18.5% to 15%.
IV- Exemption from income-tax to individuals earning income up to Rs. 5 lakh and increase in standard deduction
Finance Act, 2019 exempted an individual taxpayer with taxable income up to Rs. 5 lakh by providing 100% tax rebate and enhanced the standard deduction from Rs. 40,000 to Rs. 50,000.
V- Abolition of Dividend Distribution Tax (DDT)
The Finance Act, 2020 removed the Dividend Distribution Tax under which the companies are not required to pay DDT – to increase the attractiveness of the Indian Equity Market and to provide relief to a large class of investors in whose case dividend income is taxable at the rate lower than the rate of DDT.
Tax Buoyancy for 2019-20
- These buoyancies indicate that the growth trajectories of both the arms of direct taxes, i.e., Corporate Tax and PIT are intact and are rising steadily.
- The higher growth rate in direct taxes as compared to growth rate in the GDP even in these challenging times proves that recent efforts for the widening of the tax base undertaken by the Government are yielding results.
Other Steps taken to improve Indian Economic activities
VI- Vivad se Vishwas
Direct Tax Vivad se Vishwas Act, 2020 was enacted under which the declarations for settling disputes are currently being filed.
The act provides for resolution of pending tax disputes which benefits the Government by generating timely revenue and also benefits the taxpayers as it will bring down mounting litigation costs and efforts can be better utilized for expanding business activities.
VII- Faceless E-assessment and appeals Scheme
Faceless E-assessment provides for a new scheme for making assessment by eliminating the interface between the Assessing Officer and the assessee, optimizing use of resources through functional specialization and introducing the team-based assessment.
VIII- Document Identification Number (DIN)
In order to bring efficiency and transparency in the functioning of the Income Tax Department, Every communication of the Department mandatorily have a computer-generated unique document identification number (DIN).
IX- Encouraging digital transactions
Various measures have been taken which include reduction in rate of presumptive profit on digital turnover, removal of MDR charges on prescribed modes of transactions, reducing the threshold for cash transactions, prohibition of certain cash transactions, etc.
X- Expansion of scope of TDS/TCS
For widening the tax base, several new transactions were brought into the ambit of Tax Deduction at Source (TDS) and Tax Collection at Source (TCS). These transactions include huge cash withdrawal, foreign remittance, purchase of luxury car, e-commerce participants, sale of goods, acquisition of immovable property, etc.
XI- Simplification of compliance norms for Start-ups
Start-ups have been provided hassle-free tax environment which includes simplification of assessment procedure, exemptions from Angel-tax, constitution of dedicated start-up cell etc.
Focus: GS-II Governance
Why in news?
NITI Aayog, in association with Agami and Omidyar Network India, brought together key stakeholders in a virtual meeting for advancing Online Dispute Resolution (ODR) in India.
This exercise set into motion the use of technology towards efficient and affordable access to justice in our post-pandemic response.
Online Dispute Resolution (ODR)
- Online dispute resolution (ODR) is a branch of dispute resolution which uses technology to facilitate the resolution of disputes between parties.
- It primarily involves negotiation, mediation or arbitration, or a combination of all three.
- In this respect it is often seen as being the online equivalent of alternative dispute resolution (ADR).
- However, ODR can also augment these traditional means of resolving disputes by applying innovative techniques and online technologies to the process.
- ODR is a wide field, which may be applied to a range of disputes; from interpersonal disputes including consumer to consumer disputes (C2C) or marital separation; to court disputes and interstate conflicts.
- While courts are becoming digitized through the efforts of the judiciary, more effective, scalable, and collaborative mechanisms of containment and resolution are urgently needed.
Highlights of recommendations in the meeting
- ODR should be made mandatory for specified categories.
- Private ODR and ADR providers need to be complemented to ensure that online resolution can reach different industries, locations, and parts of the country and also support the public institutions in a big way.
- The future will be a hybrid model that combines offline courts, online courts and ODR.
Challenges in implementation of ODR
- It is a new endeavour as Arbitration proceedings have not been widely practiced in India.
- Poor Access to internet connectivity in the remote areas will impede ODR proceedings.
- Infrastructural and institutional limitations curtail the rapid growth of ODR in almost all developing countries including India.
- The ODR mechanism has not been able to inculcate trust and confidence amongst people for obvious constraints of technology, awareness and apprehensive, sceptical approach of people.
- Limited by lack of physical existence and face-to-face interaction between the parties to the dispute.
Progress of Implementation of ODR in India
- The General Assembly of the United Nations has recommended the use of United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration in 1985.
- The model law can be used in cases where a dispute arises in the context of international commercial relations and the parties seek an amicable settlement of that dispute by recourse to conciliation.
- India has incorporated these uniform principles of alternative dispute resolution in the Arbitration and Conciliation Act, 1996.
Focus: GS-III Science and Technology
Why in news?
Scientists have developed a rare-earth-based magnetocaloric material that can be effectively used for cancer treatment.
- In magnetic hyperthermia, magnetic nanoparticles are subjected to alternating magnetic fields of few Gauss, which produce heat due to magnetic relaxation losses.
- Magnetic hyperthermia is studied to try to address the issues of side effects of cancer treatment like chemotherapy.
- One of the major drawbacks in magnetic hyperthermia is the lack of control of temperature, which may damage the healthy cells in the body and also have side effects like increased blood pressure etc.
- Magnetocaloric materials can provide controlled heating.
- This method, when used in conjunction with radiation therapy, would reduce the side effects, damage caused to the human body and also reduce the treatment time of cancer tumours.
- The Magnetocaloric Effect is commonly seen as a reversible heating and cooling of magnetic solids upon their exposure to a varying magnetic field.
- An increase or decrease in the strength of an external magnetic field modifies the ordering of the magnetic moments of the atoms that form the material, thus altering magnetic entropy.
- When there is no heat exchange with the environment, the magnetic entropy change must be compensated by a change in material’s temperature, i.e. it either heats or cools.
- The Magnetocaloric Effect is the strongest near the material’s Curie temperature, i.e. the temperature of its spontaneous magnetic ordering/disordering.
- Complex Oxides & Ceramics
- Magnetic hyperthermia is an experimental treatment for cancer, based on the fact that magnetic nanoparticles can transform electromagnetic energy from an external high-frequency field to heat.
- This is due to the magnetic hysteresis of the material when it is subjected to an alternating magnetic field.