Less than two months after the announcement of the Union budget, the government has introduced a number of sweeping changes to the Finance Bill, raising questions on the timing and rationale of those changes. The bill was discussed in the Lok Sabha on Wednesday and has been passed after strong protests from the opposition.
On Tuesday, the government announced over 40 amendments to the Finance Bill 2017 that include significant changes to those that were announced by Finance Minister Arun Jaitley in February, including making Aadhaar card mandatory for filing tax returns.
Here are the key highlights of the changes:
Aadhaar mandatory
The government has made the Aadhaar card compulsory for filing tax returns, and for applying for Permanent Account Number (PAN).
Although FM Jaitley maintains this is being done to clamp down on tax evasion, it is likely to create disruption in the short-term and could prove to be a dampener.
"The [Aadhaar] announcement is likely to be a dampener to tax filers, specially first timers," said Archit Gupta, Founder & CEO ClearTax.com. "FY 2016-17 filing is expected to see a large number of first time filers due to demonetisation efforts, and this move may make them more guarded."
According to Gupta, taxpayers are generally wary of sharing additional information in tax returns. He noted that some taxpayers have expressed concern about how the government is going to use Aadhaar with tax returns data.
Your PAN card may expire
Should one fail to get an Aadhaar number, their existing PAN number could become invalid. That means those who already have PAN cards have to communicate their Aadhaar numbers to the relevant tax authorities. However, the government may exempt certain people from this provision through a notification.
Stricter cash limits
The government has slashed the cash transaction limit from Rs 3 lakh announced during the budget speech to Rs 2 lakh now. Transactions exceeding Rs 2 lakh would be fined by an amount equal to the transaction amount, the government has said.
Relaxed rules for companies to donate to political parties
The government has removed existing limits and disclosure requirements governing company donations to political parties. For instance, it has removed the cap requiring companies to contribute only up to 7.5 per cent of their average net profits for last three financial years. Additionally, companies won't have to disclose which parties have received their contributions.
Appellate tribunals overhaul
The government has merged a number of appellate tribunals with the aim to make them more efficient. Several tribunals will either cease to exist or will be overseen by other tribunals. For example, the Airports Economic Regulatory Authority Appellate Tribunal and Cyber Appellate Tribunal will be replaced by the Telecom Disputes Settlement and Appellate Tribunal.
However, according to non-profit PRS Legislative Research, "the rationale behind replacing certain tribunals is unclear."
"For example, the TDSAT (Telecom Disputes Settlement and Appellate Tribunal) may not have the expertise to adjudicate matters related to the pricing of airport services," the research firm said in a note. "Similarly, it is unclear if the NCLAT which deals with matters related to company disputes and governance, will have the expertise to deal with matters related to anti-competitive practices, which are currently managed by the Competition Appellate Tribunal."
Appellate tribunal appointments
The government can now make new rules governing senior appointments of appellate tribunals and also dictate their terms of service, raising questions about the independence of such judicial tribunals, PRS Legislative Research noted.
"Allowing the executive to determine appointment, reappointment and removal of members could affect the independent functioning of the tribunal," PRS said. "There would be conflict of interest if the government were to be a litigant before a Tribunal, as well as determine appointment of its members."