NEW DELHI, Dec 6: The PHD Chamber of Commerce and Industry (PHDCCI) has put forward an extensive set of recommendations to the government, calling for a major overhaul of India’s direct tax framework.
The Chamber said these changes are essential to improve compliance, support businesses and strengthen the overall investment climate.
PHDCCI has proposed capping dividend taxation at 20 per cent, noting that companies already pay tax before distributing profits. It believes a cap will reduce the combined tax burden on promoters and support reinvestment.
The Chamber also recommended reinstating the 150 per cent weighted deduction for R&D expenditure, saying India must encourage innovation to stay globally competitive.
The industry body has asked the government to allow CSR spending as a deductible business expense since companies are now legally required to spend on social welfare.
It further sought an increase in depreciation on plant and machinery from 15-30 per cent and the reintroduction of a 15 per cent investment allowance to promote capital expansion and job creation.
To support employee welfare, PHDCCI suggested removing the Rs 7.5 lakh cap on employer contributions to retirement funds. It also highlighted the restrictive 25 per cent buyback limit for private companies and urged relaxation of this cap, especially for family-owned businesses with strong reserves and no debt.
On personal taxation, the Chamber asked for rationalisation of the highest individual tax rate to around 26 per cent, aligning it with corporate tax levels. It said entrepreneurs currently face an excessive combined tax burden, which discourages formalisation and investment.
A major part of the recommendations focuses on the taxation of Virtual Digital Assets (VDAs).
PHDCCI warned that the existing 30 per cent tax and 1 per cent TDS have pushed Indian users to offshore crypto platforms, leading to large revenue leakages.
It urged lowering tax rates, reducing TDS to 0.01 per cent, raising the exemption threshold, and bringing offshore platforms under Indian compliance rules.
To revive manufacturing growth, PHDCCI requested the reintroduction of the 15 per cent concessional tax regime under Section 115BAB for new manufacturing units. It also pushed for lower tax rates for LLPs and partnership firms, which form a large segment of MSMEs and still face higher taxes compared to private companies.
On procedural concerns, the Chamber highlighted delays in faceless appeals, NOC approvals for mergers, and errors in CPC-generated intimations. It suggested fixed timelines for appeal orders, a 60-day limit for remand reports, and optional physical hearings in high-pitched assessments.
It also recommended shifting erroneous CPC cases directly to Jurisdictional Assessing Officers for quick resolution.
PHDCCI further called for revisiting Section 43B(h), which mandates strict MSME payment timelines, saying the provision is difficult to comply with and has not changed payment behaviour. It sought longer timelines for filing revised and belated returns, noting that the present 1-2 month gap is too narrow for correcting genuine mistakes.
Additional suggestions include allowing MAT credit transfers in mergers, removing the need for routine TDS/TCS certificates, providing clarity on capital gains exemptions under Sections 54 and 54F for property purchased in the name of close family members, and increasing the valuation tolerance band from 10-20 per cent for real estate transactions.
The Chamber also proposed increasing the presumptive tax limit for professionals, withdrawing the ICDS framework due to increased litigation, and permitting loss carry-forward benefits in mergers across all sectors, not only manufacturing.
PHDCCI said these reforms would reduce litigation, simplify compliance, and create a more business-friendly tax regime. It urged the government to consider these measures in the upcoming Budget to strengthen India’s economic competitiveness. (UNI)
Follow our WhatsApp channel
