The Direct Taxes Code 2009 is now on the back burner. The Union finance ministry has veered round to the view that its bold move to reform direct taxes should be subjected to further scrutiny. Contrary to earlier expectations, therefore, the Direct Taxes Code 2009 will not be presented to Parliament as a Bill along with the Union Budget for 20010-11on February 26.
The draft direct tax code that will lead to overhaul of the Income Tax Act, has created uncertainty among the developers and units in the special economic zones over continuation of the tax sops.
The government on Monday promised to come out with a framework for the Direct Taxes Code that will simplify tax structure within 45 days.
Finance Minister P Chidambaram on Monday said he is reviewing the Direct Taxes Code (DTC) Bill and it will be introduced in Parliament after taking into account the recommendations of the Parliamentary panel.
The government will introduce the Direct Taxes Code by April 2011 after examining thoroughly seven proposals such as taxing savings schemes and clamping the Minimum Alternate Tax (MAT) on gross assets that have not found favour with the industry, trade and people at large.
The Direct Taxes Code is being mooted as a replacement to the Income Tax Act 1961. What is the idea behind replacing something that has been around for close to 50 years and what is the strategy behind the exercise?
The Direct Taxes Code Bill, introduced in Parliament on August 30 last year, proposes to replace the 50-year-old Income Tax Act.
The 48-year-old Indian Income Tax Act is set to be replaced by a new Direct Tax Code from April 1, 2011.
EEE continues for PF, life insurance and NPS; capital gains from stocks, equity funds may become a part of ordinary income.
The delegation, comprising leader of Opposition in Lok Sabha Sushma Swaraj, her counterpart in Rajya Sabha Arun Jaitley and others, said Mukherjee had assured them that DTC was only at the drafting stage and discussions were still on.
"We are trying to bring the new taxation regime, which can last for another 50 years. Therefore, our endeavour is to see that new taxation system should include the basic features and time tested procedures of existing act, which have survived judicial security over the years."
A senior official in the finance ministry said the Central Board of Direct Taxes addressed the nine areas of concern in the Code identified by Finance Minister Pranab Mukherjee.
The Direct Taxes Code suffers from serious weaknesses.
The biggest impact of the new tax system is the significant widening of income slabs. According to this, people with annual income not exceeding 1.6 lakh (Rs 160,000) will not have to pay any tax.
But, govt plans to bring some provisions that can't wait.
Financial and tax expert Anil Rego of Right Horizons has his doubts.
Direct Taxes Code will make politically difficult changes feasible
The new Direct Taxes Code has been put in the public domain and will most likely be up for debate in the monsoon session of Parliament.
While presenting the Union Budget for 2009-10, finance minister Pranab Mukherjee had said that in order to bring in tax reforms in the country the government will bring the new DTC within 45 days. The code will replace the existing Income Tax Act, which was enacted in 1961 and would subsume the direct tax legislations.
Tax practitioners said that the move will help salaried individuals meet the cost of some of the surgeries since the present limit was low and was mostly used up by consultation fees and cost of medicines.
The government hopes to implement direct tax code from April 2011.
Implications for capital gains, wealth taxes, and investment strategies require careful consideration, notes Anil Rego, founder and CEO, RightHorizons.
The government on Monday tabled the much-awaited Direct Taxes Code Bill in the Lok Sabha which proposed to raise the exemption limit on income tax from the current Rs 1,60,000 to Rs 200,000.
The proposed move to withdraw the DDT would help encourage investments by addressing multiple taxation of income and bringing down the effective tax rate on companies, which is among the highest in the world.
Finance Minister Pranab Mukherjee has also said that the bill on DTC was likely to be tabled in the monsoon session of Parliament.
Finance Minister Pranab Mukherjee on Wednesday said the proposed Direct Taxes Code would give an edge to the country while dealing with international taxation issues.
The Direct Taxes Code is likely to be implemented from 2011-12. Sources said the bill in this respect may be tabled in Parliament in the Budget session.
The proposal to levy a minimum tax based on assets undoes most of the good that the code seeks to do and will discourage capital-intensive industries.
The long awaited direct tax code bill (DTC) proposes to simplify Indian taxation system. Here's how it will affect and benefit the salaried class.
The Direct Tax Code recently been proposed by the Government of India, will bring about a change in the whole taxation system of the country. But how will it impact tax savers?
Sheilu Sreenivasan, founder president, Dignity Foundation, an NGO that works for the cause and care of the elderly, said "Our biggest worry is not what the government is going to give to senior citizens, but what it is going to take away from them."
The developers, including Raheja Ltd, Ascendas, L&T and GMR, among others, are in the Ministry of Commerce and Industry's Export Promotion Council for export oriented units and special economic zones.
Fresh plans of privatisation or divestment in central public sector enterprises and public sector banks might take a back seat this financial year because these may require a large consensus among coalition partners.
Finance minister Pranab Mukherjee said he was confident of the DTC being recommended by the standing committee in the coming (winter) Parliament session.
A good tax system should minimise the cost of collection, compliance cost and the cost to the economy in terms of the distortions it creates while generating revenues.
'The adjustments (of tax slabs and standard deduction) will reduce the tax burden for salaried individuals with an income of around Rs 20 lakh by approximately Rs 18,000.' 'For non-salaried individuals with the same income level, the savings will be around Rs 10,000.'
Despite a dull macro-economic environment almost all the FMCG companies posted a decent volume growth.
'We have now drastically simplified it, primarily to two rates in long-term capital gains: 20% and the applicable rates. Similarly, in short-term capital gains.' 'For listed shares, there is a slight increase, but for unlisted shares, where indexation benefits are removed, there is a reduction in rates, benefiting unlisted companies, venture capital firms, etc.' 'Similarly, in real estate, wherever returns are higher, the new structure is beneficial. In very few cases, returns are lower, and those are more of an exception.'
The forthcoming Budget is expected to bring about some of the changes for a smoother transition to the new tax code. Read on. . .
To modernise the tax system, the government has proposed to replace the Income Tax Act, 1961, with a new legislation.
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