Govt to clear the position of Direct Taxes Code in the next Budget

Finance Min­is­ter Arun Jait­ley is like­ly to announce the fate of the Direct Tax­es Code in next year’s Bud­get. The code aims to replace the five-decade old Income Tax Act, 1961 and Wealth Tax Act, 1957 in a sin­gle legislation.

There are two views, either scrap the pro­posed code and con­tin­ue with the exist­ing sys­tem or start afresh, writ­ing a new struc­ture,” a senior Finance Min­istry offi­cial told Busi­ness Line, adding that next year’s Bud­get will clear the pic­ture. The UPA Gov­ern­ment had intro­duced a Bill for the code in 2010, which lapsed with the dis­so­lu­tion of the 15th Lok Sabha.

The offi­cial said some pro­pos­als in the DTC, such as those relat­ed to inter­na­tion­al tax­a­tion, have already been imple­ment­ed with amend­ments in the exist­ing Act, which rais­es the ques­tion of whether the new law is need­ed or not. On April 1, the pre­vi­ous UPA Gov­ern­ment had placed a revised ver­sion of the code after con­sid­er­ing rec­om­men­da­tions of the Stand­ing Com­mit­tee on Finance and the views of stake­hold­ers. Tak­ing note of this, the Finance Min­is­ter, while pre­sent­ing his Bud­get on July 10, said the Gov­ern­ment shall con­sid­er the com­ments received from the stake­hold­ers on the revised Code. The Gov­ern­ment will also review the DTC in its present shape and take a view in the whole mat­ter, he added.

The revised code pro­posed four tax slabs against the exist­ing three. The fourth slab talks about new income tax rate of 35 per cent for indi­vid­u­als, Hin­du Undi­vid­ed Fam­i­lies (HUFs) and arti­fi­cial juridi­cal per­sons, if their annu­al income exceeds ₹10 crore. Inter­est­ing­ly, the pre­vi­ous Gov­ern­ment reject­ed the Stand­ing Com­mit­tee on Finance’s rec­om­men­da­tion of nil tax for annu­al income up to ₹3 lakh from ₹2 lakh, but the present Gov­ern­ment raised the exemp­tion lim­it to ₹2.5 for from ₹2 lakh for indi­vid­ual tax­pay­ers below the age of 60 years and to ₹3 lakh from ₹2.5 lakh for peo­ple between the age of 60 and 80.

One of the key argu­ments giv­en for the intro­duc­tion of the new direct tax law is the numer­ous amend­ments involved. Besides, the annu­al finance Acts over the years have not just total­ly revamped the orig­i­nal Act but also involve a com­plex expla­na­tion of tax provisions.

The Stand­ing Com­mit­tee on Finance, in its report pre­sent­ed in the Lok Sab­ha on March 13, 2012, had said that when the Income Tax Bill, 1961 was intro­duced on March 24, 1961 had 298 seri­al­ly-list­ed sec­tions and four Sched­ules, but the Act (till 2011-12) has around 656 sec­tions and 14 Sched­ules. This does not include the Wealth Tax Act. Now, the revised Direct Tax Code, 2013 has 21 chap­ters, 325 claus­es and 23 schedules.

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