The Indian economy formulated the Direct Tax Code to modernize and modify the sixty-year-old Income Tax Act. The Indian government aims to restructure and simply the direct tax laws into one legislation. Direct Tax Code will replace the Income Tax Act (1961) and the Wealth Tax Act (1957.)
When DTC 2010 was presented in the Indian Parliament, the government put together a Standing Committee of Finance (SCF) to discuss its specifics with numerous stakeholders. The SCF diligently worked hard to revise the DTC, and a final revision version was submitted in 2012.
What's the need for a Direct Tax Code?
The Income Tax Act was implemented several decades ago. Since the Indian economy has undergone several changes, making the Act irrelevant in the current times. The Income Tax Act has almost 700 sections covering many concepts, but the business environment has drastically changed, making the IT Act full of loopholes and less flexible.
Direct Tax Code Key Highlights
- After its first draft in 2009, a Revised Discussion Paper was released in 2010.
- In 2010, the Parliament appointed the SCF or Standing Committee of Finance. The SCF submitted its revised report in 2012.
- The government considered the modifications made by the SCF, and another revised version was introduced in 2014.
- It lapsed after 2014 as the NDA government won the national elections.
- In 2017, the Prime Minister appointed a special committee (CBDT) to draft a new DTC. The report was submitted to the Finance Minister in August 2019.
Features of new Direct Tax Codes
Here are some fundamental features of the new DTC.
- Citizens earning up to an annual income of 55 Lakhs are excepted to get significant tax relief.
- Increased incentives for start-up companies.
- Foreign companies are expected to pay branch profit tax.
- Assessment officers may replace the Assessing Units.
- Implementation of mediation mechanism between CBDT and taxpayers.
- Abolishment of dividend distribution tax.
- New Direct Tax Codes will have significantly lesser sections than the Income Tax Act.
The primary objective of the Direct Tax Code is to consolidate all direct tax laws and acts formed by the government. It will simplify the rules and make them more effective and efficient. With the proper execution of the new Direct Tax Code, India will have a robust and stable tax system.
FAQs on Direct Tax Code
Q.1. When was the first draft of the Direct Tax Code released?
The first draft of the Direct Tax Code bill was introduced on August 12, 2009.
Q.2. Who received the final report of the new Direct Tax Codes?
Nirmala Shantaram, the Finance Minister of India, received the final report of the new DTC submitted by the CBDT task force on August 19, 2019.
Q.3. Who are the members of the CBDT task force?
The head of the CBDT was Arbind Modi, but after retirement, he was replaced by Akhilesh Ranjan, a prior CBDT member. Other members include Rajiv Memani- the regional managing partner and chairman of EY India,
Girish Ahuja- a chartered accountant, G C Srivastava- a retired IRS and Advocate, Mansi Kedia- Consultant, ICEIER, the last member is Mukesh Patel- a practising Tax Advocate.
Q.4. When will the new Direct Tax Codes be released?
There is little information available surrounding the new Direct Tax Codes. The report consists of two parts: Draft Bill and recommendations according to the media sources. The details of the report are being kept secret from the public domain.