The Direct Taxes Code (DTC) was touted as a big facelift of the Income Tax law but a number of its provisions, considered harsh, were diluted or some such as General Anti-Avoidance Rule incorporated in the nearly five-decade old law itself. Finance minister P Chidambaram, who conceptualized the DTC, is yet to give any firm indication of government's thinking on the new law. ET looks at few provisions that this budget may borrow from DTC:

1. Increase In Minimum 2 Alternate Tax (MAT)

First introduced in 1988-89 but was withdrawn in 1991. It was brought back by Chidambaram in 1996-97 budget to force profi tmaking companies to pay tax, the levy has risen and could go up further.

2. Higher Personal Income Tax Exemption Limit

The direct taxes code bill had suggested that income up to Rs 2 lakh be exempt from tax. However, parliamentary standing committee suggested it should be increased to Rs 3lakh.

3. Phase Out More Profit-Linked Deductions

The DTC proposes investment linked deductions for priority sectors and doing away with exemptions from tax on some profi ts. Investment linked deductions are performance based and, therefore, considered superior tax incentives.

4. Residence Of Company To Be Based On Place Of Effective Management

Place of effective management is an internationally recognized concept for determination of residence of a fi rm incorporated in a foreign jurisdiction

Most of our tax treaties recognize the concept of place of effective management for determination of residence of a company as a tie-breaker rule for avoidance of double taxation

There is no clarity in the Indian law on this issue

DTC has provided 'place of effective management' threshold for determining residency of foreign company

5. Provision To Check Deferral Of Taxed By Indian Controlled Foreign Company

DTC has proposed concept of controlled foreign company

It is a way of taxing a foreign company, which is controlled by a resident in India

The rule will appy to passive income, on income not distributed to shareholders, which results in deferral of taxes

Such income would be taxable in India in the hands of resident shareholders as dividend received from the foreign company