The government could combine income tax, fringe benefit tax and wealth tax into one code Direct Taxes Code Bill, 06 when a new income tax law will roll out in 08, as a part of the initiative to make taxation laws simpler and people friendly.
The Central Board of Direct Taxes on Thursday submitted a report on simplifying the Income Tax Act, 1961 to finance minister P Chidambaram.
The salient features of the report are bringing together the income tax, fringe benefit tax and wealth tax, replacing the concept of previous year and assessment year with financial year and replacing legalese with simple language. This report is an exercise of the future and is not aimed at amending the existing Income Tax Act, 1961.
It is about a brand new income tax Act, which if all goes well, will come into force from April 1, 08, that is for assessments made in 09-10, Mr Chidambaram said. He said the new Act will hopefully come into force from April 08, subject to Parliament approving it well in time.
The report has done away with all provisos and explanations present in the existing law. These have been incorporated in the main provision. All redundant provisions have been removed from the statute besides, removing anomalies and inconsistencies to enable easy implementation and compliance.
Various provisions common for all direct taxes, relating to tax administration and procedures have been combined. The finance minister had announced in his budget speech of 05 that the Income Tax Act, 1961 would be simplified and a new bill would be introduced in Parliament. A group of officials from the CBDT was then constituted to simplify and rationalise the law relating to income tax.
The officials carried out an extensive review of the existing provisions in the income-tax and wealth-tax codes with inputs from various sources and formulated the new direct-tax code. After internal examination and assessments, the report may be placed for comments from public and then sent to a select committee.