Centre to clear the air on Direct Taxes Code in the next Budget
September, 25th 2014
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 BusinessLine, 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.