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New direct tax code to simplify tax procedures
June, 05th 2007

The planned direct tax code promises to make tax issues simpler for the common man. While it may not do away with the need to refer chartered accountants and tax experts, it does promise to make taxation aspects easier to understand. To begin with, the finance ministry is planning to have tax calculators in the new code, to make it easier for a layman to understand and calculate his tax liability. At present, a taxpayer has to go through copious amounts of explanations in the Income Tax Act.

The new code proposes to replace these explanations with mathematical formulae to estimate the amount of tax a person has to pay. The formulae will be given for all direct taxes. The move is a part of the finance ministrys decision to demystify, as far as possible, issues relating to direct taxes in the proposed code. We hope to collect more revenue with the help of the new code, as we feel that a proper understanding of tax liability will encourage people to pay their taxes correctly, a finance ministry official said. The direct tax code is also expected to have a special section in the beginning, containing comprehensive definitions of all taxation terms. This is expected to lead to more simplification and will also deter people from referring to various sections to understand any one issue, which they generally do at present.Simpler terms will also be used instead of the complicated terminology, which is there in the present Act. The direct tax code, which is expected to replace the current Income Tax Act, 1961, is scheduled to be tabled in Parliament in its monsoon session.

While the current Income Tax Act is very comprehensive, the finance ministry had felt a need to review it as it has become very complicated due to the many amendments to the Act over the years.

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