A government panel is expected to submit a draft direct tax code to the government soon, after which it will be examined by the Centre’s top leadership, and then placed in public domain for feedback before being passed as law.
Business Standard has learnt from informed sources that while the draft direct tax code (DTC) will contain proposed changes in tax brackets and rates, most of the overhaul will focus on tax administration.
“There will be two parts to DTC. The tax changes in DTC will require parliamentary approval, but there will also be changes in the structure of tax administration brought in through executive decisions, through notifications and circulars,” said an official.
“The panel is expected to submit the draft code to the centre in the month of May. It will be examined and then put in public domain,” the person said. Only after an extensive process of feedback and consultation with stakeholders will the draft law be taken to Parliament for approval, he added.
In November, the centre had set up a six-member ‘task force’ to review the Income Tax Act and to draft a new Direct Tax Law in consonance with economic needs of the country. The task force is headed by Arbind Modi, member Central Board of Direct Taxes. It includes Girish Ahuja, a chartered accountant and director on State Bank of India’s board; Rajiv Memani of EY; Mukesh Patel, a tax advocate; Mansi Kedia of ICRIER; and retired Indian Revenue Service officer G.C. Srivastava.
The proposal of a direct tax code to replace existing income tax laws was first mooted in former Prime Minister Manmohan Singh’s government. In 2009, the UPA government had in 2009 come out with a draft DTC to simplify the tax legislation for individual taxpayers as well as corporates.
The DTC Bill, 2010, which was introduced in Parliament in 2010, lapsed with the dissolution of the 15th Lok Sabha. That bill had proposed annual I-T exemption limit at Rs 200,000, and levying 10 per cent tax on income between Rs 200,000 and Rs 500,000, 20 per cent on Rs 500,000 to Rs 1 million and 30 per cent above Rs 1 million. For domestic companies it suggested tax rate of 30 per cent of business income.
The DTC being prepared by the panel appointed by the current government is said to be starting from scratch and preparing an entirely new draft code.