The much awaited introduction of the Direct Taxes Code Bill in the Lok saba is already over. But there seems to be nothing holistic as it was previously expected. It looks like just another annual Finance Bill with marginal tax effects. The lucidity of the previous draft is now gone. It has the same looks as that of the Income Tax Act, 1961. Almost all exemption available in the erstwhile IT Act is still available. The savings limit only marginally increased from 1 lakh to 1.5 lakhs. No more deferential Treatment for Women Assessee. Basic exemption limit increased from 1.6 lakhs to 2 lakhs. Other than this it is almost the old IT act sections rearranged in a new fashion for the common man. The code bill also carries quite many obsolete provisions. For e.g. the definition of an Accountant still includes reference to Section 226 of the Companies Act which is obsolete now. It seems that the government has once again heeded to popular demands. The Direct Taxes Code a judicious mixture of wonders and blunders of the Indian Tax regime
The Direct Taxes Code (DTC) is the most expected Indian Legislation of the decade. For the first time, a bill has been kept open for public commentary even before its introduction in the Parliament. The DTC, as such, is the simplest any tax legislation can become. Has then the DTC, 2009 proved Albert Einstein’s saying (“The hardest thing in the world to understand is the Income Tax”) to be false? Of course not… It has become simple for people who know income tax and not the layman. Let me critically appraise some of the provisions of the Direct Taxes Code, 2009 which may have missed the common eye.
Hefty Increase in Tax Slabs:
The most welcome measure in the DTC Bill is the increase in individual tax slabs. It has increased the slabs to an extent no one expected. When the DTC Bill is enacted, income up to Rupees 10 Lakhs will be taxed only at 10%. Further income between 10 Lakhs and 25 Lakhs will be taxed at 20% and income above 25 Lakhs will be taxed at 30%. Further there will be no more surcharge, Education Cess and Higher and Secondary Education Cess. This will ensure easier tax compliance. All individual will be making whooping tax savings. Let’s compare how the Gross Total income of a General Individual will be taxed under the present regime and under the Direct Taxes Code.
|S. No.||Particulars||As Per the Income Tax Act 1961, (For AY : 2010- 11)||As per Direct Taxes Code Bill, 2009|
|1.||Gross Total Income||15,00,000||15,00,000|
|2.||Less : deduction for savings||1,00,000||3,00,000|
|4.||Income Tax on Above||3,24,000||1,24,000|
|5.||Add: Education Cess on Above||6,480||Nil|
|6.||Add: Higher and Secondary Education Cess||3,240||Nil|
|7.||Total Tax Payable||3,33,720||1,24,000|
From the above it is very much evident that the individual will be making a whooping tax savings of Rs. 2,09,720/- under the Direct Taxes Code.
Adieu Assessment Year!
The Direct Taxes Code proposes to do away with the terms Assessment Year and Previous Year. Continue reading Critical Appraisal of the DTC Bill, 2009