DTC (Direct Tax Code)

Finance Minister P Chidambaram has said that the Direct Taxes Code (DTC), initiated by him during his earlier tenure, needed a fresh look.

After a meeting with top officials of Central Board of Excise and Customs (CBEC), he also said the tax department has to be firm with tax evaders for whom non-compliance is a business.

"DTC has gone through various versions...I need time to look at DTC. I am only 28 days old... It requires a fresh look", Chidambaram said in reply to a question at a press conference in New Delhi on Tuesday.

The idea of Direct Taxes Code (DTC), which seeks to replace the Income Tax Act, 1961, was mooted by Chidambaram as Finance Minister in the UPA-1 government and lot of drafting was done when he was shifted to Home in 2008.

His successor Pranab Mukherjee introduced the DTC Bill in 2010 which also included a number of new provisions, followed by changes suggested by Parliament Committee on Finance.

The controversial provisions relating to retrospective tax amendments and GAAR were enacted in the Finance Bill, 2012, which are under review.

To a question whether General Anti Avoidance Rules (GAAR) would get postponed again, Chidambaram said, he was awaiting the report of the Shome Committee, which is looking into the concerns expressed by foreign and domestic investors.

On the indirect tax collections, the Minister said that he was hopeful that the target of Rs 5.05 lakh crore during the current fiscal would be met.

Chidambaram said the department would have to be firm with the small number of non-compliant businesses.

"Most people would like to be compliant with tax laws. It is only a very small number that wishes to be non-compliant. I have told the department that we have to be firm with the small number of those non-compliant people", he said.

Chidambaram said he has asked CBEC officers to focus more on top 100 tax payers to achieve the indirect tax collection target of Rs 5.05 lakh crore in the current fiscal.

"If you take customs and excise zone wise, top 100 tax payers of the customs, top 100 in excise and top 100 in service tax account for about 95 per cent of taxes collected.

"So really, each charge has to focus on top 100 ... All the others contribute only about 5 per cent. So if we maintain an interactive, friendly tax administration with them ... we will achieve our target," he said.

The Minister further said that April-July collection figures of indirect taxes do not reflect the trend, and added, "the numbers beyond August will be more encouraging".

Indirect tax collection during April-July showed an increase of 22 percent against annual target of 27 percent.

Chidambaram also made a case for de-centralisation of powers saying that tax administration of a large country likeIndia cannot be run from Delhi.

"Most Chief Commissioners are naturally resentful of the fact that powers are getting centralised. I have assured that powers will be de-centralised. Tax administration of large country like India cannot be run by fiat from Delhi. So large number of powers will be de-centralised and that will attended to next week", he added.

The tax administration, he added, must be friendly as most people wants to comply with tax laws and get on with other activities.

"It's only a small number which makes its business to be non-complaint with tax laws. I have held this philosophy very long ... We should be friendly to the large number of tax payers who wish to be complaint with tax laws and we have to be firm with the small numbers (who do not comply) with tax laws", the Minister added.

Referring to Service Tax, Chidambaram said that although 16 lakh people are registered for paying Service Tax, 10 lakh of them do not pay the levy.

"This could be out of ignorance, this could be because they do not have adequate assistance to understand how to pay service tax ... So we are going to launch a massive campaign that people must pay taxes and the tax administration will help them pay taxes and will be friendly to tax payer," he said.

Chidambaram said that officials should not harass honest tax payers and make it taxpayer friendly.

"We are not going to be regarded as the hounding tax administration. That's not our approach at all. We will be a friendly tax administration. We will be friendly to all those people who are compliant with taxes and I believe bulk of the people pay tax," he said.

The Minister said that tax administration should be such that business men are able to devote more time to his work rather than spending long hours outside tax office.

"Business men must be allowed to get on with business. He must be allowed to spend his time and efforts energy on business and his interaction with tax department must be as minimal as possible so that he pays his taxes and gets on with life," Chidambaram said.

(DD-28.8)

Direct Taxes Code 2010

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Exemption Limit extended upto 2,00,000/- (DTC Approved by Cabinet)

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               The cabinet approved  Direct Tax Code bill on Thursday, i.e. 26.08.2010.  It is hoped that this bill will be tabled in Parliament during the ongoing Monsoon session and thereafter it may be referred to standing committee.

Higlights of the Direct Tax Code.

• Increase in Income Tax exemption limit upto 2.00 lakh from 1.60 lakh.
• Removal of Surcharge and Cess on corporate tax. 
• Corporate Tax will be 30% but surcharge and cess will be nil. 
• DTC will come into force by the deadline of 1st April 2012.

The Cabinet approved the much-awaited Direct Taxes Code (DTC) Bill on Thursday, which is likely to be tabled in Parliament during the ongoing Monsoon session and thereafter it may be referred to standing committee.

When asked what will be the limit of exemptions for income tax, Finance Minister Pranab Mukherjee told reporters after the Cabinet meeting that it is proposed to be raised to Rs 2 lakh from the current Rs 1.6 lakh.

"The whole objective is that a plethora of exemptions will be limited. (Income) tax slabs will be three. Rate of taxes will be taken in the schedule so that they need not be changed every year," he said.

On the corporate tax, he said it is sought to be retained at the present level of 30 percent, but there will not be any surcharge or cesses on it.

According to sources, the DTC bill is likely to be tabled in Parliament on Monday. Thereafter, it will be referred to Parliamentary standing committee, they added.

When asked what the new income tax slabs would be, Mukherjee said, "That will be discussed in Parliament."

For senior citizens and females, the tax slabs are likely to be relaxed further, they added

When contacted, senior officials in the Finance Ministry declined to comment on the slabs.

At present, income between Rs 1.65 lakh and Rs 5 lakh attracts 10 percent tax, while the rate is 20 percent for the Rs 5-8 lakh bracket and 30 percent for income above Rs 8 lakh.

The first draft of the bill had suggested 10 percent tax on income between Rs 1.60 lakh and Rs 10 lakh, 20 percent on income between Rs 10 and Rs 25 lakh and 30 percent beyond that.

However, finance ministry officials had later said those slabs were just illustrative.

The Bill, approved by Cabinet on Thursday also seeks to impose minimum alternate tax (MAT) at 20 percent of the book profit, compared to 18 percent at present.

The first draft had proposed to impose MAT on assets, which drew strong criticism from the industry. The MAT on book profit has been maintained in the revised draft as well.

The first draft had also proposed to tax long-term savings like provident funds at the time of withdrawal. However, the revised draft exempted them, after the first draft drew flak.

"Concerns were expressed for shifting from EEE (exempt, exempt, exempt) to EET (exempt, exempt, tax)," the Finance Minister said.

This would also address the issue of taxing surplus funds of charitable institutions, he added.

When enacted, the DTC will replace the archaic Income Tax Act and simplify the direct tax regime in the country.

Finance Ministry officials exuded confidence that the Bill will come into force by the deadline of 1^st April 2011.

The code aims at reducing tax rates, but expanding the tax base by minimising exemptions.

"DTC will help in streamlining various tax exemptions, deductions and thereby bring in moderate tax rates. DTC would address most of the issues raised by corporate India, like, not imposing tax on gross assets, clarifying EEE, introducing graded deduction for capital gains among others," Ernst & Young Tax Market Leader Sudhir Kapadia said.

Draft Direct Taxes Codes Papers Revised

CBDT (Central Board of Tax Department) has issued revised discussion paper on Draft Direct Taxes Codes.  Initially the Draft DTC was issued in August 2009. Lot of valuable inputs have been received through pubic.  Now after amendment  revised draft direct taxes code papers are prepared.  The major changes in Draft DTC are as under:-

• Minimum Alternate Tax (Mat) on gross assets
• Tax treatment of Savings- Exempt Exempt Tax (EET) vis-a-vis Exempt Exempt Exempt (EEE) basis
• Status of Double Tax Avoidance Agreement vis-a-vis the Domestic law.
• The administration of the General Anti-avoidance Rule (GAAR)
• Taxation of income from House Property on a presumptive baiss.
• Tax treatment on Capital Tax and on Non-Profit organizations etc.

The response on Revised Draft Direct Taxes Code can be submitted electronically on http://finmin.nic.in and emailed at directtaxescode-rev@nic.in upto 30th June, 2010


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Revised Discussion Paper