Overview of the Direct Taxes Code

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The New Tax Code|

The New Direct Tax Code which was said to be introduced from the financial year, 2012-13 replacing the five decade old Income tax Act,1961 has the objective to make the Indian tax structure straightforward. The Income Tax Act 1961 has become very complex and virtually unintelligible to the common man by virtue of a complicated structure, numerous amendments, frequent policy changes and a multitude of judgments that gave varying interpretations to already undecipherable provisions. This complexity has not only increased the cost of compliance for the average tax payer, but also made it costly for the administration to collect tax. For the replacement of Income Tax 1961, the new Direct Tax Code which is completely new gives moderate relief to tax payers, reduce unnecessary exemptions and improve compliance for improving collections. The tax payers themselves can compute and file Income Tax Returns without the help of experts. This paper highlights the overview of the Direct Taxes Code in a nutshell.| |

Girish Kalla:IVth Year|
2/12/2013|
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Table of Contents
INTRODUCTION2
REASON FOR THE NEW TAX CODE3
HIGHLIGHTS OF DTC4
IMPACT OF THE DTC5
Impact on Investments Enjoying Tax Exemptions (Under Section 80C): 5
Impact on Insurance: 7
Impact on Equity Investment: 8
Impact on Investment in House Property: 9
DIRECT TAXES CODE-A PIPE DREAM10
Relevance of MAT:10
Wooing Foreign Investment10
Assessing the Impact:11
WEALTH TAX BENEFITS12
A MIXED BAG12
THE SALIENT FEATURES OF THE CODE IN BRIEF13
RECOMMENDATION15
CONCLUSIONS15

INTRODUCTION
The Income Tax Act was passed in 1961 and has been amended every year through the Finance Acts. A lot of things have changed since then. No doubt, many things have been implemented by modifying the IT Act from time to time. Thus, the IT Act today is very difficult to interpret, and has resulted in many disputes and court cases. Of late, Income Tax department of India has put the new proposal for direct tax in front of Government of India and Government has unveiled the draft of a brand new direct tax law, which will replace the five-decade old Income Tax Act. This is known as Direct Tax Code (DTC). The aim of New Direct Tax Code (DTC) is to make the current tax structure in India straightforward. An important part of the budget every year has been the detailing of the tax rates. However, with the introduction of the new direct tax code, the tax rates will not be part of the budget presented to Parliament every year. The new code will completely overhaul the existing tax proposals for not only Assessee (a person by whom income tax or any other sum of money is payable under the Act), but also corporate houses and foreign residents. It has been drawn with inspiration from the prevailing tax legislation in US, Canada and UK. It is a topic of interest and a matter of concern for every taxpayer in India. India wants to modernize its direct tax laws, mainly its income tax act which is now nearly 50 years old. The government needs a modern tax code in step with the needs of an economy which is now the third largest in Asia. The new tax code is expected to widen the tax base, end unnecessary exemptions, moderate tax rates and add to the government’s coffers. The direct tax code seeks to consolidate and amend the law relating to all direct taxes so as to establish an economically efficient, effective and equitable direct tax system which will facilitate voluntary compliance and help increase the tax-GDP ratio. Another objective is to reduce the scope for disputes, minimize litigation and formulate the strategy relates to checking of erosion of the tax base through tax evasion. It is designed to provide stability in the tax regime as it is based on well accepted principles of taxation and best international practices. It will eventually pave the way for a single unified taxpayer reporting system. The Philosophy behind...
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