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The direct tax code was released in Aug 2009 and it was declared at that time it will replace the more than half century old Income tax Act, 1961 in a New and polished way with simple and understandable language and professional way. The main thrust was on simplification and simple language.

 

When the Code was introduced the common man was also attracted to it and the reason was very simple – “the moderate Tax rates”.  See the difference:-

 

 

PRESENT  TAX RATES

 DTC  TAX RATES

Income (Rs. Lakhs)

Existing Tax Rates

Income (Rs. Lakhs)

 DTC rates

Up to Rs.1.60

NIL

Up to Rs.1.60

NIL

Rs.1.60 to Rs. 5 .00

10%

Rs.1.60 to Rs.10.00

10%

Rs. 5.00 to Rs. 8.00

20%

Rs. 10.00 to Rs. 25.00

20%

Above Rs. 8.00

30%

Over 25.00

30%

 

At the same time in name of structural reforms the law makers introduced EET system of taxation on Investment, scheme for abolishing the deductions including the useful deduction of Housing loan interest, Assets based MAT and presumptive rent for taxation of House property and new scheme of taxation of the capital gains.  Certain other illogical provisions were introduced in the Code but in all 11 issues have been taken for consideration in revised discussion paper.

 

In the  revised discussion paper what they have done? They want to take back all these illogical and impractical provisions and now they want to Tax corporate sector on old Book profit based MAT , tax most of  the investment on EEE system again, tax the capital gain on differentiate method by distinguishing the long and short term capital gains. Further in case of tax on Non-profit organizations they now want to use again the charitable word instead of new terminology used by them and further want to resort the carry forward provisions.

 

Now what they introduced were illogical provisions but they have introduced some other Tax payers’ friendly provisions also in the Code – like moderate tax rate, abolishing the STT and enhancing the investment limit for deduction from Rs. 1.20 Lakhs to Rs. 3 lakhs. Now they want to “calibrate” all these good provisions also. This means that if they remove the illogical provisions after accepting the fact that these were impractical and want to resort some of the useful deductions then they will adjust the good provisions also.

 

On the cost of good provisions they will remove the “bad provisions” and they will enhance the tax rates from the rates which have been declared in the original Tax code, they will recalculate the investment limit if they are giving the Housing loan interest relief to tax payers and they will again think about removing the STT if they are giving some relief on the capital gain tax front so on and so forth.

 

“This is the truth of DTC”. The law makers want to introduce the “bad provisions” in the bargain of giving some well deserved relaxation to the taxpayers and this is being done in the name of “Simplification” of the tax laws. Moderate tax rate will certainly give boost to the tax collection but how much and who will give the assurance to the law makers and which international Insurance company is ready to “assure” the law makers in this respect.  So they want to adjust it with their own “Give and take” policy of taxation.

 

In the name of simple language the law makers are using the words like – grandfathered, Arm’s Length and calibrating etc. etc.

 

If this is the truth of DTC then how it will serve the purpose for which it has been issued to the Indian tax payers??

 

- CA SUDHIR HALAKAHNDI

 

 

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Category Taxpayers, Other Articles by - CA SUDHIR HALAKHANDI 



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