Fact sheet on the proposed new direct tax code
By IANSWednesday, August 12, 2009
NEW DELHI - The following are some salient features pertaining to the new Direct Tax Code proposed by the government, for which a draft and a discussion paper were released by Finance Minister Pranab Mukherjee Wednesday:
What does it seek: The Direct Tax Code will replace the existing Income Tax Act that was enacted in 1961, which had replaced an earlier legislation of 1922 enacted prior to the country’s independence.
When will it be introduced: The government intends to present the relevant bill during the winter session of parliament, after considering and incorporating, if seen fit, the opinions on its provisions from the public. The government hopes it will become law in 2011.
The main purpose: The new code will completely overhaul and simplify the existing tax proposals for not only individual tax payers, but also corporate houses and foreign residents.
How will it help: The idea is to keep the provisions simple so that even an average taxpayer can understand the language, than having to go to chartered accountants and income tax practitioners. It will also introduce the concept of tax calculators.
Administrative reforms: The new code will also recast the powers of the Central Board of Direct Taxes, induce more transparency in decision-making and tune it to tax boards of countries like the US, Canada and Britain.
What can the public do: The finance ministry has uploaded on its website - www.finmin.nic.in - the draft direct tax code, a discussion paper, a comment on the code and what rating people would like to give to it.
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August 16, 2009: 7:18 am
HON.FINANCE MINISTER Dear Sir, SUB: MODEL CODE OF DIRECT TAXES The model tax laws is always welcome as the existing Income Tax 1961 had become very old and needs change. For the ordinary middle class salaried people enhancement of tax limit @10% upto Rs.10.00 lacs is a big bonanza over and above increase of limit under section 80C from Rs.1.00 lacs to Rs.3.00 lacs.The disappointment of withdrawal of Home loan interest benefit and tax on withdrawal of PPF PF and other savings is like a putting salt on the wounds. From the angle of middle class salaried people the following points may be considered. 1.The salary employee is honest class of people in paying all types of taxes as generally TDS is deducted from the income received by them. This is not the case with business and professional people. There are few loopholes in our existing structure which are used by almost all the business and professional class to reduce their taxable income. 2.As a middle class person we are paying different taxes in the form of Municipal taxes water and electricity and other utility bill charges which are required as a basic needs of person living in a decent society. The taxes and bills in the case of Municipality like Mumbai are very high on account of high rates. The business people take the benefit of all these expenditure in P & L whereas we are deprived of the same though there is no tax upto Rs.1.60 lacs to both the type of individuals namely salaried and business/professionals. The education expenditure in the form of tution fees paid for the children’s education can be taken under section 80C. If other expenditures which are a basic necessity may be allowed as deduction from the income, this may help people to face the inflationary situation smoothly. This will also avoid payment of taxes on income which is used for paying municipal and other taxes 3.Now a days owning a vehicle two/four wheeler may not be a luxery item but a necessity for a handicapped persons like us. The benefit of depreciation cannot be claimed being a salaried people. Thus the cost of wear and tear enjoyed by the other class cannot be enjoyed by the salaried people. 4.The medical expenditure now a days is becoming costlier and for a handicapped person recurring expenses for purchase of special shoes/calipers & crunches/wheel chairs/different medicines etc are required to be done to remain fit to able to do normal duties of work. Thus the exemption of Rs.50,000/- is not sufficient and same has not increased since 2003-4. The health insurance companies are denying medical insurance cover to the physically handicapped people on the various ground 5.All the long term saving schemes to move to EET regime of taxation. Middle class people are saving under those schemes for living a peaceful retired life and for the expenditure of children education/marriage/medical expenses. As such the interest received under those scheme and blocking period under the various scheme is generally longer. Sometime it is the only bread and butter for the senior citizens whose population is increasing thanks to the medical facilities available. Hope some changes in the new direct taxes code may take place in view of above points |
PRAFULL D CHANDORKAR