Examining the effectiveness of the Direct Tax Code Essay

New Delhi: A A More NRIs may fall under the revenue enhancement cyberspace if the Direct Taxes Code ( DTC ) Bill proposal to enforce a levy on their planetary income if they stay in India for more than 60 yearss in a twelvemonth is approved by Parliament.

As per the bing Income Tax Torahs, an NRI is apt to pay revenue enhancement on planetary income if he is in India in that twelvemonth for a period or periods amounting to 182 yearss.

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Furthermore, in instance an NRI resides in India for a period of 365 yearss or more over a period of four old ages prior to the assessment twelvemonth, he is besides apt to pay revenue enhancement on his planetary income.

The new DTC Bill has proposed to do an NRI apt to pay revenue enhancement on planetary income is he resides in India in a peculiar twelvemonth for a period or periods amounting to 60 yearss, down from the bing proviso of 182 yearss in the bing

Income Tax Act:

However, the present dispensation for revenue enhancement of planetary income if an NRI resides in India for 365 yearss or more over a four-year period has been retained in the proposed DTC.

The DTC hopes to stop up loopholes with the proposed alterations with the purpose of forestalling revenue enhancement equivocation through this path, said a senior Finance Ministry functionary.

In add-on, the DTC has besides removed the ‘Resident Not Ordinarily Resident ( RNOR ) ‘ class to simplify the revenue enhancement Torahs, the functionary said.

Now, there will be merely two classs, ‘Resident ‘ and ‘Non-Resident ‘ , the functionary added.

Commenting on the proposal PwC Executive Director ( Tax ) Kuldeep Kumar said, “ With this alteration, a non-resident would be at greater hazard of going an ordinary citizen and go apt to pay revenue enhancement in India as the threshold bound has been

reduced. ”

There would be liability on a occupant belonging to a state where the revenue enhancement rate is lower than India and there is a Double Tax Avoidance Agreement ( DTAA ) between both the countries.A

The non-resident would be considered a occupant if the threshold bound of stay has been exceeded for the intent of enforcing revenue enhancement.

In the instance of a occupant of a non-treaty state, which India has no DTAA with, the revenue enhancement load would be higher if he exceeds the threshold bound of stay in India, Kumar said, adding that he has to pay revenue enhancement on all the planetary income in India every bit good as the state of abode as per the

predominating revenue enhancement Torahs of that state.


A At present, India has comprehensive DTAAs with approximately 74 states, including the USA, Singapore, UK, Thailand, South Africa, Saudi Arabia, New Zealand and Australia.

Experts feel that the DTC proposal could be a damper for NRIs sing India to run into their relations or for concern promotion.A

( B ) . New Direct Tax Code: Pay less in revenue enhancements from April 2011

New Delhi: A A A windfall for taxpayers from the following fiscal twelvemonth. You will in fact have to pay less Direct revenue enhancement in every slab of income. This comes with the Cabinet uncluttering the Direct revenue enhancement codification.

The much-awaited Direct Taxes Code ( DTC ) Bill is likely to be tabled in Parliament during the on-going Monsoon session and thereafter it may be referred to a choice commission of members of both houses of Parliament.

The new commissariats under the Direct Tax Code are as follows:

Tax for income betweenA Rs.A 2 hundred thousand -A Rs.A 5 hundred thousand: 10 %

Tax for income betweenA Rs.A 5 hundred thousand -A Rs.A 10 hundred thousand: 20 %

Tax for income overA Rs.A 10 hundred thousand: 30 %

The bound for freedoms for salaried people isA Rs.A 2 hundred thousand, while that for senior citizens isA Rs.A 2.5 lakh.A

The new Code comes into consequence from April, 2011.

After the blessing of the Cabinet, the decks are cleared for postponing the statute law in the Monsoon Session of Parliament so that the new Act ushering in decreased revenue enhancement rates and freedoms may come into consequence from following financial.

When enacted, the Code will replace the antediluvian Income Tax Act and simplify the whole direct revenue enhancement government in the state.

The Code purposes at cut downing revenue enhancement rates, but spread outing the revenue enhancement base by understating freedoms.

The Finance Ministry had earlier come out with a bill of exchange on the ( Direct Tax Code ) DTC measure, some of whose commissariats drew strong unfavorable judgment from industry every bit good as the populace.

To turn to those issues, the ministry brought out the revised bill of exchange, dropping earlier proposals of taxing provident financess on backdown and imposing Minimum Alternate Tax on corporates based on their assets.

“ As of now, it is proposed to supply the EEE ( Exempt-Exempt-Exempt ) method of revenue enhancement for Government Provident Fund ( GPF ) , Public Provident Fund ( PPF ) and re cognized Provident Funds ( RPF ) … ” , the revised DTC released by the Finance Ministry said.

The revised bill of exchange besides puts pensions administered by the interim regulator PFRDA, including pension of authorities employees who were recruited since January 2004, under EEE intervention.

The first DTC bill of exchange had proposed to revenue enhancement all nest eggs strategies including provident financess at the clip of backdown conveying them under the EET ( Exempt-Exempt-Tax ) manner.

Under the EEE manner, the revenue enhancement freedom is enjoyed at all the three phases – investing, accretion and backdown.


the earlier DTC bill of exchange had proposed to cut down the corporate revenue enhancement to 25 per cent from the present 30 per cent. The revised proposal has besides made it clear that revenue enhancement inducements on lodging loans will go on. Payment on involvement on lodging loans up toA Rs.A 1.5 hundred thousand will go on. The earlier bill of exchange was soundless on lodging loans

( C ) Impact of DTC

The Direct Taxes Code is non likely to hold a major impact on residential section, harmonizing to Mr. Amit Goenka, National Director – Capital Minutess ; Knight Frank India. The DTC has suggested backdown of the revenue enhancement tax write-off on the chief constituent of place loans effectual April 1, 2012. This is aimed at conveying revenue enhancement para between assorted slabs of taxpayers. Those who have taken a place loan of more than Rs 20 hundred thousand will non be affected as the involvement constituent on that is normally adequate to measure up for the Rs 1.5 lakh involvement tax write-off. Besides, this population, which typically earns over Rs 10 hundred thousand, a twelvemonth could non claim benefit of the chief tax write-off as the cap of Rs 1 hundred thousand under Section 80CC/CCC was easy met go forthing no room for chief tax write-off. Harmonizing to the company, much of the initial stages of Avenue-71 have been booked by end-users. The township offers 2- , 3- , and 4-BHK flats with a entire salable country of 16.5 million sq.

Avenue-71 is an energy-efficient and environment-friendly township. Merely 18 per cent of the available country has been used for edifices ; themed gardens take up much of the unfastened infinites.

CREAA ‘s office-bearers

Mr. Jayant Hemdev has been elected as President of the Chennai Real Estate Agents Association ( CREAA ) for 2010-11, harmonizing to a imperativeness release from the Association.


The revenue enhancement impact will be felt by those gaining lower incomes, say, Rs 2-5 hundred thousand per annum and holding availed themselves of lower place loans of, say, Rs 10 hundred thousand. They would hold a lower revenue enhancement shield with this move. However, with a alteration of the revenue enhancement slabs, this impact would be about offset. Hence, the lodging loan industry or mortgage proprietors would non be materially affected by the move under DTC which is seen as an equaliser across income categories and purposes to convey more reason to the revenue enhancement government

( D ) Corporate India cautious in welcoming DTC measure

New DELHI: Corporate India was cautious in its response to the Direct Taxes Code measure, welcoming the proposal to raise the freedom bound for single revenue enhancement remunerators, while showing letdown that corporate revenue enhancement rates were non lowered to 25 per cent.A

The three taking industry associations, which cover about the full gamut of corporate India, said some commissariats of the DTC, tabled in Parliament today and proposed to be implemented from April 1, 2012, were non in sync with international best practices.A

“ The proposed new direct revenue enhancement codification is a welcome move, but it has non gone far plenty, ” said FICCI President Rajan Bharti Mittal.A

The industry organic structure said that mean planetary corporate revenue enhancement rate is around 25 per cent and it is imperative that in India besides have a corporate revenue enhancement rate of 25 per cent.A

“ The fringy accommodation of repairing the rate at 30 per cent is dissatisfactory, ” Mittal said.A

Further, the new income revenue enhancement slabs that have been proposed provide application of maximal revenue enhancement rate of 30 per cent at income degree of over Rs 10 hundred thousand. This is besides non a major alteration as originally the maximal rate was proposed to be levied at income degrees of over Rs 25 hundred thousand, FICCI said.A

Industry organic structure Ascham complemented the UPA authorities and said that it would pave the manner for just disposal of direct revenue enhancements and turn to the concerns of industries.A

“ The revised DTC should hold addressed concerns associating to capital additions revenue enhancement every bit good as minimal alternate revenue enhancement ( MAT ) as per expectancy of India Inc. , ” Assocham President Swati Piramal said.A

PHD Chamber said that the addition in proposed MAT on book net incomes from current rate of 18 per cent to 20 per cent will be regressive for companies. Companies have been demanding an abolishment of MAT.A


Making the revenue enhancement rates a portion of the codification itself will be an appreciable move as it would supply stableness to altering revenue enhancement rates twelvemonth after twelvemonth.

However, corporate revenue enhancement rate of 30 per cent as proposed by the codification will be of fringy alleviation for the corporates and the Chamber believes that it should be brought down to a degree of 25 per cent.

( Tocopherol ) Analysis of the Direct Tax Code 2010: Grant Thornton

The Central Board of Direct TaxesA ( CBDT ) so issued a Revised Discussion Paper in June 2010 after sing the positions of assorted concern houses, forums and the general populace.

TheA Direct Tax Code, which has now been tabled, rolls back certain controversial commissariats such as levy of Minimum Alternate Tax ( MAT ) on gross assets footing, re-introduction of Exempt-Exempt-Tax ( EET ) government in regard of revenue enhancement of nest eggs, remotion of the involvement tax write-off up to Rs.150, 000 for self-occupied belongingss, revenue enhancement of long term capital additions on sale of listed portions, In fact the revenue enhancement rates proposed on short term additions will be lower than the prevalent rate.

It has besides sought to clear up that revenue enhancement vacation of the units located inA Particular Economic ZonesA will be grandfathered. In many ways, the current Bill looks a batch more kindred to the present Income Tax Act than the first Draft of the Code released for treatment.

The rates for revenue enhancements have been reduced and slabs widened to profit both persons and corporates. These alterations though widely discussed and deliberated in media are reasonably decorative compared to the significant alterations harmonizing brushing powers to the Tax governments in the dispensation of appraisals and entreaties under the Code.

The powers of the revenue enhancement governments under the General Anti-Avoidance Rules ( GAAR ) have non been diluted and this continues to be a cause for concern though it has been stated that the commissariats are intended to be invoked merely for wilful equivocation of revenue enhancement.


The Direct Tax Code was intended to simplify the Income revenue enhancement government and cut down judicial proceeding — in its current signifier it is more voluminous than the present Income Tax Act and bodes increased judicial proceeding.

While the purpose of the jurisprudence shapers outlining this Code to convey in lucidity and simplification is commendable, to what extent the executing reflects this unity of idea remains to be seen.


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