Direct Tax

Tax Collection
Direct Taxes, now the major resource provider to the Central Government, have grown at
an average annual rate of 24 percent in the last five years and have nearly trebled from
Rs.1,32,771 crore in financial year 2004-05 to about Rs.3,78,000 crore in financial year 2009-
10, increasing its share from 4.1 percent to 6.1 percent of the Gross Domestic Product (GDP).
This tremendous growth has been made possible not only due to rationalisation of tax structure
and improvement in tax administration leading to better tax compliance, but also persistent and
unrelenting efforts of employees of the Income Tax department. File your Income Tax Return to ensure the Government has the documents to prove the same.

Tax Reforms
2. To improve compliance further, tax laws need to be simple, stable and robust; tax rates
should remain moderate; and multiplicity of tax exemptions and deductions should be gradually
phased out in order to widen and deepen the tax base. Tax administration needs to be further
toned up by appropriate use of technology on the one hand, and improving professional
competence and responsiveness of the employees on the other.
3. A major tax reform initiative has already been announced in the proposed ‘Direct Taxes
Code 2009’ to simplify, rationalize and consolidate the laws and procedure, relating to direct
taxes. Its draft is under revision, taking into consideration the areas of concern expressed by
various stakeholders, and the discussion paper will be shortly in the public domain before
introduction in Parliament in the forthcoming monsoon session. It will indeed be legislation for
the 21st century, which will witness the emergence of an economically strong and vibrant India. I
anticipate that the new code will usher in major changes in procedures and practices of Direct
Tax. The Department, therefore, needs to draw a roadmap for administratively meeting the
challenges and the changes that will be introduced by the new Code. The Human Resource
Directorate of the Department should draw up plans for training in cooperation with tax training
institutes for capacity building for implementation of the Direct Tax Code. The transition from
existing law to DTC would require completion of delegated legislation in a time bound manner.
CBDT should ensure smooth transition by planning the activities schedule well in advance.