Direct Tax Code

The much talked about Direct Tax Code (DTC) bill was introduced today in the parliament by the finance minister Pranab Mukherjee. DTC bill was cleared by the cabinet and will know be subjected to the parliamentary committee for scrutiny. The scrutiny and replacement of the current tax norms is the need of the hour as India is marching to be the third largest economy. The purpose of the bill will be to modernise India’s direct tax laws, mainly its income tax act which is now nearly 50 years old, the government through the bill seeks to simply procedural laws and build a investor friendly atmosphere. It aims at phasing out multiple tax exemptions and deductions. The DTC bill proposed to raise the exemption limit on income tax from the current Rs1.6 (for male)lakh to Rs2 lakh. The bill seeks to fix corporate tax at the current 30% but without surcharge and cess. With surcharge and cess, the current tax liability on corporate comes to over 33%. The legislation also proposes to increase MAT from 18% to 20% of book profit of a company. It seeks to levy dividend distribution tax at 15%. The bill, introduced by finance ministry, seeks to widen income tax slabs to levy 10% rate on income between Rs2 lakh to 5 lakh, 20% on between Rs5-10 lakh and 30% above Rs10 lakh.

DTC bill was cleared by the cabinet and will know be subjected to the parliamentary committee for scrutiny. The legislation is expected to be taken up for discussion when the parliament reconvenes for the winter session in November. ‘The tax norm is also expected to update tax rates and administration for foreign institutional investors, for whom India is a top destination.