New Direct Tax Code – To be implemented in 2011…..!!!

In the year 1991 when Mr. Manmohan Singh was presenting the budget as the finance minister had said that there is a need of new tax code which is very simple and which can be easily understood by a common man. It was not practical till Mr. P. Chidambaram was included in UPA government and was made the finance minister at the centre. It was him who stated the importance of net income tax law but he could not bring it to reality but was successful in bringing into light the change of tax code. Mr. Pranab Mukherjee on 6^th July 2009 while presenting the budget in the parliament has said that draft of new tax code will be prepared and presented to the general public in the next 45 days and on 12^th August finance minister presented a discussion paper and draft of direct tax code to the public. Not only this, Mr. P.Chidambaram was specially invited to the function and it was told that a small part of the new direct tax code has been drafted by Mr. Chidambaram himself. The direct tax code will be presented in the parliament during the upcoming winter session and is said that if everything goes as planned then it would be implemented in 2011.

The direct tax code is the modified version, which is a combination of the Income Tax Act of 1961 and Wealth tax Act 1957. This code is consolidation of all the direct taxes such as income tax, fringe benefit tax, dividend distribution tax, wealth tax etc. Direct tax code will have 16 chapters, 285 sections and 18 schedules.

The objectives for the preparation of Direct tax code

• To make the taxation process very easy by removing complexities and interpretation issues.
• There are mathematical formulas used to make the whole process easy.
• It should be easily understandable for a common man

After reading all this one question that lingers in our minds is after all why there is a need to change the whole code why can’t we just make some changes to the existing code to suit the needs of the hour? Well then let me tell you something about the existing income tax code.

• Since its implementation post independence till 2009 there have been around 25 amendments to this by finance act. Just imagine that you have a new cell and it falls on ground for 25 times and you fix it with fevi kwik, will it be the same one as it was when you had purchased it? The answer would be definitely no. hence in the same way there have been so many changes made to the IT Act that some of the experts feel that it has lost its originality.

• The economic conditions that were prevailing during drafting of IT Act are completely different to the present economic condition. Indian economy has taken a U-turn especially after the reforms of 1991.

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