Direct Tax Code Bill was first introduced in Lok Sabha on August 30,2010 by Finance Minister Mr. Pranab Mukherjee. It was a freshly written white paper turned bill that aimed at introducing strong changes to the tax structure, capping all the loopholes possible and bring strong applicability of compliance in India
When Direct Tax Code (DTC) will be applicable
DTC bill has had its share of criticism post its proposal which has eventually been the reason for delay in applicability of it. Direct Tax Code was first meant to be applicable from 1st April 2011 is now proposed to be applicable from 1st April 2012. The Direct Taxes Code Bill which was introduced in Parliament last year, proposes to replace the 50-year old Income Tax Act. Our Finance Minister Mr. Pranab Mukherjee has given several statements in the current year assuring of DTC going on roll from the beginning of the Financial year 2012-13
Before finalizing, the draft was put to several invited memoranda containing views/suggestions from various Individuals/Experts/lnstitutions/Organisations interested in the bill. The Memoranda that was submitted to the Committee would form part of the records of the Committee and would be treated as ‘confidential’ and would enjoy privileges of the Committee.
Because of the changes that are proposed to be brought with DTC coming into operations, Individuals, companies, HUF/AOP/BOI are set to get certain tax benefits and also some tax norms will get stringent.
Changes in Direct Tax Code 2012 for Individual
Tax slabs will see a change when DTC gets applicable and individuals will get more respite from taxes. To sight an example: Proposed Individual exemption limit under DTC will be Rs. 2,00,000 where as in Current scenario for P.Y. 2011-12 it is at Rs 1,80,000 which means that you will not have to pay tax on further income of Rs. 20,000 and which in turn means tax saving of Rs. 2,000. Tax saving at current and proposed rate of taxability on the difference of Rs 2,00,000 and Rs 1,80,000 @10% will amount to Rs. 2000.
Changes in Direct Tax Code 2012 for Corporates
- The rate of tax for corporate taxpayers shall be 30 percent (inclusive of surcharge and cess)
- Carry forward of losses shall be allowed without any time limit.
- Due date of filing the tax return shall be 31 August following the financial year, replacing 30thSeptember.
- The rate of CDT will be 15%.
Likely retention of EET (Exempt Exempt Tax)
Another important thing and bad news for individuals is the finance ministry is likely to retain the EET (exempt-exempt-tax) principle proposed in the Direct Tax Code 2012 on the lump sum amount a salaried taxpayer will receive from his investment in savings schemes such as the Public Provident Fund and other superannuation funds. This means while the contribution and accumulation are tax-free, withdrawal will be taxed at the marginal rate of income tax.
By the look of things and policy if implemented Depending on the quantum withdrawn, almost one third of the savings could be eaten away.
With structural changes to the Direct Tax Code, DTC bill in its final stages, it looks in all certainty that the DTC bill should be out in budget 2012 and active or applicable from 1st April 2012 but as they say, there’s nothing certain in Indian politics