The Indian government has now set its sights on overhauling the 56-year-old direct tax law covering income and corporation tax as it seeks to make the Indian regime more contemporary and tailor it to current requirements. Senior government officials said the finance ministry was in the process of setting up a task force to write the new tax law, attempted in 2009, when Pranab Mukherjee released the Direct Taxes Code (DTC) prepared by P Chidambaram and his team- only to be diluted a few years later.
While the Bill was never legislated, the Finance Ministry has now begun a review, and the Prime Minister himself has made comments on the outdated nature of the law. Sources said the plan is to have the draft legislation ready by the budget before it is put out for public comments. The idea is to simplify the regime and increase the threshold for taxation. Several exemptions were to be withdrawn for companies too.
Proposing an exemption of up to Rs 3,00,000, it had suggested that the peak rate of 30 per cent tax apply to those with income above Rs 25,00,000, while those earning Rs 10,00,000-25,00,000 were to face 20 per cent levy. The idea was to simplify the regime and increase the threshold for taxation. For companies, too, several exemptions were to be withdrawn. While tax experts are in favour of a new law, the question is timing.
“The government should give a breather to India Inc since it is already dealing with several changes such as GST, the new Companies Act and the new accounting standards,” said Sudhir Kapadia, national tax leader at Ernst & Young.
