Budget 2013: DTC still work-in-progress; to be tabled in Budget session

Moneycontrol Bureau

In his Budget speech, Finance Minister P Chidambaram today said that the Direct Tax Code will be introduced in the Budget session of Parliament, indicating that it remains a work in progress. The proposed tax code was meant to be a combination of major tax relief and removal of most tax-exempted benefits. It is expected to usher in a new tax regime of transparency and greater compliance. The Direct Tax Code was introduced in Parliament in August 2010 by current President and former Finance Minister Pranab Mukherjee. The proposed tax code was scheduled to replace the Income Tax Act of 1961 from April 2011 onwards. However, due to the controversial retrospective tax proposals, the Bill was referred to a parliamentary standing committee. In fact the idea was originally mooted by Chidambaram himself when he was the finance minister in the earlier term of the United Progressive Alliance.
The Bill then got deferred once again to April 2013 as the there was a delay in submitting the report by the committee. The DTC recommends very deep changes in taxation, which will drastically change tax-saving patterns. Unfortunately, while the new law is simpler than the existing one, it is not as simple as what was promised in the first draft of the DTC. Therefore, it will take time for tax-payers, accountants and even tax lawyers and officials to fully understand the implications of the new system. The FM also mentioned the infamous General Anti Avoidance rule, or GAAR, saying that the modified provisions will be effective from April 1, 2016.