Direct Tax Code
DTC (Direct Tax Code)
Income-tax was first introduced in India in 1860 by James Wilson who became India's first finance member. The present Income Tax Act was enacted in 1961, which come into force on 1st April, 1962. One of the most critical drafts of Indian statutes was Income tax Act, 1961. In order to simplify the current tax structure government of India comes with a proposal of introduction of Direct Tax Code (DTC). The new Tax draft has given Common man more than what he had expected; it is not only beneficial to individual tax payer, but also corporate houses and foreign houses.
First time, the Government introduced the Direct Taxes Code 2010 (DTC) in the Parliament on 30 August 2010. While some onerous provisions from the first draft of the DTC have been rightly dropped after representations, several proposals in the DTC are still likely to compel the corporates to rethink their existing structures and mode of conducting business.
The main taxes/duties that the Union Government is empowered to levy are:- Income Tax (except tax on agricultural income, which the State Governments can levy), Customs duties, Central Excise and Sales Tax and Service Tax. In the wake of economic reforms, the tax system in India has under gone a radical change, in line with the liberal policy. Some of the changes include:- rationalization of tax structure; progressive reduction in peak rates of customs duty ; reduction in corporate tax rate; customs duties to be aligned with ASEAN levels; introduction of value added tax ; widening of the tax base; tax laws have been simplified to ensure better compliance. Tax policy in India provides tax holidays in the form of concessions for various types of investments. These include incentives to priority sectors and to industries located in special area/ regions. Tax incentives are available also for those engaged in development of infrastructure. Taxes are the key source of Income for a nation; tax administration is one of the toughest jobs for a government and that too for a nation like India which is divided in all sort viz., geographical distribution, population distribution, income distribution etc.
The Direct Tax Code seeks to consolidate and amend the law relating to the direct taxes, which consists of Income Tax, Dividend Distribution Tax, Fringe Benefit Tax and wealth Tax so as to enable to establish an economically efficient, effective and equitable direct tax system which will facilitate voluntary compliance and help increase in the tax GDP ratio. Another objective is to reduce the scope for dispute and minimize litigation.