Taxpayers in India can look forward to some better days in the years ahead with the government planning to adopt a new Direct Tax Code which will be called 2.0 since this is the second such exercise at changing the Income Tax Act. The previous one was made 58 years back and obviously needs a relook in the changed circumstances. The current Income Tax Act has as many as 700 clauses /sections. The Direct Tax Code 2.0 will aim at bringing this number down by a considerable margin.
Some of the highlights of the recommendations by the task force appointed by the government to suggest the appropriate changes to the Direct Tax Code are as follows:
The number of slabs in the higher income brackets may be expanded; if this recommendation is accepted, then those earning up to Rs 55 lakh per annum may find themselves paying less tax going forward.
The task force has also recommended that the taxation levels for corporate taxpayers be pegged at 25% from the current level of 30%. The recommendation says foreign companies too may be charged at the same 25%. Branch profits made by foreign firms may still be taxable.
One recommendation that the markets will possibly cheer is that the Dividend Distribution Tax be done away with and instead leave the taxation in the hands of the shareholder receiving the dividend.
The other subject that is being hotly debated these days is regarding the harassment the taxpayers face from the tax sleuths, and the task force says the existing system of assessment office may be replaced by an assessment unit with faceless interaction being emphasised. Mediation and negotiated settlement are being recommended.
Some steps towards reforming the direct tax administration have already been initiated by the Finance Ministry in recent times. The FM had said that the income tax for corporates with a turnover of Rs 400 crore is being brought down to 25% from 30%. The FM had said this would cover 99.3% of the companies in India leaving just the remaining 0.7% in the higher bracket. She had said they will also be ultimately brought down to 25% in due course.
The task force submitted its recommendations to the Finance Minister on Monday.