The DTC does not have a single proviso!
THE Parliamentary Standing Committee on Finance has submitted its report on the Direct Taxes Code. We had already carried the highlights of the Report on Saturday.
Some more interesting bits from the Report:
The Income Tax Bill, 1961, as introduced in Lok Sabha on 24th March 1961, had 298 serially listed sections and Four Schedules. The Income Tax Act, 19...61 as it stands today has around 656 sections and Fourteen Schedules.
On being asked as to what structural changes has the Direct Taxes Code made in the existing Direct Tax Laws in order to make it simpler and better comprehensible, the Ministry in their written replies stated as under:
(a) It simplifies the language of the legislation by the use of direct, active speech, expressing only a single point through one sub-section and rearranging the provisions into a rational structure.
(b) Currently, the rates of tax for a particular year are stipulated in the Finance Act for that relevant year. In the DTC, all rates of taxes are proposed to be prescribed in Schedules to the Code, thereby obviating the need for annual finance bill, if no change in the tax rate is proposed. Tax rates are mentioned in the Finance Act (and not in the Income-tax Act) through Part I, II and III of First Schedule and Part IV for a particular year. The tax rates in the DTC are provided under Schedules I to IV. These are: The First Schedule: Rates of Income Tax; The Second Schedule: Rate of other Taxes; The Third Schedule: Rates for deduction of tax at source in the case of resident deductee; The Fourth Schedule: Rates for deduction of tax at source in the case of non-resident deductee.
(c) TDS rates on non-salary income are spread over Part II of the First Schedule to the Finance Act. Other TDS provisions are spread over 43 sections of the Act. All these tax rates, are consolidated into the Third Schedule of the DTC and mentioned in a tabular format while TDS provisions are listed over 8 clauses.
(d) Currently in the Income Tax Act, 1961, there are 9 sections (section 115A to 115BBB) dealing with tax rates for non-residents on specific incomes. These have now been classified as special source incomes and the tax rate has been specified in Part III of the First Schedule of the DTC.
(e) Exemption provisions under the Income-tax Act [section 10)] are spread over more than 60 pages and more than 50 sub-clauses. All these provisions are mentioned in two Schedules of the DTC. The Sixth Schedule lists the income which is exempt and the Seventh Schedule lists the persons whose income is exempt.
(f) It strengthens taxation provisions for international transactions. In the context of a globalised economy, it has become necessary to provide a stable framework for taxation of international transactions and global capital. This has been reflected in the new provisions.
ON the question whether the Government has somehow failed to deliver on the basic promise of simplifying the provisions which could be comprehensible to the assessees, facilitate easier filing procedure so that the average taxpayer finds it convenient and include specific clauses to ensure accountability of tax authorities, the Ministry in their written submission stated as follows:?
The use of direct, active speech, expressing only a single point through one sub-section and re-arranging the provisions into a rational structure will assist a layperson to understand the provisions of the DTC. Easier filing procedures are an ongoing initiative of the Income tax department under which two page return forms for salaried taxpayers (Saral and now Sahaj) and for small business taxpayers (Sugam) have been introduced besides the facility for e-filing returns of income. Similar initiatives would also continue under the new legislative regime.
The DTC is simple as it uses direct, active speech, expressing only a single point through one sub-section and the provisions are structured in a rational manner.
For example,
(a) Currently, tax rates are mentioned in the Finance Act through Part I, II and III of First Schedule and Part IV for computing net agricultural income. Tax Deduction at Source (TDS) rates and provisions are spread over these Schedules and 43 sections of the Act. All these tax rates, are consolidated into 4 Schedules (Schedule I to IV) of the DTC and mentioned in a tabular format. TDS provisions are listed in 8 clauses and 2 of these Schedules.
(b) Currently in the Income Tax Act, 1961, there are 9 sections (section 115A to 115BBB) dealing with tax rates for non-residents on specific incomes. These have now been classified as special source incomes and the tax rate has been specified in Part III of the First Schedule.
(c) Currently, section 10 of the Income Tax Act, 1961, details persons whose incomes are exempt as well as nature of incomes which are exempt. It contains more than 50 clauses and some clauses are further divided into several sub-clauses. The section runs into 60 pages. All these provisions are mentioned in two Schedules of the DTC. The Sixth Schedule lists the incomes which are exempt and the Seventh Schedule lists the persons whose income is exempt. These cover 6 pages.
(d) Currently, section 10(23C) of the Income-tax Act has 16 provisos within the section which makes it difficult to read and comprehend. The DTC does not have a single proviso.
