With the mammoth task of garnering support on contentious issues like exempt exempt tax (EET) regime for savings and minimum alternative tax (MAT) still to be done, the Direct Tax Codes Bill, which will replace the archaic Income Tax Act, 1961, is not likely to be introduced in the ongoing Parliament session. According to official sources, the bill will be tabled in Parliament only in the Budget Session.
Earlier, it was being planned by the finance ministry to introduce the bill in the ongoing Winter Session. “There are issues which are yet to be resolved like the EET regime. The views are yet to be discussed. It will take some time. Then it has to go to the law ministry which will take a few weeks,” sources told to a leading newspaper.
The draft of the income tax bill was circulated in August for public debate and since, the finance ministry has held various discussions with several stakeholders. During the course of deliberations, the finance minister had identified nine areas of concern and said the concerns would be considered. The DTC proposes to bring all savings schemes under an EET taxation system, which means that people will have to pay tax at the time of withdrawal of money. At present, several savings scheme like PPF are under the EEE (Exempt Exempt Exempt) regime wherein tax exemption is enjoyed at all three stages – investment, accrual or withdrawal. The proposal has not gone down well with the stakeholders.
As regards MAT, the DTC proposes a minimum tax on the gross assets of a company instead of the book value method being adopted under the present system. However the proposal has not found favour with the industry.
Other areas include – Capital Gains Taxation in the case of non-residents; The Income Tax Act and the Double Taxation Avoidance Agreement (DTAA); General Anti-Avoidance Rule (GAAR); issues relating to effective management control and taxation of foreign companies in India; taxation of charitable organizations; taxation of income from house property in case of Self-Occupied Property (SOP) by the individual; and taxation in case of salaried class employees. The government plans to implement the new direct tax regime from 2011.