The government looks all set to introduce the new Direct Taxes Code in the forthcoming budget session , a government official said. Finance minister Pranab Mukherjee met Prime Minister Manmohan Singh on Tuesday to discuss the contours of the new code, billed as the major reform of the direct tax structure being undertaken by the United Progressive Alliance (UPA) government in its second tenure.
The finance ministry has also made a detailed presentation to the prime minister on the direct taxes code.
The finance ministry has already held extensive consultations with all the stakeholders on the draft code and has also initiated an exercise to make appropriate changes and prepare the relevant legislation.
The government wants to make this crucial reform politically acceptable to people before taking it to Parliament. Tuesday’s meeting is also believed to have taken up the changes that are being proposed in the draft code put out late last year.
The meeting assumes significance as the finance ministry has initiated the annual budgetary exercise and will be finalise new tax proposals.
The draft code that seeks to replace the Income-Tax Act of 1961 has evoked strong criticism from the industry, political parties and general public at large over the proposed withdrawal of several tax exemptions .
It has proposed sharply lower tax rates for both individuals and corporates but has decided to withdraw the many exemptions available under current tax law s.
The proposals that have invited the maximum criticism include taxation of savings at the time of withdrawal, called E-E-T (exempt-exempt-tax ) in technical parlance as against present E-E-E (exempt-exempt-exempt ) and a minimum alternate tax on gross assets of companies.
The UPA government has also proposed comprehensive reforms of indirect taxes through a national-level goods and services tax (GST).
While the GST, which was proposed to be rolled out from April 1, 2010, is in limbo and may get delayed by a year, the draft direct taxes code has faced resistance from most stakeholders and also from the income tax department.