Revised Discussion Paper on Direct Taxes Code released

The Government of India (GOI) had released a draft Direct Taxes Code (DTC) along with a Discussion Paper in August 2009 for public comments. Since then, a number of inputs on the proposals outlined in these documents have been received from a large number of organizations and individuals. These inputs have been examined and major issues on which various stakeholders have given their views have been identified. The GOI, today, on 15 June 2010, has released a Revised Discussion Paper (RDP) that addresses these major issues. The issues addressed in the RDP are :

1. Minimum Alternate Tax (MAT)
2. Tax treatment of savings
3. Taxation of income from employment
4. Taxation of income from house property
5. Taxation of capital gains
6. Taxation of non-profit organizations
7. Special Economic Zones – taxation of existing units
8. Concept of residence for companies incorporated outside India
9. Double Taxation Avoidance Agreement vis-a-vis domestic law
10. Wealth Tax
11. General Anti Avoidance Rule (GAAR)

Each of the chapters in the RDP describes the DTC proposal, highlights the issues and concerns and details the revised proposals in response to these concerns. This RDP is available on the following websites:

www.finmin.nic.in

www.incometaxindia.gov.in

Download Revised Discussion Paper on Direct Taxes Code from this site

The GOI has indicated that responses to the RDP are invited up to 30 June 2010.

An initial review of the revised proposals in the RDP suggest that a number of concerns expressed by various stakeholders have been given due consideration by the GOI. For example, the RDP proposes to continue with the existing system of levying MAT on book profits rather than tax on gross assets as proposed in the DTC. Similarly, the proposal on ‘treaty override’ has been limited largely to anti-avoidance cases. The proposal to introduce GAAR continues, but with more safeguards. The RDP also suggests that a Controlled Foreign Company regime may be introduced.