New Direct Tax Code (DTC)

‘Assessing Unit’, not ‘Assessing Officer’

To check harassment by taxmen, individual ‘assessment officers’ are likely to be replaced with ‘assessment units’ to deal with individual taxpayers. Corporate taxpayers will also have assessment units including multiple officers along with industry specialists. All communication between taxpayers and taxmen will be digital.

Uniform corporate tax:

India imposes 25 per cent corporate tax on small companies up to Rs 400 crore in revenue, 30 per cent on large domestic companies above Rs 400 crore and 40 per cent on foreign firms, plus a 4 per cent health and education surcharge on total tax payments. This is among the highest in the world. Besides, there’s a surcharge of 12 per cent for domestic companies and 5 per cent for foreign companies that boast a taxable income of over Rs 10 crore.

On 20th Sept(Effective from this current fiscal which began from April 1): * New Corporate Tax Rate: Basic 22% from 30%(provided no exemption or incentive opted for) while new manufacturing Companies it has been cut down to 15% from 25%. Effective Tax rate would be 25.17% inclusive of all surcharge and cess for domestic companies. Such companies also not required to pay MAT. Companies availing exemption or tax holidays and concessions can opt to pay tax of 22% after exemption period or tax holiday is over. * For new manufacturing companies that start production before March 2023 and incorporated on or after 1st October 2019, corporate tax rate brought down to 15% from 25%. * MAT for companies that want to use tax exemptions cut to 15% from 18.5%.

No Dividend Distribution Tax:

The new tax law might help companies with Dividend Distribution Tax(15% +12% surcharge+3% cess- Effective rate- 20.35%) as well. It might allow for dividends to be taxed only in the hands of shareholders.

Repatriation tax:

The upcoming Direct Tax Code might also propose a “branch profit tax” for foreign companies on the earnings they repatriate to their overseas parent. This will be over and above the corporate tax. For instance, the Tax Cuts and Jobs Act rolled out by the US government in 2017 encourages overseas arms of American companies to repatriate their profits to their parent companies. [ One-time repatriation tax of profits in overseas subsidiaries is taxed at 8%, 15.5% for cash. U.S. multinationals have accumulated nearly $3 trillion offshore, much of its subsidiaries in tax-haven countries. The Act may encourage companies to bring the money back to the U.S. eventually, but at these much lower rates.]

Slab Rates:

Likely to recommend introducing a 10 per cent tax rate slab for annual income between Rs 5 lakh and Rs 10 lakh followed by a 20 per cent slab for the Rs 10-20 lakh income bracket and a 30 per cent, or higher, slab for higher income levels. Lastly, the direct tax report recommended a 35 per cent income tax slab for taxpayers earning over Rs 2 crore per year. Apart from slashing income tax rates, the direct tax report also suggested dropping surcharges and cess levied on income taxes.

Vastly simplified law:

As against the 700-odd sections in the six-decade old Income-tax Act, the new Direct Tax Code will be simplified greatly, containing less than 400 sections.

Demand Order:

if a person gets a (tax) demand order on account of 20 items, the assessee has a choice that of the 20 items if he agrees on 10, he can pay the tax on only those 10 items, and get exemption from paying any interest or penalty.The items on which the assessee does not agree, he can go for a negotiated settlement. If a negotiated settlement is reached, the assessee will only have to pay the tax and interest and no penalty. If one does not agree with everything, he can partly agree and partly litigate.

Author Bio

Name: Ritu
Qualification: CA in Practice
Company: N/A
Location: Pune, Maharashtra, IN
Member Since: 04 Aug 2019 | Total Posts: 1

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February 2024