bhavesh projcet

8/3/2019 bhavesh projcet

1/102

2

A

COMPREHENSIVE PROJECT

ON

COMPARATIVE ANALYSIS

OFDIRECT TAX CODE AND INCOME TAX ACT

Submitted to

C K SHAH VIJAPURWALA INSTITUTE OF MANAGEMENT

IN PARTIAL FULFILLMENT OF THEREQUIREMENT OF THE AWARD FOR THE DEGREE OF

MASTER OF BUSINESS ADMINISTRATIONUnder

Gujarat Technological University

UNDER THE GUIDENCE OF

Faculty GuideMs. Ishita Ashara(Asst. Professor)

Submitted by

Sushank Kadam Chirag RupaniEnrolment No. Enrolment No.

(097050592040) (097050592012)

M.B.A. SEMESTER IV

C K Shah Vijapurwala Institute of ManagementM.B.A. PROGRAMME

Affiliated to Gujarat Technological University

Ahmedabad


2/102

3

April 2011

S u b m i t t e d b y :

S u s h a n k K a d a m

E n r o l m e n t

N o : 0 9 7 0 5 0 5 9 2 0 4 0

C h i r a g R u p a n i

E n r o l m e n t

N o : 0 9 7 0 5 0 5 9 2 0 1 2

Submitted to:

C.K.Shah Vijapurwala Institute of

Management

In partial fulfilment of the requirement of

the award for MBA under Gujarat

Technological University

Comparative Analysis

of

Direct Tax Code

&

Income Tax Act


3/102

4

PREFACE

MBA is a stepping-stone to the management carrier and to

develop good manager it is necessary that the theoretical must be

supplemented with exposure to the real environment. Theoretical

knowledge just provides the base and its not sufficient to produce a

good manager thats why practical knowledge is needed.

Therefore the research product is an essential requirement for

the student of MBA. This research project not only helps the student to

utilize his skills properly learn field realities but also provides a chance

to the organization to find out talent among the budding managers in

the very beginning.

As a student of professional course, it is quite necessary for us

to have knowledge about the practical aspect of Taxation within India

and the Direct tax code which will be levied from 2012. The project

work is to develop our ability and knowledge about the new tax code

i.e. Direct Tax Code & develop ideas in that context.

The theoretical knowledge & conceptual ideas are the

background for the career development but project work has also equal

contribution for occur. The sentence experience is the best teacher is

very true in every field & so project work during the course is arranged

to develop the skill & attitude.

It is rightly said that practice makes a man perfect. In order to

achieve excellence and success, theoretical knowledge must be

supplemented with practical knowledge and practical work i.e. is

Project work. Among the numerous interesting things concerned with

changing the understanding of management students, this project work

plays an important role in development of us.


4/102

5

ACKNOWLEDGEMENT

Completion of project has been possible only because of the

constant encouragement, goodwill, support and guidance of our peers.

The cooperation by them acted as a driving force at each stage during

the project.

We express our gratitude to MS. Ishita Ashara our project guide

for directing our project in right direction and for creating opportunistic

situation to gain knowledge. Also we thank her for helping us to guide

in making our project memorable. We are also very thankful to all

faculties for providing useful information about Project preparation,

various aspects regarding project.

We also thank to Dr. Rajesh Khajuria (Director) for giving us a

great opportunity to learn Direct Tax Code. We also thank them for

tremendous support they have provided by taking time out of their busy

schedules.

We also give a special thanks to all staff of C.K.Shah

Vijapurwala Institute of Management for keeping us on our toes

throughout the program and also helping us through their work

schedule.

We thank all our colleagues & friends for providing a goodworking atmosphere in the organization.


5/102

6

DECLARATION

We, Sushank Shantaram Kadam and Chiragkumar

Bipinchandra Rupani, hereby declare that the report for

Comprehensive Project entitled Comparative Analysis of

Direct Tax Code & Income Tax Act is a result of our own work

and our indebtedness to other work publications, references, if

any, have been duly acknowledged.

DATE: 28/04/2011

PLACE: Vadodara

Sushank S. Kadam

...............................

Chirag B. Rupani

................................


6/102

7

EXECUTIVE SUMMARY


7/102

8

EXECUTIVE SUMMARY

Direct tax code, it is said to replace the existing Income Tax Act,

1961. The Government had announced its intention to introduce a

revised and simplified Income tax Bill. If approved, the DTC shall come

into force from April 1, 2012, and shall be applicable for the financial

year 2012-13. The new tax code would be a vast improvement over

Income Tax Act 1961. To moderate tax rate and simplify tax laws, all

direct taxes including FBT and income tax would be brought under one

code. The new code is aimed at eliminating the scope of litigation as far

as possible.

Direct Tax code (DTC) 2012 proposes substantial changes to

the current direct tax legislation and is likely to have significant impact

on the business community. The business community do well to assess

the impact on their current structure and business models. Direct Tax

Code seeks to increase tax exemption on income from Rs. 1.8 lakh

to Rs. 2 lakh and fix the corporate tax at a flat 30 per cent. As per the

Bill, income from Rs. 2-5 lakh will be taxed at 10 per cent; Rs. 5-10 lakhat 20 per cent and 30 per cent thereafter.

The Direct Tax Code significantly highlighted on following points.

Income tax exemption limit proposed at Rs. 2 lakh per annum, up from

Rs. 1.8 lakh.

10 per cent tax on annual income between Rs. 2-5 lakh, 20 per cent on

between Rs. 5-10 lakh, and 30 per cent for above Rs. 10 lakh.

Tax burden at highest level will come down by Rs. 41,040 annually.

Corporate tax to remain at 30 per cent but without surcharge and cess.
http://www.fingyan.com/income-tax-act-in-india/http://www.fingyan.com/income-tax-act-in-india/http://www.fingyan.com/income-tax-act-in-india/http://www.fingyan.com/income-tax-act-in-india/


8/102

9

The Minimum Alternate Tax (MAT) rate has been increased from 18 to

20 percent.

Dividend distribution tax, tax on distributed profits of a domestic co will

be 15 percent.

Exemption for investment in approved funds and insurance schemes

proposed at Rs. 1.5 lakh annually, against Rs.1.2 lakh currently.

DTC removes most of the categories of exempted income. Equity

Mutual Funds (ELSS), Term deposits, NSC (National Savings

certificates), Unit Linked Insurance Plans (ULIPs), Long term

infrastructures bonds, house loan principal repayment, stamp duty and

registration fees on purchase of house property will lose tax benefits.

Only half of Short-term capital gains will be taxed.

For incomes arising of House Property: Deductions for Rent and

Maintenance would be reduced from 30% to 20% of the Gross Rent.

Also all interest paid on house loan for a rented house is deductible

from rent.

Tax exemption on Education loan to continue.

Tax exemption on LTA (leave travel allowance) is abolished.

Taxation of Capital gains from property sale: For sale within one year,

gain is to be added to taxable salary.

Tax on dividends: Dividends will attract 5% tax.

Medical reimbursement maximum limit for medical reimbursements has

been increased to 50,000 per year from current 15,000 limits.


9/102

10

SR NO PARTICULARSPAGE

NOPART I GENERAL INFORMATION

1 INTRODUCTION 13

2 NEED,FEATURES & OTHER ASPECT 32

a) Need for DTC 33

b) Salient Features Of DTC 35

c) Development Of DTC 37

3 TAX SLAB RATE OF DTC 39a) Tax Deductions 41

b) Post DTC Tax Liabilities & Savings 43

4 SCHEDULES TO DTC 44

5 EXPERTS VIEWS ON DTC 46

PART II PRIMARY STUDY

6 RESEARCH METHODOLOGY 52

a) Research Methodology 53b) Objective Of Study 53

7 MECHANISM OF TAXATION 54

8 COMPARATIVE STUDY 59

9 INDUSTRYWISE IMPACT ANALYSIS 65

10 EXAMPLE 80

11 RESULTS & FINDINGS 89

12 PROPOSED CHANGE IN DTC IN 2011 9313 PROS AND CONS 96

14 CONCLUSION 99

15 BIBLIOGRAPHY 102

LIST OF TABLES/GRAPHS/DIAGRAMS

TABLE OF CONTENT


10/102

11

LIST OF TABLES/GRAPHS/DIAGRAMS

SR NO. PARTICULARS TABLE PAGE

1 FEATURES OF DTC 1 32

2 TAX SALBS OF INDIVIDUALS 2 39

3 TAX SALBS OF SENIOR CITIZEN 3 40

4 COMPARISION OF TAX SLAB 4 41

5 COMPARISION OF TAX LIABILITY 5 42

6 MECHANISM OF TAXATION 6 54

7 COMPARISION OF TAX RATES 7 63

8TAX LIABILITY AT DIFFERENT

INCOMES8 82


11/102

12

PART I

GENERAL INFORMATION


12/102

13

INTRODUCTION


13/102

14

INTRODUCTION

The draft Direct Taxes Code (DTC) along with a

Discussion Paper was released in August, 2009 for public

comments which will going to enacted w.e.f.1st day of April 2012.

Since then, a number of valuable inputs on the proposals outlined

in these documents have been received from a large number of

organisations and individuals. These inputs have been examined

and the major issues on which various stakeholders have given

their views have been identified.

The existing Income Tax Act of India was enacted in 1961. It

replaced the first Income Tax Act of 1922. Thus, historically, the first

Income Tax Act was operational for almost 40 years and the existing

one has been in place for almost 48 years. Little change has been

made during this time up until the current proposals.

Over the years, Indias tax laws have become more complicated

and difficult to administer or even understand. Litigation is at an all

time high in the country with tribunals and courts swamped with tax

disputes being challenged by the taxpayers and the tax department.The present Income Tax Act contains more than 400 sections and

even more subsections, provisos and explanations. For the general

tax payer, it is virtually impossible to decipher the act.

The Indian government is seeking to initiate radical tax reforms

by proposing to enact a new Direct Tax Code which will replace the

existing Income Tax Act and come into effect on April 1, 2012 (for the

fiscal year 201213). The Direct Taxes Code Bill was placed by the

Finance Minister for public debate and discussion on August 12,

2009. The code seeks to combine the law relating to all direct taxes

(income tax and wealth tax) less than one roof. The proposed DTC

has been designed with the objective of simplification of the

provisions of tax laws by having a fresh look at the provisions of the

act. After taking into consideration the representations received on the

proposed provisions of the DTC, the government has now proposed


14/102

15

to modify the DTC and issued a revised discussion paper to this effect

on June 15. This Revised b i l l addresses these major issues.

The issues which this Revised Discussion Paper addresses are:

i. Minimum Alternate Tax (MAT) - Gross assets vis-a-vis book

profit.

ii. Tax treatment of savings - Exempt Exempt Tax (EET) vis-a-vis

Exempt Exempt Exempt (EEE) basis.

iii. Taxation of i nc om e fr om emp l oy me nt - Ret ir emen t

benefits and perquisites.

iv. Taxation of income from house property.

v. Taxation of capital gains

vi. Taxation of non-profit organisations

vii. Special Economic Zones Taxation of existing units

viii. Concept of Residence in the case of a company incorporated

outside India.

ix. Double Taxation Avoidance Agreement (DTAA) vis-a-vis

domestic law. x. Wealth Tax.

X. General Anti Avoidance Rule (GAAR).

The proposals in this revised bill would lead to a reduction in the

tax base proposed in the DTC. The indicative tax slabs and tax rates

and monetary limits for exemptions and deductions proposed in the DTC

will, therefore, be calibrated accordingly while finalising the legislation.


15/102

16

MINIMUM ALTERNATE TAX-GROSS ASSET VIS--VIS BOOK

PROFIT

The bill includes discussion on the DTC deals with Minimum

Alternate Tax (MAT). As stated in the /nm

Discussion, a company would ordinarily be liable to tax in respect

of its total income. However, owing to tax incentives, the liability on

total income, in many cases, has been found to be extremely

low or even zero. Internationally, a variety of economic bases

and methods are used to calculate presumptive income so as to

overcome the problem of excessive tax incentives. These

presumptions could be based on net wealth, value of assets used in

business or gross receipts of the enterprise.

It has been proposed in the DTC that the "value of gross

assets" will be the aggregate of the value of gross block of fixed

assets of the company, the value of capital works in progress of

the company, the book value of all other assets of the company,

as on the last day of the relevant financial year, as reduced

by the accumulated depreciation on the value of the gross block of

the fixed assets and the debit balance of the profit and loss

account if included in the book value of other assets. The rate of

MAT will be 0.25 per cent of the value of gross assets in the

case of banking companies and 2 per cent of the value of gross

assets in the case of all other companies. The MAT will be a final

tax.

TAX TREATMENT OF SAVINGS EXEMPT EXEMPT TAX (EET)VIS--VIS EXEMPT EXEMPT EXEMPT (EEE) BASIS

This DTC bill proposes the Exempt-Exempt-Taxation (EET)

method of taxation for savings. Under this method, the

contributions towards certain savings are deductible from income

(this represents the first 'E' under the EET method), the

accumulation/accretions are exempt (free from any tax incidence)

till such time as they remain invested (this represents the second


16/102

17

E under the EET method) and all withdrawals at any time are

subject to tax at the applicable marginal rate of tax (this represents

the T under the EET method).

Based on the EET principle, the Code provides for deduction

in respect of aggregate contributions up to a limit of (Rs.300000)

three hundred thousand rupees (both by the employee and the

employer) to any account maintained with any permitted savings

intermediary, during the financial year. This account will have to be

maintained with any permitted savings intermediary in accordance

with the scheme framed and prescribed by the Central

Government. The permitted savings intermediaries will be approved

provident funds, approved superannuation funds, life insurer and

New Pension System Trust.

It has been represented that in India, in the absence of a

universal social security system, the proposed EET method of

taxation of permitted savings would be harsh. Tax payers require

some flexibility in making withdrawals in lump sum without being

subjected to tax. People may need lump sum funds on retirement

for various family obligations. Requests have therefore been made

for continuation of Exempt Exempt Exempt (EEE) method of tax

treatment of investments. Alternatively, the application of EET

should be restricted to new savings instruments after the date

from which the DTC comes into effect, and it should not apply to

existing saving instruments.

Therefore, as of now, it is proposed to provide the EEE method

of taxation for Government Provident Fund (GPF), Public

Provident Fund (PPF) and Recognised Provident Funds (RPFs)

and the pension scheme administered by Pension Fund

Regulatory and Development Authority. Approved pure life

insurance products and annuity schemes will also be subject to

EEE method of tax treatment. In order to achieve the objective of

long term savings, the rules for contribution as well as withdrawal

will be harmonised and made uniform so that such savings are


17/102

18

actually made and utilised by the taxpayer for the long term.

Investments made, before the date of commencement of the

DTC, in instruments which enjoy EEE method of taxation under

the current law, would continue to be eligible for EEE method of

tax treatment for the full duration of the financial instrument.

TAXATION OF INCOME FROM EMPLOYMENT RETIREMENT

BENEFITS AND PERQUISITES

Direct Taxes Code (DTC) deals with computation of income

taxable under the head Income from employment. It provides

that Income from employment will be gross salary as reduced

by the aggregate amount of permissible deductions.

Now the term salary is defined to include the value of

perquisites, profits in lieu of salary, amount received on voluntary

retirement or termination, leave salary, gratuity and any annuity,

pension or any commutation thereof. Contributions made by the

employer to an approved superannuation fund, provident fund, life

insurer and New Pension System Trust is considered as salary.

Deductions from gross salary are allowed for compensation

received under voluntary retirement scheme, amount of gratuity

received on retirement or death and amount received on

commutation of pension to the extent such amounts are

deposited in a Retirement Benefits Account. Thus, retirement

benefits will be exempt only if deposited in Retirement Benefits

Account and will be subject to tax on withdrawal from such account.

Under the DTC, salary will include, inter-alia, the

following:-

(a) The value of rent free or concessional, accommodation

provided by the employer irrespective of whether the

employer is a Government or any other person;

(b) The value of any leaves travel concession;

(c) The amount received on encashment of unveiled earned


18/102

19

leave on retirement or otherwise;

(d) Medical reimbursement; and

(e) the value of free or concessional medical treatment paid

for, or provided by, the employer.

TAXATION OF INCOME FROM HOUSE PROPERTY

The Direct Taxes Code (DTC) deals with the computation of

income from house property. Income from house property is one

of the five heads under which accruals or receipts relating to

ordinary sources of income are to be classified. The bill states

that income from house property, which is not occupied for the

purpose of any business or profession by its owner, is to be taxed

under this head. The bill proposes a new scheme for computation

of income from house property in the draft DTC, the salient features

of which are:

(a) Income from house property shall be the gross rent less

specified deductions.

(b) Gross rent will be higher of (i) the amount of contractual

rent for the financial year; and (ii) the presumptive rent

calculated at six per cent per annum of the rateable value

fixed by the local authority. However, in a case where no

rateable value has been fixed, six per cent shall be calculated

with reference to the cost of construction or acquisition of

the property. If the property is acquired during the financial

year, the presumptive rent shall be calculated for the

proportionate period of that financial year.

(c) The advance rent will be taxed only in the financial year to

which it relates.

(d) The gross rent of one self-occupied property will be deemed

to be nil, as at present. In addition, the gross rent of any one

palace in the occupation of a ruler will also be deemed to be

nil, as at present.

(e) The following deductions will be admissible against the gross


19/102

20

rent:-

(i) Amount of taxes levied by a local authority and tax on

services, if actually paid.

(ii) 20% of the gross rent towards repairs and maintenance

as against thirty per cent at present.

(iii) Amount of any interest payable on capital borrowed

for the purposes of acquiring, constructing, repairing,

renewing or re- constructing the property.

(f) In the case of a self-occupied property where the gross

rent is deemed to be nil, no deduction for taxes or interest will

be allowed.

(g) The income from property shall include income from the letting

of any buildings along with any machinery, plant, furniture or

any other facility if the letting of such building is inseparable

from the letting of the machinery, plant, furniture or facility.

TAXATION OF CAPITAL GAINS

The Direct Taxes Code (DTC) provides that income from

transactions in all investment assets will be computed under the

head "Capital gains. The DTC provides that gains (losses) arising

from the transfer of investment assets will be treated as capital gains

(losses). These gains (losses) will be included in the total income of

the financial year in which the investment asset is transferred. The

capital gains will be subjected to tax at the rate of 30% in the case of

non-residents and in the case of residents at the applicable marginalrate.

Under the Code, the current distinction between short-term

investment asset and long-term investment asset on the basis of

the length of holding of the asset will be eliminated. In general, the

capital gains will be equal to the full consideration from the transfer

of the investment asset minus the cost of acquisition of the asset,

cost of improvement thereof and transfer-related incidentalexpenses. However, in the case of a capital asset which is


20/102

21

transferred anytime after one year from the end of the financial year

in which it is acquired, the cost of acquisition and cost of

improvement will be indexed to reduce the inflationary gains.

The capital gains from all investment assets will be aggregated to

arrive at the total amount of current income from capital gains. This

will, then, be aggregated with unabsorbed capital loss at the end

of the immediate preceding financial year (unabsorbed preceding

year capital loss) to arrive at the total amount of income under the

head Capital gains.

The DTC proposes to abolish Securities Transaction Tax. Therefore,

all capital gains (loss) arising from the transfer of equity shares in a

company or units of an equity oriented fund will form part of the

computation process described above. The cost of acquisition is

generally with reference to the value of the asset on the base date or,

if the asset is acquired after such date, the cost at which the asset is

acquired. The base date will now be shifted from 1.4.1981 to

1.4.2000. As a result, all unrealized capital gains due to

appreciation during the period from1.4.1981 to 31.3.2000 will not

be liable to tax as the assesses will have an option to take the cost of

acquisition for these assets at the price prevailing as on 1.4.2000.

TAXATION OF NON-PROFIT ORGANISATIONS

The Direct Taxes Code (DTC) deals with taxation of non-

profit organizations. The Code uses the phrase permitted

welfare activities instead of the phrase "charitable purpose"

used in the current legislation to define the activities to be

pursued by these organisations. Permitted welfare activities has

been defined to mean any activity involving relief of the poor,

advancement of education, provision of medical relief,

preservation of environment, preservation of monuments or places

or objects of artistic or historic interest and the advancement of any

other object of general public utility. Advancement of any other

object of general public utility will not include any activity in the


21/102

22

nature of trade, commerce or business, or any activity of

rendering any service in relation to any trade, commerce or

business, for a fee or for any other consideration, irrespective of

the nature of use, application or retention of the income from such

activity.

The Discussion Paper mentions that while trusts and

institutions established for charitable purposes have generally

enjoyed tax exemptions, the following shortcomings have been

observed in the exemption regime:-

(a) The exemption regime is complex, overlapping and

dissimilar since it varies across institutions based on their

activities.

(b) The provisions fail to meet the test of efficiency as they

provide different conditions for institutions carrying on similar

activities.

(c) The provisions also do not meet the test of equity as the

compliance cost for an institution varies depending upon the

provision of law under which the exemption is granted.

(d) The concept of income of such an institution has been the

subject matter of litigation. Should gross receipts of the

institution or the net income of the institution be reckoned as

the income? This question has been the subject matter of

extensive debate.

(e) A vexed issue is whether the institution should be

allowed to accumulate income not applied or utilized for

charitable purposes and how the accumulation should be

treated.


22/102

23

(f) There is unending dispute whether a business is incidental to

attainment of the objectives of the institution or not, since

the income from incidental business is exempt from tax.

The DTC proposes a new tax regime for all trusts and institutions

carrying on charitable activities. The salient features of the new regime

are as under:-

(a) An organization shall be treated as a non-profit

organization if,-

(i) it is established for the benefit of the general

public;

(ii) it is established for carrying on permitted welfare

activities;

(iii) it is not established for the benefit of any particular

caste;

(iv) it is not established for the benefit of any of its

members;

(v) it actually carries on the permitted welfare activities

during the financial year and the beneficiaries of

the activities are the general public;

(vi) it does not intend to apply its surplus or other income

or use its assets or incur expenditure, directly or

indirectly, for the benefit of any interested person;

(vii) Any expenditure by the organisation does not ensure,

directly or indirectly, for the benefit of any interested

person;

(viii) the funds or assets of the organisation are not used or

applied, or deemed to have been used or applied,

directly or indirectly, for the benefit of any interested

person;

(ix) The surplus, if any, accruing from its permitted activities

does not ensure, directly or indirectly, for the benefit


23/102

24

of any interested person;

(x) The funds or the assets of the non-profit organisation

are not invested or held in any associate concern or in

any prescribed form or mode;

(xi) It maintains such books of account and in such manner,

as may be prescribed;

(xii) It obtains a report of audit in the prescribed form

from an accountant before the due date of filing

of the return in respect of the accounts of the business,

if any, carried on by it; and the accounts relating to the

permitted welfare activities and

(xiii) It is registered with the Income-tax Department under the

Code.

(b) The tax liability of a non-profit organisation shall be 15 per

cent of the aggregate of the following:-

(I) the amount of surplus generated from the permitted

welfare activities; and

(II) the amount of capital gains arising on transfer of an

investment asset, being a financial asset;

Surplus generated from permitted welfare activities;

The amount of surplus generated from the permitted welfare

activities shall be the gross receipts as reduced by the outgoings.

The gross receipts shall be the aggregate of the following:-

(i) The amount of voluntary contributions received during

the financial year;

(ii) Any rent received in respect of a property consisting of

any buildings or lands appurtenant thereto;

(iii) The amount of any income derived from a business

which is incidental to any of the permitted welfare

activities;

(iv) Full value of the consideration received from the


24/102

25

transfer of any investment asset, not being a financial

asset;

(v) Full value of the consideration received from the

transfer of any business capital asset of a

business incidental to its permitted welfare activities;

(vi) The amount of any income received from any

investment of its funds or assets; and

(vii) All other incomings, realizations, proceeds, donations

or subscriptions received from any source.

The amount of outgoings shall be the aggregate of-

(i) Voluntary contributions received during the financial

year by the non- profit organisation made with a

specific direction that they shall form part of the

corpus of the non-profit organisation;

(ii) The amount actually paid during the financial year for

any expenditure, excluding capital expenditure, incurred

wholly and exclusively for earning or obtaining any

"gross receipts";

(iii) The amount actually paid during the financial year for

any expenditure, excluding capital expenditure, on the

permitted welfare activities;

(iv) The amount of capital expenditure actually paid during

the financial year in relation to-

i. Any business capital asset of a business

incidental to any of the permitted welfare activities;

or

ii. Any investment asset, not being a financial asset.

(v) Any amount actually paid during the financial year to

any other non- profit organisation engaged in a similar

permitted welfare activity;

(vi) Any amount applied outside India during the

financial year if the amount is applied for an activity


25/102

26

which tends to promote international welfare in which

India is interested and the non-profit organisation is

notified by the Central Government in this behalf.

(c) The surplus generated from permitted welfare activities

be determined on the basis of cash system of

accounting.

(d) Capital gains arising on the transfer of an investment

asset, being a financial asset, will be computed in

accordance with the provisions under the head

"Capital gains".

(e) A non-profit organisation will be prohibited from any

of its funds or holding any of its asset in any associate

concern or in any prescribed form or mode.

(f) It will be mandatory for every non-profit

organisation to register with the Income-tax

Department by making an application to the Chief

Commissioner or Commissioner concerned. The

registration, once granted, shall be valid from the

financial year in which the application is made till it is

withdrawn.

(g) The donations made to a non-profit organisation will

be eligible for deduction in the hands of the donor at the

appropriate rates.

(h) The income of any trust or institution

recognised/registered under the religious endowment

Acts of the Central Government or the

State Governments shall be fully exempt from income-

tax. However, donations to such trusts or

institutions will not enjoy any deduction in the hands

of the donor.


26/102

27

SPECIAL ECONOMIC ZONES TAXATION OF EXISTING

UNITS

The Direct Taxes Code (DTC) deals with taxation of non-profit

organizations. The Code uses the phrase permitted welfare

activities instead of the phrase "charitable purpose" used in the

current legislation to define the activities to be pursued by these

organisations. Permitted welfare activities has been defined to

mean any activity involving relief of the poor, advancement of

education, provision of medical relief, preservation of environment,

preservation of monuments or places or objects of artistic or

historic interest and the advancement of any other object of

general public utility. Advancement of any other object of general

public utility will not include any activity in the nature of trade,

commerce or business, or any activity of rendering any service in

relation to any trade, commerce or business, for a fee or for any

other consideration, irrespective of the nature of use, application or

retention of the income from such activity.

It has been pointed out that while the current profit linked

deductions available to developers of Special Economic Zones

(SEZs) have been protected for their unexpired period in the DTC,

there is no mention of grandfathering of these profit linked

deductions in the case of units operating in these SEZs.

CONCEPT OF RESIDENCE IN THE CASE OF A COMPANY

INCORPORATED OUTSIDE INDIA

Direct Taxes Code (DTC) discusses the test of

residence of a person for tax purposes. The tax residence of

companies (that is, where companies are established or carry on

business) is usually based on either place of incorporation (legal

seat), location of management (real seat) or a combination of the

two. The DTC provides that a company incorporated in India will

always be treated as resident in India. However, a company

incorporated abroad (foreign company) can either be resident or


27/102

28

non-resident in India. It has been proposed in the DTC that a

foreign company will be treated as resident in India if, at any time

in the financial year, the control and management of its affairs is

situated wholly or partly in India (it need not be wholly situated in

India, as at present).

It has been pointed out that under the new test for

determining residence in the DTC, a foreign company whose

control and management is partly in India will be treated as a

resident of India and thus liable for taxation in India on its

global income. The word partly used in the DTC sets a very low

threshold for regarding a foreign company as a resident in India.

Apprehensions have been expressed that it could lead to a foreign

multi-national company being held as resident in India on the

ground that some activity like a single meeting of the Board of

Directors is held in India. Also, a foreign company owned by

residents in India could be held to be resident in India as part of

the control of such company may be in India. It has been

represented that this will result in uncertainty in taxation and will

impact foreign direct investment into India. Modification of the

phrase wholly or partly has therefore been suggested.

The bill also proposed that a company incorporated outside

India will be treated as resident in India if its place of effective

management is situated in India. The term will have the same

meaning as currently laid down in the part of wealth tax to the

Code as under:

Place of effective management of the company means-

(i) The place where the board of directors of the company or its

executive directors, as the case may be, make their decisions;

or

(ii) In a case where the board of directors routinely approve the

commercial and strategic decisions made by the executive

directors or officers of the company, the place where such

executive directors or officers of the company perform their


28/102

29

functions.

DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA) VIS--VIS

DOMESTIC LAW

The bill also discussed about relief from double taxation.

Ordinarily, countries f o l l o w both residence-based taxation and

source-based taxation. However, if two countries tax the same

income, one based on the principle of residence and the other based

on the principle of source, it could lead to double taxation of the

same income. Hence, countries have agreed on certain principles to

avoid double taxation and accordingly, entered into Double

Taxation Avoidance Agreements (DTAA).

DTAA provides for certainty on how and when will income of a

particular kind be taxed and by which contracting State. The taxation

right of each State is defined. If one State has the right to tax a certain

income, provision is made for the other State to give tax credit or

exemption to that income in order to avoid double taxation. The DTC

provides that neither a DTAA nor the Code shall have a

preferential status by reason of its being a treaty or law. In the

case of a conflict between the provisions of a treaty and the

provisions of the Code, the one that is later in point of time shall

prevail.

The current provisions of the Income-tax Act provide that

between the domestic law and relevant DTAA, the one which is

more beneficial to the taxpayer will apply. However, this is subject

to specific exceptions e.g., the taxation of a foreign company at a

rate higher than that of a domestic company is not considered as a

less favourable charge in respect of the foreign company. Similarly it is

proposed to provide that between the domestic law and relevant

DTAA, the one which is more beneficial to the taxpayer shall apply.

However, DTAA will not have preferential status over the domestic law

in the following circumstances:-

o When the General Anti Avoidance Rule is invoked, or


29/102

30

o When Controlled Foreign Corporation provisions are invoked or

o When Branch Profits Tax is levied.

WEALTH TAX

The Direct Taxes Code (DTC) deals with the levy of wealth

tax. Under the DTC, wealth-tax will be payable by an individual,

HUF and private discretionary trusts. It will be levied on net wealth

on the valuation date i.e. the last day of the financial year. Net

wealth is defined as assets chargeable to wealth-tax as reduced

by the debt owed in respect of such assets. Assets chargeable to

wealth-tax shall mean all assets, including financial assets and

deemed assets, as reduced by exempted assets. Exempted

assets include stock in trade, a single residential house or a plot

of land etc. The net wealth of an individual or HUF in excess of

Rupees fifty crore shal l be chargeable to wealth-tax at the rate of

0.25 per cent.

GENERAL ANTI-AVOIDANCE RULE

The Direct Taxes Code (DTC) deals with the provisions of the

General Anti Avoidance Rule (GAAR). The GAAR provisions

apply where a taxpayer has entered into an arrangement, the

main purpose of which is to obtain a tax benefit and such

arrangement is entered or carried on in a manner not normally

employed for bona- fide business purposes or is not at arms length

or abuses the provisions of the DTC or lacks economic

substance. The Assessing Officer in accordance with the

directions of Commissioner of Income Tax may in such cases

determine the tax consequences for the assesses by disregarding

the arrangement.

Under the Code, the power to invoke GAAR is

bestowed upon the Commissioner of Income- tax. For this

purposes the Code empowers him to call for such information as


30/102

31

may be necessary. He is also required to follow the principles of

natural justice before declaring an arrangement as an

impermissible avoidance arrangement. He will determine the tax

consequences of such impermissible avoidance arrangement and

issue necessary directions to the Assessing Officer for making

appropriate adjustments. The directions issued by him will be

binding on the Assessing Officer.


31/102

32

NEED, FEATURES & OTHER

SIGNIFICANT ASPECTS OF DTC


32/102

33

NEED FOR DTC

The rationale for introducing DTC is to increase the efficiency and

equity of the tax system by eliminating the plethora of tax exemptions

or subsidies that create distortions. Its major policies include reduction

in the tax rates to bring more people and companies under the tax net.

India wants to modernize its direct tax laws, mainly its income tax act

which is now nearly 50 years old. The government wants a modern tax

code in step with the needs of an economy which is now the third

largest in Asia.

The new tax code is expected to widen the tax base, end unnecessary

exemptions, moderate tax rates and add to the government's funds.

Diagram: 1 Features of DTC


33/102

34

SOURCE:

(http://www.google.co.in/imgres?imgurl=http://www.indianmba.com/Faculty_Column/FC1213/Fc1

213.jpg&imgrefurl=http://www.indianmba.com/Faculty_Column/FC1213/fc1213.html&usg=__ciY2C

SVQqzzSnUlBv9PI2L2YjM4=&h=303&w=550&sz=35&hl=en&start=27&zoom=1&tbnid=mJGH0odCiE

wRTM:&tbnh=91&tbnw=165&ei=gvi4TbT1Mo2wvgOCuLWiAw&prev=/search%3Fq%3Dfeatures%2B

of%2Bdirect%2Btax%2Bcode%26hl%3Den%26biw%3D1280%26bih%3D709%26gbv%3D2%26tbm%3

Disch0%2C300&itbs=1&iact=hc&vpx=711&vpy=435&dur=228&hovh=119&hovw=217&tx=93&ty=90

&page=2&ndsp=27&ved=1t:429,r:4,s:27&biw=1280&bih=709)

KEY MESSAGES OF THE DTC

Thrust of the DTC

o Improve efficiency of tax system by eliminating distortions in the

tax structure

o Simplify the complex structure of the Act, that is

incomprehensible to average taxpayer

o Introduce moderate levels of taxation and expand the tax base

o Simplify the language to enable better comprehension

o Remove ambiguity to foster voluntary compliance

o Provide stability In the tax regime based on well accepted

principles of taxation and best international practices
http://www.google.co.in/imgres?imgurl=http://www.indianmba.com/Faculty_Column/FC1213/Fc1213.jpg&imgrefurl=http://www.indianmba.com/Faculty_Column/FC1213/fc1213.html&usg=__ciY2CSVQqzzSnUlBv9PI2L2YjM4=&h=303&w=550&sz=35&hl=en&start=27&zoom=1&tbnid=mJGH0odCiEwRTM:&tbnh=91&tbnw=165&ei=gvi4TbT1Mo2wvgOCuLWiAw&prev=/search%3Fq%3Dfeatures%2Bof%2Bdirect%2Btax%2Bcode%26hl%3Den%26biw%3D1280%26bih%3D709%26gbv%3D2%26tbm%3Disch0%2C300&itbs=1&iact=hc&vpx=711&vpy=435&dur=228&hovh=119&hovw=217&tx=93&ty=90&page=2&ndsp=27&ved=1t:429,r:4,s:27&biw=1280&bih=709http://www.google.co.in/imgres?imgurl=http://www.indianmba.com/Faculty_Column/FC1213/Fc1213.jpg&imgrefurl=http://www.indianmba.com/Faculty_Column/FC1213/fc1213.html&usg=__ciY2CSVQqzzSnUlBv9PI2L2YjM4=&h=303&w=550&sz=35&hl=en&start=27&zoom=1&tbnid=mJGH0odCiEwRTM:&tbnh=91&tbnw=165&ei=gvi4TbT1Mo2wvgOCuLWiAw&prev=/search%3Fq%3Dfeatures%2Bof%2Bdirect%2Btax%2Bcode%26hl%3Den%26biw%3D1280%26bih%3D709%26gbv%3D2%26tbm%3Disch0%2C300&itbs=1&iact=hc&vpx=711&vpy=435&dur=228&hovh=119&hovw=217&tx=93&ty=90&page=2&ndsp=27&ved=1t:429,r:4,s:27&biw=1280&bih=709http://www.google.co.in/imgres?imgurl=http://www.indianmba.com/Faculty_Column/FC1213/Fc1213.jpg&imgrefurl=http://www.indianmba.com/Faculty_Column/FC1213/fc1213.html&usg=__ciY2CSVQqzzSnUlBv9PI2L2YjM4=&h=303&w=550&sz=35&hl=en&start=27&zoom=1&tbnid=mJGH0odCiEwRTM:&tbnh=91&tbnw=165&ei=gvi4TbT1Mo2wvgOCuLWiAw&prev=/search%3Fq%3Dfeatures%2Bof%2Bdirect%2Btax%2Bcode%26hl%3Den%26biw%3D1280%26bih%3D709%26gbv%3D2%26tbm%3Disch0%2C300&itbs=1&iact=hc&vpx=711&vpy=435&dur=228&hovh=119&hovw=217&tx=93&ty=90&page=2&ndsp=27&ved=1t:429,r:4,s:27&biw=1280&bih=709http://www.google.co.in/imgres?imgurl=http://www.indianmba.com/Faculty_Column/FC1213/Fc1213.jpg&imgrefurl=http://www.indianmba.com/Faculty_Column/FC1213/fc1213.html&usg=__ciY2CSVQqzzSnUlBv9PI2L2YjM4=&h=303&w=550&sz=35&hl=en&start=27&zoom=1&tbnid=mJGH0odCiEwRTM:&tbnh=91&tbnw=165&ei=gvi4TbT1Mo2wvgOCuLWiAw&prev=/search%3Fq%3Dfeatures%2Bof%2Bdirect%2Btax%2Bcode%26hl%3Den%26biw%3D1280%26bih%3D709%26gbv%3D2%26tbm%3Disch0%2C300&itbs=1&iact=hc&vpx=711&vpy=435&dur=228&hovh=119&hovw=217&tx=93&ty=90&page=2&ndsp=27&ved=1t:429,r:4,s:27&biw=1280&bih=709http://www.google.co.in/imgres?imgurl=http://www.indianmba.com/Faculty_Column/FC1213/Fc1213.jpg&imgrefurl=http://www.indianmba.com/Faculty_Column/FC1213/fc1213.html&usg=__ciY2CSVQqzzSnUlBv9PI2L2YjM4=&h=303&w=550&sz=35&hl=en&start=27&zoom=1&tbnid=mJGH0odCiEwRTM:&tbnh=91&tbnw=165&ei=gvi4TbT1Mo2wvgOCuLWiAw&prev=/search%3Fq%3Dfeatures%2Bof%2Bdirect%2Btax%2Bcode%26hl%3Den%26biw%3D1280%26bih%3D709%26gbv%3D2%26tbm%3Disch0%2C300&itbs=1&iact=hc&vpx=711&vpy=435&dur=228&hovh=119&hovw=217&tx=93&ty=90&page=2&ndsp=27&ved=1t:429,r:4,s:27&biw=1280&bih=709http://www.google.co.in/imgres?imgurl=http://www.indianmba.com/Faculty_Column/FC1213/Fc1213.jpg&imgrefurl=http://www.indianmba.com/Faculty_Column/FC1213/fc1213.html&usg=__ciY2CSVQqzzSnUlBv9PI2L2YjM4=&h=303&w=550&sz=35&hl=en&start=27&zoom=1&tbnid=mJGH0odCiEwRTM:&tbnh=91&tbnw=165&ei=gvi4TbT1Mo2wvgOCuLWiAw&prev=/search%3Fq%3Dfeatures%2Bof%2Bdirect%2Btax%2Bcode%26hl%3Den%26biw%3D1280%26bih%3D709%26gbv%3D2%26tbm%3Disch0%2C300&itbs=1&iact=hc&vpx=711&vpy=435&dur=228&hovh=119&hovw=217&tx=93&ty=90&page=2&ndsp=27&ved=1t:429,r:4,s:27&biw=1280&bih=709http://www.google.co.in/imgres?imgurl=http://www.indianmba.com/Faculty_Column/FC1213/Fc1213.jpg&imgrefurl=http://www.indianmba.com/Faculty_Column/FC1213/fc1213.html&usg=__ciY2CSVQqzzSnUlBv9PI2L2YjM4=&h=303&w=550&sz=35&hl=en&start=27&zoom=1&tbnid=mJGH0odCiEwRTM:&tbnh=91&tbnw=165&ei=gvi4TbT1Mo2wvgOCuLWiAw&prev=/search%3Fq%3Dfeatures%2Bof%2Bdirect%2Btax%2Bcode%26hl%3Den%26biw%3D1280%26bih%3D709%26gbv%3D2%26tbm%3Disch0%2C300&itbs=1&iact=hc&vpx=711&vpy=435&dur=228&hovh=119&hovw=217&tx=93&ty=90&page=2&ndsp=27&ved=1t:429,r:4,s:27&biw=1280&bih=709http://www.google.co.in/imgres?imgurl=http://www.indianmba.com/Faculty_Column/FC1213/Fc1213.jpg&imgrefurl=http://www.indianmba.com/Faculty_Column/FC1213/fc1213.html&usg=__ciY2CSVQqzzSnUlBv9PI2L2YjM4=&h=303&w=550&sz=35&hl=en&start=27&zoom=1&tbnid=mJGH0odCiEwRTM:&tbnh=91&tbnw=165&ei=gvi4TbT1Mo2wvgOCuLWiAw&prev=/search%3Fq%3Dfeatures%2Bof%2Bdirect%2Btax%2Bcode%26hl%3Den%26biw%3D1280%26bih%3D709%26gbv%3D2%26tbm%3Disch0%2C300&itbs=1&iact=hc&vpx=711&vpy=435&dur=228&hovh=119&hovw=217&tx=93&ty=90&page=2&ndsp=27&ved=1t:429,r:4,s:27&biw=1280&bih=709http://www.google.co.in/imgres?imgurl=http://www.indianmba.com/Faculty_Column/FC1213/Fc1213.jpg&imgrefurl=http://www.indianmba.com/Faculty_Column/FC1213/fc1213.html&usg=__ciY2CSVQqzzSnUlBv9PI2L2YjM4=&h=303&w=550&sz=35&hl=en&start=27&zoom=1&tbnid=mJGH0odCiEwRTM:&tbnh=91&tbnw=165&ei=gvi4TbT1Mo2wvgOCuLWiAw&prev=/search%3Fq%3Dfeatures%2Bof%2Bdirect%2Btax%2Bcode%26hl%3Den%26biw%3D1280%26bih%3D709%26gbv%3D2%26tbm%3Disch0%2C300&itbs=1&iact=hc&vpx=711&vpy=435&dur=228&hovh=119&hovw=217&tx=93&ty=90&page=2&ndsp=27&ved=1t:429,r:4,s:27&biw=1280&bih=709http://www.google.co.in/imgres?imgurl=http://www.indianmba.com/Faculty_Column/FC1213/Fc1213.jpg&imgrefurl=http://www.indianmba.com/Faculty_Column/FC1213/fc1213.html&usg=__ciY2CSVQqzzSnUlBv9PI2L2YjM4=&h=303&w=550&sz=35&hl=en&start=27&zoom=1&tbnid=mJGH0odCiEwRTM:&tbnh=91&tbnw=165&ei=gvi4TbT1Mo2wvgOCuLWiAw&prev=/search%3Fq%3Dfeatures%2Bof%2Bdirect%2Btax%2Bcode%26hl%3Den%26biw%3D1280%26bih%3D709%26gbv%3D2%26tbm%3Disch0%2C300&itbs=1&iact=hc&vpx=711&vpy=435&dur=228&hovh=119&hovw=217&tx=93&ty=90&page=2&ndsp=27&ved=1t:429,r:4,s:27&biw=1280&bih=709http://www.google.co.in/imgres?imgurl=http://www.indianmba.com/Faculty_Column/FC1213/Fc1213.jpg&imgrefurl=http://www.indianmba.com/Faculty_Column/FC1213/fc1213.html&usg=__ciY2CSVQqzzSnUlBv9PI2L2YjM4=&h=303&w=550&sz=35&hl=en&start=27&zoom=1&tbnid=mJGH0odCiEwRTM:&tbnh=91&tbnw=165&ei=gvi4TbT1Mo2wvgOCuLWiAw&prev=/search%3Fq%3Dfeatures%2Bof%2Bdirect%2Btax%2Bcode%26hl%3Den%26biw%3D1280%26bih%3D709%26gbv%3D2%26tbm%3Disch0%2C300&itbs=1&iact=hc&vpx=711&vpy=435&dur=228&hovh=119&hovw=217&tx=93&ty=90&page=2&ndsp=27&ved=1t:429,r:4,s:27&biw=1280&bih=709http://www.google.co.in/imgres?imgurl=http://www.indianmba.com/Faculty_Column/FC1213/Fc1213.jpg&imgrefurl=http://www.indianmba.com/Faculty_Column/FC1213/fc1213.html&usg=__ciY2CSVQqzzSnUlBv9PI2L2YjM4=&h=303&w=550&sz=35&hl=en&start=27&zoom=1&tbnid=mJGH0odCiEwRTM:&tbnh=91&tbnw=165&ei=gvi4TbT1Mo2wvgOCuLWiAw&prev=/search%3Fq%3Dfeatures%2Bof%2Bdirect%2Btax%2Bcode%26hl%3Den%26biw%3D1280%26bih%3D709%26gbv%3D2%26tbm%3Disch0%2C300&itbs=1&iact=hc&vpx=711&vpy=435&dur=228&hovh=119&hovw=217&tx=93&ty=90&page=2&ndsp=27&ved=1t:429,r:4,s:27&biw=1280&bih=709http://www.google.co.in/imgres?imgurl=http://www.indianmba.com/Faculty_Column/FC1213/Fc1213.jpg&imgrefurl=http://www.indianmba.com/Faculty_Column/FC1213/fc1213.html&usg=__ciY2CSVQqzzSnUlBv9PI2L2YjM4=&h=303&w=550&sz=35&hl=en&start=27&zoom=1&tbnid=mJGH0odCiEwRTM:&tbnh=91&tbnw=165&ei=gvi4TbT1Mo2wvgOCuLWiAw&prev=/search%3Fq%3Dfeatures%2Bof%2Bdirect%2Btax%2Bcode%26hl%3Den%26biw%3D1280%26bih%3D709%26gbv%3D2%26tbm%3Disch0%2C300&itbs=1&iact=hc&vpx=711&vpy=435&dur=228&hovh=119&hovw=217&tx=93&ty=90&page=2&ndsp=27&ved=1t:429,r:4,s:27&biw=1280&bih=709http://www.google.co.in/imgres?imgurl=http://www.indianmba.com/Faculty_Column/FC1213/Fc1213.jpg&imgrefurl=http://www.indianmba.com/Faculty_Column/FC1213/fc1213.html&usg=__ciY2CSVQqzzSnUlBv9PI2L2YjM4=&h=303&w=550&sz=35&hl=en&start=27&zoom=1&tbnid=mJGH0odCiEwRTM:&tbnh=91&tbnw=165&ei=gvi4TbT1Mo2wvgOCuLWiAw&prev=/search%3Fq%3Dfeatures%2Bof%2Bdirect%2Btax%2Bcode%26hl%3Den%26biw%3D1280%26bih%3D709%26gbv%3D2%26tbm%3Disch0%2C300&itbs=1&iact=hc&vpx=711&vpy=435&dur=228&hovh=119&hovw=217&tx=93&ty=90&page=2&ndsp=27&ved=1t:429,r:4,s:27&biw=1280&bih=709http://www.google.co.in/imgres?imgurl=http://www.indianmba.com/Faculty_Column/FC1213/Fc1213.jpg&imgrefurl=http://www.indianmba.com/Faculty_Column/FC1213/fc1213.html&usg=__ciY2CSVQqzzSnUlBv9PI2L2YjM4=&h=303&w=550&sz=35&hl=en&start=27&zoom=1&tbnid=mJGH0odCiEwRTM:&tbnh=91&tbnw=165&ei=gvi4TbT1Mo2wvgOCuLWiAw&prev=/search%3Fq%3Dfeatures%2Bof%2Bdirect%2Btax%2Bcode%26hl%3Den%26biw%3D1280%26bih%3D709%26gbv%3D2%26tbm%3Disch0%2C300&itbs=1&iact=hc&vpx=711&vpy=435&dur=228&hovh=119&hovw=217&tx=93&ty=90&page=2&ndsp=27&ved=1t:429,r:4,s:27&biw=1280&bih=709


34/102

35

SALIENT FEATURES OF THE DTC

Consolidation of provisions: in order to enable a better

understanding of tax legislation, provisions relating to definitions,incentives, procedure and rates of taxes have been consolidated.

Further, the various provisions have also been rearranged to make it

consistent with the general scheme of the Act.

Elimination of regulatory functions: traditionally, the taxing statute

has also been used as a regulatory tool. However, with regulatory

authorities being established in various sectors of the economy, the

regulatory function of the taxing statute has been withdrawn. This has

significantly contributed to the simplification exercise.

Ensure that the law can be reflected in a Form: for most taxpayers,

particularly the small and marginal category, the tax law is what is

reflected in the Form. Therefore, the structure of the tax law has been

designed so that it is capable of being logically reproduced in a Form.

Flexibility: the structure of the statute has been developed in a

manner which is capable of accommodating the changes in the

structure of a growing economy without resorting to frequent

amendments. Therefore, to the extent possible, the essential and

general principles have been reflected in the statute and the matters of

detail are contained in the rules/schedules.

Providing stability: at present, the rates of taxes are stipulated in the

Finance Act of the relevant year. Therefore, there is a certain degree of

uncertainty and instability in the prevailing rates of taxes. Under the

Code, all rates of taxes are proposed to be prescribed in the First to the

Fourth Schedule to the Code itself thereby obviating the need for an

annual Finance Bill. The changes in the rates, if any, will be done

through appropriate amendments to the Schedule brought before

Parliament in the form of an Amendment Bill.


35/102

36

Reducing the scope for litigation: wherever possible, an attempt has

been made to avoid ambiguity in the provisions that invariably give rise

to rival interpretations. The objective is that the tax administrator and

the tax payer are ad idem on the provisions of the law and the

assessment results in a finality to the tax liability of the tax payer. To

further this objective, power has also been delegated to the Central

Government/Board to avoid protracted litigation on procedural issues.

Single Code for direct taxes: all the direct taxes have been brought

under a single Code and compliance procedures unified. This will

eventually pave the way for a single unified taxpayer reporting system.

Use of simple language: with the expansion of the economy, the

number of taxpayers can be expected to increase significantly. The

bulk of these taxpayers will be small, paying moderate amounts of tax.

Therefore, it is necessary to keep the cost of compliance low by

facilitating voluntary compliance by them. This is sought to be

achieved, inter alia, by using simple language in drafting so as to

convey, with clarity, the intent, scope and amplitude of the provision of

law. Each sub-section is a short sentence intended to convey only one

point. All directions and mandates, to the extent possible, have been

conveyed in active voice. Similarly, the provisos and explanations have

been eliminated since they are incomprehensible to non-experts. The

various conditions embedded in a provision have also been nested.

More importantly, keeping in view the fact that a tax law is essentially a

commercial law, extensive use of formulae and tables has been made.


36/102

37

DEVELOPMENT OF DTC

Substantial amendments to Income-tax Act, 1961, (Act) by various

Finance Acts and amending statutes.

Concerns raised by taxpayers and tax administrators on the complex

structure of the laws

o Numerous amendments have rendered the Act

incomprehensible

o Has resulted in increased cost of compliance and administration

o Difference in interpretation on a number of issues has led to

litigation

o Conflicting judgements rendered by Courts at various levels

have compounded the problem further

Several attempts to reform the tax laws since the 1990s

2005-06 Budget : Intention to undertake major tax reforms

o To improve Tax-GDP ratio, expand taxpayer base, increase tax

compliance and make tax administration efficient

o Proposal to introduce simplified Income Tax Bill

2007-08 Budget : Proposal to release DTC for public discussion

12 August 2009 : DTC Bill, 2009 and Discussion Paper released

o 285 sections, 18 schedules, power to make rules on several

aspects

o 318 terms defined in Definition Section

DTC to replace the Act and come into force on 1 April, 2011


37/102

38

REMOVAL OF EXEMPTED INCOME

New DTC removes most of the categories of exempted income. ULIPs,

Term deposits, NSC, house loan, principal repayment, stamp duty and

registration fees on purchase of house property will loose tax benefits.

Surcharge and education cess are abolished and Tax exemption on

LTA (leave travel allowance) is abolished.

TERMS ABOLISHED UNDER DTC

Earlier Income Tax Act and Wealth tax Act (Covering Income Tax,

TDS, DDT, FBT and Wealth taxes) are abolished and single code of

Tax, DTC in place.

Concept of Assessment year and previous year is abolished. Only the

Financial Year terminology exists.

Only status of Non Resident and Resident of India exits. The other

status of resident but not ordinarily resident goes away


38/102

39

TAX SLAB RATE OF DTC


39/102

40

TAX SLAB RATE OF DTC

The following are the newly announced tax slabs for individuals

For Individual (Men, Women & HUF)

The big change is that the same tax slabs will apply to men and

women. Now both are eligible for Rs 2 lakhs tax free exemption,

whereas previously it used to be up to Rs 1.6 lakhs for men and up to

Rs 1.9 lakhs for women.

TABLE: 2

Tax RateDTC

ParliamentaryBill (Aug 2010)

Current Slab underIncome Tax Act Original DTC

Nil Up to Rs 2,00,000 Up to Rs 1,60,000 Up to Rs. 1,60,000

10%From Rs 2,00,001

to Rs 5,00,000From Rs 1,60,001 to

Rs 5,00,000From Rs 1,60,001 to

Rs 10,00,000

20%From Rs 5,00,001to Rs 10,00,000

From Rs 5,00,001 toRs 8,00,000

From Rs 10,00,001to Rs 25,00,000

30%Above Rs10,00,000

Above Rs 8,00,000 Above Rs 25,00,000

SOURCE: (http://www.thewealthwisher.com/2010/10/16/direct-tax-code-dtc-impact-new-

tax-slabs-leads-to-savings/)

For men or women earning up to Rs 8 lakhs the net annual tax saving

under the new DTC bill is going to be a maximum of Rs 4,000.

For men or women earning between Rs 8 lakhs to Rs 10 lakhs the net

annual tax saving is going to be a maximum of Rs 24,000.

For men or women earning above Rs 10 lakhs, there is no additional

net annual saving available under the direct tax code other than the Rs

24,000 as mentioned in the above example as well.
http://www.thewealthwisher.com/2010/10/16/direct-tax-code-dtc-impact-new-tax-slabs-leads-to-savings/http://www.thewealthwisher.com/2010/10/16/direct-tax-code-dtc-impact-new-tax-slabs-leads-to-savings/http://www.thewealthwisher.com/2010/10/16/direct-tax-code-dtc-impact-new-tax-slabs-leads-to-savings/http://www.thewealthwisher.com/2010/10/16/direct-tax-code-dtc-impact-new-tax-slabs-leads-to-savings/


40/102

41

For Senior Citizens

For those above 65 years of age, the tax exemption limit has been

raised to Rs 2.5 lakhs from Rs 2.4 lakhs, for a net new saving of Rs

1,000 per annum.

TABLE: 3

Tax RateDTC

ParliamentaryBill (Aug 2010)

Current Slabunder Income

Tax ActOriginal DTC

Nil Up to Rs 2,50,000 Up to Rs 2,40,000 Up to Rs. 2,40,000

10%From Rs 2,50,001 to

Rs 5,00,000From Rs 2,40,001

to Rs 5,00,000From Rs 2,40,001 to

Rs 10,00,000

20%From Rs 5,00,001 to

Rs 10,00,000From Rs 5,00,001

to Rs 8,00,000From Rs 10,00,001 to

Rs 25,00,000

30% Above Rs 10,00,000 Above Rs 8,00,000 Above Rs 25,00,000

SOURCE: (http://www.thewealthwisher.com/2010/10/16/direct-tax-code-dtc-impact-new-tax-slabs-leads-to-savings/)

TAX DEDUCTIONS

Currently, the Income Tax Act offers individuals an annual deduction of

Rs 1 lakh under 80C that can be used for instruments such as PPF (up

to cap of Rs 70,000), PF, NPS scheme, ELSS, premium for pure life

insurance or ULIP, principal repayment of home loan, NSC, fixed

deposits with a maturity of five years, payment of tuition fees for full-

time education for up to 2 children. In the current financial year (April

2010 through March 2011), one can get an additional deduction of Rs

20,000 for investing in certain notified infrastructure bonds under

80CCF. Additionally, 80D gives a deduction of Rs 15,000 towards

medical insurance.
http://www.thewealthwisher.com/2010/10/16/direct-tax-code-dtc-impact-new-tax-slabs-leads-to-savings/http://www.thewealthwisher.com/2010/10/16/direct-tax-code-dtc-impact-new-tax-slabs-leads-to-savings/http://www.thewealthwisher.com/2010/10/16/direct-tax-code-dtc-impact-new-tax-slabs-leads-to-savings/http://www.thewealthwisher.com/2010/10/16/direct-tax-code-dtc-impact-new-tax-slabs-leads-to-savings/http://www.thewealthwisher.com/2010/10/16/direct-tax-code-dtc-impact-new-tax-slabs-leads-to-savings/


41/102

42

Under the DTC Bill, some of the above deductions have changed.

What was previously available as the 80C deduction of Rs 1 lakh is

now available as a deduction towards investments only in retiral

accounts such as PPF, PF, NPS, and in savings schemes as notified

by the Government. These are all eligible for taxation under EEE

treatment. EEE refers to the tax incidence exempt at time of

investment, exempt during accumulation, and exempt at withdrawal.

These will be available for the tax year starting April 1, 2012.

Additionally, an aggregate deduction of Rs 50,000 is available for

premium for pure life insurance, health insurance and tuition fees for

two children.

As a result, the total deduction available is Rs 1.5 lakhs.

The previous 80C deduction investments in ELSS and ULIPs

were eligible for the Rs 1 lakh deduction, as was a deduction towards

repayment of principal for an outstanding home loan. Under the DTC

Bill all these three options are no longer eligible for a deduction.

TABLE: 4


42/102

43

SOURCE:(http://www.google.co.in/imgres?imgurl=http://cms.outlookindia.com/Upload

s/outlookmoney/2010/20100825/page28_20100922.jpg&imgrefurl=http://money.outlookin

dia.com/article.aspx%3F267163&usg=__2pYAMuRqwLf32AkBx8p5q7o9G_U=&h=447&w=80

0&sz=78&hl=en&start=165&zoom=1&tbnid=QZTbIFHz_UY3AM:&tbnh=129&tbnw=207&ei=K

vq4TeLlAofMuAPU0ayiAw&prev=/search%3Fq%3DTAX%2BSLAB%2BOF%2Bdirect%2Btax%2B

code%26hl%3Den%26biw%3D1280%26bih%3D709%26gbv%3D2%26tbm%3Disch0%2C34000

%2C3400&itbs=1&iact=hc&vpx=265&vpy=284&dur=1577&hovh=168&hovw=301&tx=202&ty

=98&page=7&ndsp=29&ved=1t:429,r:1,s:165&biw=1280&bih=709)

POST DTC TAX LIABILITIES AND SAVINGS

TABLE: 5

TaxableIncome(Rs inlakhs)

Men less than 65 years Women less than 65years Senior Citizens

PostDTC

Liability(Rs)

Savings(Rs.)

PostDTC

Liability(Rs)

Savings(Rs.)

PostDTC

Liability(Rs)

Savings(Rs.)

1.6 Nil Nil Nil Nil Nil Nil

1.9 Nil 3090 Nil Nil Nil Nil

2 Nil 4120 Nil 1030 Nil Nil2.4 4000 4240 4000 1150 Nil Nil

2.5 5000 4270 5000 1180 Nil 1030

4 20,000 4720 20,000 1630 15,000 1480

5 30,000 5020 30,000 1930 25,000 1780

8 90,000 6820 90,000 3730 85,000 3580

8.5 1,00,000 12,270 1,00,000 9180 95,000 9030

10 1,30,000 28,620 1,30,000 25,530 1,25,000 25,380

12.5 2,05,000 30,870 2,05,000 27,780 2,00,000 27,630

Above table shows the post liability of tax after DTC come into

existence at different level of income. Along with it, it also shows how

much the tax saving can be possible through it. For example: when

income of a man below 65 years of age, is 1.90 lakhs, under the DTC

the tax liability will be nil but according to current income tax the tax

liability will be Rs 3,090. So this amount under DTC will totally save.
http://www.google.co.in/imgres?imgurl=http://cms.outlookindia.com/Uploads/outlookmoney/2010/20100825/page28_20100922.jpg&imgrefurl=http://money.outlookindia.com/article.aspx%3F267163&usg=__2pYAMuRqwLf32AkBx8p5q7o9G_U=&h=447&w=800&sz=78&hl=en&start=165&zoom=1&tbnid=QZTbIFHz_UY3AM:&tbnh=129&tbnw=207&ei=Kvq4TeLlAofMuAPU0ayiAw&prev=/search%3Fq%3DTAX%2BSLAB%2BOF%2Bdirect%2Btax%2Bcode%26hl%3Den%26biw%3D1280%26bih%3D709%26gbv%3D2%26tbm%3Disch0%2C34000%2C3400&itbs=1&iact=hc&vpx=265&vpy=284&dur=1577&hovh=168&hovw=301&tx=202&ty=98&page=7&ndsp=29&ved=1t:429,r:1,s:165&biw=1280&bih=709http://www.google.co.in/imgres?imgurl=http://cms.outlookindia.com/Uploads/outlookmoney/2010/20100825/page28_20100922.jpg&imgrefurl=http://money.outlookindia.com/article.aspx%3F267163&usg=__2pYAMuRqwLf32AkBx8p5q7o9G_U=&h=447&w=800&sz=78&hl=en&start=165&zoom=1&tbnid=QZTbIFHz_UY3AM:&tbnh=129&tbnw=207&ei=Kvq4TeLlAofMuAPU0ayiAw&prev=/search%3Fq%3DTAX%2BSLAB%2BOF%2Bdirect%2Btax%2Bcode%26hl%3Den%26biw%3D1280%26bih%3D709%26gbv%3D2%26tbm%3Disch0%2C34000%2C3400&itbs=1&iact=hc&vpx=265&vpy=284&dur=1577&hovh=168&hovw=301&tx=202&ty=98&page=7&ndsp=29&ved=1t:429,r:1,s:165&biw=1280&bih=709http://www.google.co.in/imgres?imgurl=http://cms.outlookindia.com/Uploads/outlookmoney/2010/20100825/page28_20100922.jpg&imgrefurl=http://money.outlookindia.com/article.aspx%3F267163&usg=__2pYAMuRqwLf32AkBx8p5q7o9G_U=&h=447&w=800&sz=78&hl=en&start=165&zoom=1&tbnid=QZTbIFHz_UY3AM:&tbnh=129&tbnw=207&ei=Kvq4TeLlAofMuAPU0ayiAw&prev=/search%3Fq%3DTAX%2BSLAB%2BOF%2Bdirect%2Btax%2Bcode%26hl%3Den%26biw%3D1280%26bih%3D709%26gbv%3D2%26tbm%3Disch0%2C34000%2C3400&itbs=1&iact=hc&vpx=265&vpy=284&dur=1577&hovh=168&hovw=301&tx=202&ty=98&page=7&ndsp=29&ved=1t:429,r:1,s:165&biw=1280&bih=709http://www.google.co.in/imgres?imgurl=http://cms.outlookindia.com/Uploads/outlookmoney/2010/20100825/page28_20100922.jpg&imgrefurl=http://money.outlookindia.com/article.aspx%3F267163&usg=__2pYAMuRqwLf32AkBx8p5q7o9G_U=&h=447&w=800&sz=78&hl=en&start=165&zoom=1&tbnid=QZTbIFHz_UY3AM:&tbnh=129&tbnw=207&ei=Kvq4TeLlAofMuAPU0ayiAw&prev=/search%3Fq%3DTAX%2BSLAB%2BOF%2Bdirect%2Btax%2Bcode%26hl%3Den%26biw%3D1280%26bih%3D709%26gbv%3D2%26tbm%3Disch0%2C34000%2C3400&itbs=1&iact=hc&vpx=265&vpy=284&dur=1577&hovh=168&hovw=301&tx=202&ty=98&page=7&ndsp=29&ved=1t:429,r:1,s:165&biw=1280&bih=709http://www.google.co.in/imgres?imgurl=http://cms.outlookindia.com/Uploads/outlookmoney/2010/20100825/page28_20100922.jpg&imgrefurl=http://money.outlookindia.com/article.aspx%3F267163&usg=__2pYAMuRqwLf32AkBx8p5q7o9G_U=&h=447&w=800&sz=78&hl=en&start=165&zoom=1&tbnid=QZTbIFHz_UY3AM:&tbnh=129&tbnw=207&ei=Kvq4TeLlAofMuAPU0ayiAw&prev=/search%3Fq%3DTAX%2BSLAB%2BOF%2Bdirect%2Btax%2Bcode%26hl%3Den%26biw%3D1280%26bih%3D709%26gbv%3D2%26tbm%3Disch0%2C34000%2C3400&itbs=1&iact=hc&vpx=265&vpy=284&dur=1577&hovh=168&hovw=301&tx=202&ty=98&page=7&ndsp=29&ved=1t:429,r:1,s:165&biw=1280&bih=709http://www.google.co.in/imgres?imgurl=http://cms.outlookindia.com/Uploads/outlookmoney/2010/20100825/page28_20100922.jpg&imgrefurl=http://money.outlookindia.com/article.aspx%3F267163&usg=__2pYAMuRqwLf32AkBx8p5q7o9G_U=&h=447&w=800&sz=78&hl=en&start=165&zoom=1&tbnid=QZTbIFHz_UY3AM:&tbnh=129&tbnw=207&ei=Kvq4TeLlAofMuAPU0ayiAw&prev=/search%3Fq%3DTAX%2BSLAB%2BOF%2Bdirect%2Btax%2Bcode%26hl%3Den%26biw%3D1280%26bih%3D709%26gbv%3D2%26tbm%3Disch0%2C34000%2C3400&itbs=1&iact=hc&vpx=265&vpy=284&dur=1577&hovh=168&hovw=301&tx=202&ty=98&page=7&ndsp=29&ved=1t:429,r:1,s:165&biw=1280&bih=709http://www.google.co.in/imgres?imgurl=http://cms.outlookindia.com/Uploads/outlookmoney/2010/20100825/page28_20100922.jpg&imgrefurl=http://money.outlookindia.com/article.aspx%3F267163&usg=__2pYAMuRqwLf32AkBx8p5q7o9G_U=&h=447&w=800&sz=78&hl=en&start=165&zoom=1&tbnid=QZTbIFHz_UY3AM:&tbnh=129&tbnw=207&ei=Kvq4TeLlAofMuAPU0ayiAw&prev=/search%3Fq%3DTAX%2BSLAB%2BOF%2Bdirect%2Btax%2Bcode%26hl%3Den%26biw%3D1280%26bih%3D709%26gbv%3D2%26tbm%3Disch0%2C34000%2C3400&itbs=1&iact=hc&vpx=265&vpy=284&dur=1577&hovh=168&hovw=301&tx=202&ty=98&page=7&ndsp=29&ved=1t:429,r:1,s:165&biw=1280&bih=709http://www.google.co.in/imgres?imgurl=http://cms.outlookindia.com/Uploads/outlookmoney/2010/20100825/page28_20100922.jpg&imgrefurl=http://money.outlookindia.com/article.aspx%3F267163&usg=__2pYAMuRqwLf32AkBx8p5q7o9G_U=&h=447&w=800&sz=78&hl=en&start=165&zoom=1&tbnid=QZTbIFHz_UY3AM:&tbnh=129&tbnw=207&ei=Kvq4TeLlAofMuAPU0ayiAw&prev=/search%3Fq%3DTAX%2BSLAB%2BOF%2Bdirect%2Btax%2Bcode%26hl%3Den%26biw%3D1280%26bih%3D709%26gbv%3D2%26tbm%3Disch0%2C34000%2C3400&itbs=1&iact=hc&vpx=265&vpy=284&dur=1577&hovh=168&hovw=301&tx=202&ty=98&page=7&ndsp=29&ved=1t:429,r:1,s:165&biw=1280&bih=709http://www.google.co.in/imgres?imgurl=http://cms.outlookindia.com/Uploads/outlookmoney/2010/20100825/page28_20100922.jpg&imgrefurl=http://money.outlookindia.com/article.aspx%3F267163&usg=__2pYAMuRqwLf32AkBx8p5q7o9G_U=&h=447&w=800&sz=78&hl=en&start=165&zoom=1&tbnid=QZTbIFHz_UY3AM:&tbnh=129&tbnw=207&ei=Kvq4TeLlAofMuAPU0ayiAw&prev=/search%3Fq%3DTAX%2BSLAB%2BOF%2Bdirect%2Btax%2Bcode%26hl%3Den%26biw%3D1280%26bih%3D709%26gbv%3D2%26tbm%3Disch0%2C34000%2C3400&itbs=1&iact=hc&vpx=265&vpy=284&dur=1577&hovh=168&hovw=301&tx=202&ty=98&page=7&ndsp=29&ved=1t:429,r:1,s:165&biw=1280&bih=709http://www.google.co.in/imgres?imgurl=http://cms.outlookindia.com/Uploads/outlookmoney/2010/20100825/page28_20100922.jpg&imgrefurl=http://money.outlookindia.com/article.aspx%3F267163&usg=__2pYAMuRqwLf32AkBx8p5q7o9G_U=&h=447&w=800&sz=78&hl=en&start=165&zoom=1&tbnid=QZTbIFHz_UY3AM:&tbnh=129&tbnw=207&ei=Kvq4TeLlAofMuAPU0ayiAw&prev=/search%3Fq%3DTAX%2BSLAB%2BOF%2Bdirect%2Btax%2Bcode%26hl%3Den%26biw%3D1280%26bih%3D709%26gbv%3D2%26tbm%3Disch0%2C34000%2C3400&itbs=1&iact=hc&vpx=265&vpy=284&dur=1577&hovh=168&hovw=301&tx=202&ty=98&page=7&ndsp=29&ved=1t:429,r:1,s:165&biw=1280&bih=709http://www.google.co.in/imgres?imgurl=http://cms.outlookindia.com/Uploads/outlookmoney/2010/20100825/page28_20100922.jpg&imgrefurl=http://money.outlookindia.com/article.aspx%3F267163&usg=__2pYAMuRqwLf32AkBx8p5q7o9G_U=&h=447&w=800&sz=78&hl=en&start=165&zoom=1&tbnid=QZTbIFHz_UY3AM:&tbnh=129&tbnw=207&ei=Kvq4TeLlAofMuAPU0ayiAw&prev=/search%3Fq%3DTAX%2BSLAB%2BOF%2Bdirect%2Btax%2Bcode%26hl%3Den%26biw%3D1280%26bih%3D709%26gbv%3D2%26tbm%3Disch0%2C34000%2C3400&itbs=1&iact=hc&vpx=265&vpy=284&dur=1577&hovh=168&hovw=301&tx=202&ty=98&page=7&ndsp=29&ved=1t:429,r:1,s:165&biw=1280&bih=709http://www.google.co.in/imgres?imgurl=http://cms.outlookindia.com/Uploads/outlookmoney/2010/20100825/page28_20100922.jpg&imgrefurl=http://money.outlookindia.com/article.aspx%3F267163&usg=__2pYAMuRqwLf32AkBx8p5q7o9G_U=&h=447&w=800&sz=78&hl=en&start=165&zoom=1&tbnid=QZTbIFHz_UY3AM:&tbnh=129&tbnw=207&ei=Kvq4TeLlAofMuAPU0ayiAw&prev=/search%3Fq%3DTAX%2BSLAB%2BOF%2Bdirect%2Btax%2Bcode%26hl%3Den%26biw%3D1280%26bih%3D709%26gbv%3D2%26tbm%3Disch0%2C34000%2C3400&itbs=1&iact=hc&vpx=265&vpy=284&dur=1577&hovh=168&hovw=301&tx=202&ty=98&page=7&ndsp=29&ved=1t:429,r:1,s:165&biw=1280&bih=709http://www.google.co.in/imgres?imgurl=http://cms.outlookindia.com/Uploads/outlookmoney/2010/20100825/page28_20100922.jpg&imgrefurl=http://money.outlookindia.com/article.aspx%3F267163&usg=__2pYAMuRqwLf32AkBx8p5q7o9G_U=&h=447&w=800&sz=78&hl=en&start=165&zoom=1&tbnid=QZTbIFHz_UY3AM:&tbnh=129&tbnw=207&ei=Kvq4TeLlAofMuAPU0ayiAw&prev=/search%3Fq%3DTAX%2BSLAB%2BOF%2Bdirect%2Btax%2Bcode%26hl%3Den%26biw%3D1280%26bih%3D709%26gbv%3D2%26tbm%3Disch0%2C34000%2C3400&itbs=1&iact=hc&vpx=265&vpy=284&dur=1577&hovh=168&hovw=301&tx=202&ty=98&page=7&ndsp=29&ved=1t:429,r:1,s:165&biw=1280&bih=709http://www.google.co.in/imgres?imgurl=http://cms.outlookindia.com/Uploads/outlookmoney/2010/20100825/page28_20100922.jpg&imgrefurl=http://money.outlookindia.com/article.aspx%3F267163&usg=__2pYAMuRqwLf32AkBx8p5q7o9G_U=&h=447&w=800&sz=78&hl=en&start=165&zoom=1&tbnid=QZTbIFHz_UY3AM:&tbnh=129&tbnw=207&ei=Kvq4TeLlAofMuAPU0ayiAw&prev=/search%3Fq%3DTAX%2BSLAB%2BOF%2Bdirect%2Btax%2Bcode%26hl%3Den%26biw%3D1280%26bih%3D709%26gbv%3D2%26tbm%3Disch0%2C34000%2C3400&itbs=1&iact=hc&vpx=265&vpy=284&dur=1577&hovh=168&hovw=301&tx=202&ty=98&page=7&ndsp=29&ved=1t:429,r:1,s:165&biw=1280&bih=709http://www.google.co.in/imgres?imgurl=http://cms.outlookindia.com/Uploads/outlookmoney/2010/20100825/page28_20100922.jpg&imgrefurl=http://money.outlookindia.com/article.aspx%3F267163&usg=__2pYAMuRqwLf32AkBx8p5q7o9G_U=&h=447&w=800&sz=78&hl=en&start=165&zoom=1&tbnid=QZTbIFHz_UY3AM:&tbnh=129&tbnw=207&ei=Kvq4TeLlAofMuAPU0ayiAw&prev=/search%3Fq%3DTAX%2BSLAB%2BOF%2Bdirect%2Btax%2Bcode%26hl%3Den%26biw%3D1280%26bih%3D709%26gbv%3D2%26tbm%3Disch0%2C34000%2C3400&itbs=1&iact=hc&vpx=265&vpy=284&dur=1577&hovh=168&hovw=301&tx=202&ty=98&page=7&ndsp=29&ved=1t:429,r:1,s:165&biw=1280&bih=709http://www.google.co.in/imgres?imgurl=http://cms.outlookindia.com/Uploads/outlookmoney/2010/20100825/page28_20100922.jpg&imgrefurl=http://money.outlookindia.com/article.aspx%3F267163&usg=__2pYAMuRqwLf32AkBx8p5q7o9G_U=&h=447&w=800&sz=78&hl=en&start=165&zoom=1&tbnid=QZTbIFHz_UY3AM:&tbnh=129&tbnw=207&ei=Kvq4TeLlAofMuAPU0ayiAw&prev=/search%3Fq%3DTAX%2BSLAB%2BOF%2Bdirect%2Btax%2Bcode%26hl%3Den%26biw%3D1280%26bih%3D709%26gbv%3D2%26tbm%3Disch0%2C34000%2C3400&itbs=1&iact=hc&vpx=265&vpy=284&dur=1577&hovh=168&hovw=301&tx=202&ty=98&page=7&ndsp=29&ved=1t:429,r:1,s:165&biw=1280&bih=709http://www.google.co.in/imgres?imgurl=http://cms.outlookindia.com/Uploads/outlookmoney/2010/20100825/page28_20100922.jpg&imgrefurl=http://money.outlookindia.com/article.aspx%3F267163&usg=__2pYAMuRqwLf32AkBx8p5q7o9G_U=&h=447&w=800&sz=78&hl=en&start=165&zoom=1&tbnid=QZTbIFHz_UY3AM:&tbnh=129&tbnw=207&ei=Kvq4TeLlAofMuAPU0ayiAw&prev=/search%3Fq%3DTAX%2BSLAB%2BOF%2Bdirect%2Btax%2Bcode%26hl%3Den%26biw%3D1280%26bih%3D709%26gbv%3D2%26tbm%3Disch0%2C34000%2C3400&itbs=1&iact=hc&vpx=265&vpy=284&dur=1577&hovh=168&hovw=301&tx=202&ty=98&page=7&ndsp=29&ved=1t:429,r:1,s:165&biw=1280&bih=709


43/102

44

SCHEDULES TO DTC


44/102

45

SCHEDULES TO DTC

Arrangement of Schedules

The 1st Schedule. Rates of Income-tax

The 2nd Schedule. Rates of other taxes

The 3rd Schedule. Rates for deduction of tax at source

The 4th Schedule. Rate for deduction of tax at source in case of non-resident deductee

The 5th Schedule. Procedure for recovery of tax

The 6th Schedule. Income not included in the total income

The 7th Schedule. Persons, entity or funds not liable to Income-tax

The 8th Schedule. Computation of profits of the insurance business

The 9th Schedule. Computation of Income from Special Sources

The 10th Schedule. Computation of Profits of Business of Operating a Qualifying Ship

The 11th Schedule. Computation of Profits of the Business of Mineral Oil or Natural Gas

The 12th Schedule.

Computation of Profits of the Business of Developing of a SpecialEconomic Zone, Manufacture or Production of Article or Things orProviding of any Service by a Unit Established in a Special Economic

Zone

The 13th Schedule. Computation of profits of a Specified business

The 14th Schedule. Determination of income on a presumptive basis

The 15th Schedule. Depreciation

The 16th Schedule. Deduction for contributions / donations

The 17th Schedule. Determination of cost of acquisition in certain cases

The 18th Schedule. Minerals and group of associated minerals

The 19th Schedule. Approved PF, Gratuity and Superannuation Funds

The 20th Schedule. Computation of Income Attributable to a controlled Foreign Company

The 21st Schedule. Orders Appealable before Commissioner (Appeals)

The 22nd Schedule. Deferred Revenue Expenditure Allowance
http://finotax.com/dtc/sch1.htmhttp://finotax.com/dtc/sch2.htmhttp://finotax.com/dtc/sch3.htmhttp://finotax.com/dtc/sch4.htmhttp://finotax.com/dtc/sch5.htmhttp://finotax.com/dtc/sch6.htmhttp://finotax.com/dtc/sch7.htmhttp://finotax.com/dtc/sch8.htmhttp://finotax.com/dtc/sch9.htmhttp://finotax.com/dtc/sch10.htmhttp://finotax.com/dtc/sch11.htmhttp://finotax.com/dtc/sch12.htmhttp://finotax.com/dtc/sch13.htmhttp://finotax.com/dtc/sch14.htmhttp://finotax.com/dtc/sch15.htmhttp://finotax.com/dtc/sch16.htmhttp://finotax.com/dtc/sch17.htmhttp://finotax.com/dtc/sch18.htmhttp://finotax.com/dtc/sch19.htmhttp://finotax.com/dtc/sch20.htmhttp://finotax.com/dtc/sch21.htmhttp://finotax.com/dtc/sch22.htmhttp://finotax.com/dtc/sch22.htmhttp://finotax.com/dtc/sch21.htmhttp://finotax.com/dtc/sch20.htmhttp://finotax.com/dtc/sch19.htmhttp://finotax.com/dtc/sch18.htmhttp://finotax.com/dtc/sch17.htmhttp://finotax.com/dtc/sch16.htmhttp://finotax.com/dtc/sch15.htmhttp://finotax.com/dtc/sch14.htmhttp://finotax.com/dtc/sch13.htmhttp://finotax.com/dtc/sch12.htmhttp://finotax.com/dtc/sch11.htmhttp://finotax.com/dtc/sch10.htmhttp://finotax.com/dtc/sch9.htmhttp://finotax.com/dtc/sch8.htmhttp://finotax.com/dtc/sch7.htmhttp://finotax.com/dtc/sch6.htmhttp://finotax.com/dtc/sch5.htmhttp://finotax.com/dtc/sch4.htmhttp://finotax.com/dtc/sch3.htmhttp://finotax.com/dtc/sch2.htmhttp://finotax.com/dtc/sch1.htm


45/102

46

EXPERTS VIEWS ON DTC


46/102

47

Experts Views on DTC

The proposed Direct Tax Code is a combination of major tax relief and

removal of most tax-exempted benefits. It is expected to usher in a new

tax regime of transparency and greater compliance. writes Dilip

Maitra.

Source:DH News Service

(http://www.deccanherald.com/content/19934/decoding-direct-tax-

code.html)

Talking to Deccan Herald, KPMG Executive Director Personal Taxation,

and IT & ESOP Vikas Vasalsaid The new proposals are in the right

direction. They will simplify regulations and reduce unnecessary

litigations significantly.

Source: (http://www.deccanherald.com/content/19934/decoding-direct-

tax-code.html)

Agreed Bangalore Chamber of Industry & Commerce (BCIC) President

K R Girish. The Code is a completely new law and not an amendment

of the existing Income Tax Act. This is a commendable change as one

has always experienced tinkering of existing laws, According to KPMGpartner i.e. K R Girish, there is a drastic deviation from the direct tax

roadmap put forward by the Kelkar Commission in the new code, The

new move to bring in tax clearance certificate for business men before

leaving the country will adversely affect the investment prospect in the

country, he said, adding There is a marked mismatch between the

governments economic policy and the provisions in the new tax code.

This will give a bad name for our country overseas.

Source:(http://www.deccanherald.com/content/19934/decoding-direct-

tax-code.html)

"Considering the many drafting blunders, inequities and anomalies in

the revised Direct Taxes Code placed before Parliament, DTC virtually

appears to be beyond repair. It needs to be dumped in the larger

interests of taxpayers as well as the revenue generated," Eminent tax

expert Mukesh Patel Addressing the FGI members on 'Direct Taxes in

the Union Budget 2011' in Vadodara,
http://www.deccanherald.com/content/19934/decoding-direct-tax-code.htmlhttp://www.deccanherald.com/content/19934/decoding-direct-tax-code.htmlhttp://www.deccanherald.com/content/19934/decoding-direct-tax-code.htmlhttp://www.deccanherald.com/content/19934/decoding-direct-tax-code.htmlhttp://www.deccanherald.com/content/19934/decoding-direct-tax-code.htmlhttp://www.deccanherald.com/content/19934/decoding-direct-tax-code.htmlhttp://www.deccanherald.com/content/19934/decoding-direct-tax-code.htmlhttp://www.deccanherald.com/content/19934/decoding-direct-tax-code.htmlhttp://www.deccanherald.com/content/19934/decoding-direct-tax-code.htmlhttp://www.deccanherald.com/content/19934/decoding-direct-tax-code.htmlhttp://www.deccanherald.com/content/19934/decoding-direct-tax-code.htmlhttp://www.deccanherald.com/content/19934/decoding-direct-tax-code.html


47/102

48

Source:

(http://www.businessworld.in/bw/2011_03_03_Dump_Direct_Tax_Code

_Says_Tax_Expert.html)

The postponement, according to Krishan MalhotraExecutive Director of KPMG, is logical. It technically was

looking very difficult to implement from April 1, next year. The

procedure will take timeat least 6 months.

Source:(http://www.moneycontrol.com/news/economy/direct-tax-code-

tabled-what-do-experts-makeit_481782.html)

In order to execute the new laws, including the combating financing of

terrorism (CFT) introduced in the code, the corporate as well as the

government require preparation time, says Ajay Kumar Executive

Director of PricewaterhouseCoopers (PwC).



The bill seems to resemble the current income tax more rather than

the original Direct Tax Code which we saw. Some of the language

seems to be again reverting back to the earlier or the current tax act.

This, Amitabh Singh Tax Partner at E&Y considers to be clear

negative. Largely it may be that when it went into the law ministry, they

clearly didnt have time to grapple with a new set of wordings and the

way the whole language was drafted and they would have been more

comfortable with a language on which the jurisprudence and the courtcases have already deliberated, he reasons.



Participants also criticized the new law to tax NGOs who are doing well

in the country. It is a retrograde move to tax 15 per cent of the

unutilized assets of NGOs in the country who have done exemplary
http://www.businessworld.in/bw/2011_03_03_Dump_Direct_Tax_Code_Says_Tax_Expert.htmlhttp://www.businessworld.in/bw/2011_03_03_Dump_Direct_Tax_Code_Says_Tax_Expert.htmlhttp://www.moneycontrol.com/news/economy/direct-tax-code-tabled-what-do-experts-makeit_481782.htmlhttp://www.moneycontrol.com/news/economy/direct-tax-code-tabled-what-do-experts-makeit_481782.htmlhttp://www.moneycontrol.com/news/economy/direct-tax-code-tabled-what-do-experts-makeit_481782.htmlhttp://www.moneycontrol.com/news/economy/direct-tax-code-tabled-what-do-experts-makeit_481782.htmlhttp://www.moneycontrol.com/news/economy/direct-tax-code-tabled-what-do-experts-makeit_481782.htmlhttp://www.moneycontrol.com/news/economy/direct-tax-code-tabled-what-do-experts-makeit_481782.htmlhttp://www.moneycontrol.com/news/economy/direct-tax-code-tabled-what-do-experts-makeit_481782.htmlhttp://www.moneycontrol.com/news/economy/direct-tax-code-tabled-what-do-experts-makeit_481782.htmlhttp://www.businessworld.in/bw/2011_03_03_Dump_Direct_Tax_Code_Says_Tax_Expert.htmlhttp://www.businessworld.in/bw/2011_03_03_Dump_Direct_Tax_Code_Says_Tax_Expert.html


48/

bhavesh projcet

Documents