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Direct Tax Code Essay

4329 words - 18 pages

Chapter – 4 OBJECTIVE
Chapter – 8 LIMITATION

Direct Tax Code Analysis



As of late, the Finance Minister has discharged the ...view middle of the document...

A portion of the key suggestion acknowledged incorporate exclusion to levy of pay from backhanded exchange for shareholders having little shareholding (upto 5%), change in meaning of place of effective administration, broad based General Anti Avoidance Rules (GAAR), and so on.


What is Direct Tax Code?
The Direct Taxes Code (DTC) is an attempt by the Government of India (GOI) to simplify the direct tax laws in India. The proposed DTC will reread, merge and streamline the structure of direct tax laws in India into a single legislation. The DTC, when implemented will replace the present Income-tax Act, 1961 (ITA), and other direct tax legislations like the Wealth Tax Act, 1957.
The below figures show the working of the computation of income under the Income Tax Act, 1961

Step 1

Step 2

Step 3

In the new Direct tax code bill, the methodology for computing income has been revised. Firstly, the sources of income are divided into two major categories: ordinary sources and special sources. Under each source, there are different heads of income, while under each head of income, there can now be diverse sources of income. This is graphically depicted below:

The steps to calculate the income under the new and revised DTC:

Step 1 (which is similar to existing Step 1)

Step 2

Step 3

Step 4

The above-mentioned Steps 1 to 3 would also be applicable for Income from Special Sources. After this that is at the end of the Step 3, income would arise at the gross total income from special sources. The cumulative of this gross total income for all the special sources would establish the total income from special sources.
After this, income from ordinary source and special source will be clubbed in order
to determine the total income of the taxpayer.

The first draft bill of DTC was released by Government of India for public comments and review along with a discussion paper on the date 12 August 2009 (DTC 2009) and based on the response from a range of stakeholders, a Revised Discussion Paper (RDP) was released in 2010. DTC 2010 was introduced in the Indian Parliament in August 2010 and a Standing Committee on Finance (SCF) was exclusively formed with the intention which, after having a broad-based conference with various stakeholders, submitted its report to the Indian Parliament on 9 March 2012.
As a follow-up on this proposal and as stated by the Finance Minister (FM) in his Interim Budget Speech in February 2014, after taking into explanation the recommendation of the SCF, a “revised” description of DTC that is DTC 2013 has been released on 31 March  2014.
The DTC 2013 proposes to introduce:
* General Anti Avoidance Rules (GAAR),
* Taxation of Controlled Foreign Companies (CFC),
* Place of Effective Management (POEM) rule as a test to determine residency and tax indirect transfer of Indian assets.
* Also contains expanded source rules for taxation of royalty,...

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