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India Direct Tax Code 2010 - Incisive Analysis & Impacts for Taxpayers Identified


Keeping to its commitment, the Government presented the revised Direct Taxes Code, 2010 ("revised Code") in the Parliament. The revised Code takes over from the Revised Discussion Paper ("RDP") released in June 2010 which made significant changes to proposals in the 2009 version of the Direct Taxes Code Bill ("original DTC Bill"). The DTC announcement is the most significant tax reform in the past 50 years and replaces the 61 law. Taxand India provides incisive and thought evoking analysis on the latest version of the code and impacts for taxpayers.

The revised Code retains the basic philosophy and objectives of the Government in overhauling the extant tax regime. As anticipated, the revised Code not only improvises on 11 critical issues identified in the RDP, the latest version amends some of the other key proposals in the 2009 version of proposed legislation. The key rationalisation proposed in the revised Code are

  • tax rates for corporate and individual taxpayers
  • re-alignment of Minimum Alternate Tax levy with respect to book profits
  • grandfathering of tax incentives for SEZ units
  • taxation of capital gains
  • introduction of settlement commission mechanism
  • taxation of non-profit organisations
  • rationalisation of anti-avoidance rules in line with proposals made by RDP

The Cabinet's nod for introduction of the revised Code with effect from 1 April 2012 is objective thinking as the extended transition period should provide taxpayers sufficient time to gear up to new legislation.

Taxand's Take

The timely introduction of the revised Code for Parliamentary debate and approval is encouraging and re-emphasises the Government's commitment to usher in new tax reforms. The approach of the Government took allowing public discussion is appreciable. The changes carried out in the revised DTC after taking into account the concerns expressed to several provisions in the original DTC Bill is also good to see. Deferral of the proposed legislation by one full year would smoothen the hurried rush for transition, as the extended time would hopefully allow taxpayers to plan their affairs and enable trade and industry to gear up to the new law.

In the interim, there is no gainsaying that the revised Bill is well intentioned to simplify archaic IT Act with adequate flavour of international best practices. It would be reasonable to pat the working group and the Finance Minister in particular for not springing any surprises with which the industry at large would not have been amused. Before a verdict can be passed, however, the right thing to do shall be to analyse the revised Code considering this is the future of the Direct tax law.

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Your Taxand contacts for further queries are:
Mukesh Butani
T. +91 124 339 5010

Abhishek Goenka
T. +91 80 4032 0100

Taxand's Take Author