Direct Tax Code in cold storage for now

New Delhi: The government has junked the much-hyped Direct Tax Code (DTC), a reform initiative to overhaul the direct tax system on the lines of GST, for now as it has already taken steps to align the tax rates with other countries.

Tax experts pointed out that the government is also not in a position to make further changes that will have revenue implications. There was also apprehension that adopting DTC would put a question mark on the rulings based on the present Income Tax Act.

Official sources said that the DTC is not on the table right now and the government will act on it only after thoroughly reassessing the situation on the ground and whether it warrants any change in the tax rules and rates.

“We have already lowered corporate tax and offered a simplified tax scheme for individual taxpayers. Dividend distribution tax (DDT) has also been removed. Parallel, the overall tax system is being taxpayer-friendly. So, where is the need for DTC? At least, for now, we don’t think of any need. Maybe, later we will see,” an official source said.

Apart from lowering tax rates and compliance, the Task Force on DTC had laid emphasis on technology for making the system taxpayer-friendly. It recommended to simplify the computation of incomes and overhaul the entire tax administration.

The then Central Board of Direct Taxes (CBDT) member and also Convenor of the Task Force Akhilesh Ranjan had suggested to improve the litigation system and easing compliance.

An official source said that there were two sets of thinking earlier on adopting the DTC. While one set of people wanted the system to be completely revamped by adopting DTC, the other set of people thought that the new code will create a spate of litigations.

“To avoid this, it is good to allow only the concept of DTC to be borrowed and continue with the current law so that old litigation precedents do not go away,” he said.

The government has not made the draft DTC public and has said the report of the Task Force is being examined. The DTC was envisaged to replace the decades-old Income Tax Act, 1961. (IANS)

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