India unveiled the new draft Direct Tax Code ("the
Code") in August for public consultation. As per the current
timeline table, the draft Code is proposed to be discussed during
the winter session of Parliament and is expected to come into force
from April 1, 2011. The much awaited Code aims to consolidate and
amend the law relating to all Indian direct taxes and pave the way
for a single unified taxpayer reporting system. The intent of the
Code is to address the twin goals of rationalisation of tax rates
and expansion of the tax base. The Code proposes a cut in the
corporate tax rate from 30% to 25%, as well as reducing the number
of tax exemptions and holidays currently available. New transfer
pricing polices including the introduction of an advanced pricing
agreement programme seem on the anvil.
When enacted in its final form, the Code will replace the Indian
Income Tax Act, 1961. The endeavour of the revenue authorities has
been to keep the language of the Code simple in order to reduce the
scope of litigation and provide flexibility and stability in line
with accepted international best practices. While the draft Code
has evoked mixed reactions so far, it is yet to be seen how the
draft Code shapes up eventually when it passes through legislative
scrutiny in Parliament!
Legislators would be well advised to bear in mind that
"taxation is akin to plucking a goose and the art of taxation
is to ensure the maximum number of feathers with the minimum amount
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