The government plans to introduce a bill for a direct taxes code (DTC) during the forthcoming monsoon session of Parliament, Finance Minister P Chidambaram has said. The code, which will replace the existing Income Tax Act 1961, aims to rationalise tax rates to bring more people and companies under the tax net."It (modified draft of DTC) will be ready in a day or two. Then we will take it to the Law Ministry and do the drafting. Once the drafting is done, we will take the note to the Cabinet and the official amendments to the Direct Taxes Act, 2010, I hope to place it in the Monsoon session," he told PTI.
The month-long monsoon session of Parliament is expected to start in late July. The Minister said there are three versions to the DTC Bill -- the DTC 2009 version, DTC 2010 bill and the Standing Committee report-- and he would endeavour to reconcile them. "We have to reconcile all three as far as possible and I have an obligation to adhere, as far as possible, to the recommendations of the Standing Committee," Chidambaram said.
The DTC Bill was introduced in Parliament in 2010 and was referred to the Standing Committee on Finance headed by senior BJP leader Yashwant Sinha. Among other things, the Committee had suggested raising the income tax exemption limit to Rs 3 lakh as against Rs 2 lakh proposed in the DTC Bill, 2010. The Income Tax Act was enacted in 1961. The first draft prepared by Chidambaram in 2009 had proposed a income tax slab from Rs 1.6-10 lakh, Rs 10-25 lakh and Rs 25 lakh and above. Besides, the corporate tax was proposed at 25 per cent.
This was followed by the draft DTC Bill prepared by the then Finance Minister Pranab Mukherjee in 2010 which proposed the slabs at Rs 2-5 lakh, Rs 5-10 lakh and Rs 10 lakh and above. Here the corporate tax was proposed at 30 per cent. The Standing Committee in its recommendation suggested the slabs in the brackets of Rs 3-10 lakh, Rs 10-20 lakh and Rs 20 lakh and above. On corporate tax, it recommended that the rate be retained at 30 per cent. The current rates for income tax would continue at 10, 20 and 30 per cent respectively.