New Indian Tax Code Set For 2013

by Mary Swire, Tax-News.com, Hong Kong

15 June 2012

India's Finance Minister has said that he hopes to see the new Direct Tax Code (DTC) in operation from April, 2013, stressing that the Income Tax Department must now ready itself for the transition.

Mukherjee made the comments at the Annual Conference of Chief Commissioners and Director Generals of Income Tax. During his speech, he said that the DTC will effect a much awaited transformation in the country's tax structure and its administration.

At present, direct taxes contribute around 56% of total central government tax revenue in India. Mukherjee credited policy innovations, the rationalization of the tax structure, and improvements in tax administration and taxpayer services for helping to bolster growth in this area over the last five years. He said that over the past decade, for every 1% growth in gross domestic product, the government also saw a 1.9% rise in direct tax collections. The Income Tax Department is charged with increasing tax collections by 15% over the course of the current financial year.

Mukherjee added that he will introduce an amended Direct Tax Code Bill into parliament during the forthcoming Monsoon Session. The Bill's reintroduction follows its examination by the Standing Committee on Finance, which has submitted a report on the government's proposals.

In March, Mukherjee used his Budget speech to tell parliament that, while the government had intended to implement the DTC from April this year, it had not received the Committee's report in time to do so. Mukherjee said at the time that the government would examine the Committee’s recommendations and take steps to enact the DTC at the earliest possible opportunity. During his speech to the Conference, he confirmed that now he hopes to see the Code become effective from April 1, 2013.

In the meantime, Mukherjee expects the Income Tax Department to prepare itself for the transition from the Income Tax Act 1961 to the new DTC regime. He explained: "It would include addressing various issues like [the] reframing of rules and forms, redrawing of business processes, training needs of human resources and the necessary infrastructure needs for smooth transition to the new regime. All this has to be completed in a manner so as to avoid any inconvenience to taxpayers and also to sustain the revenue buoyancy."

Computerization work must also continue, to cover all areas of work and all employees in the Department. This, Mukherjee said, "will not only improve the quality of service, but also bring transparency and uniformity to procedures and decision making process".