The existing Income‐tax Act of India
was enacted way back in 1961. Prior
to that, we had the Income‐tax Act,
1922. Thus, historically, the first
Income‐tax Act was operational for
almost 40 years and the existing one
has been in place for almost 48 years
now.
Over the years, the tax laws have
become more and more complicated
and tiresome. Litigation is at an all
time high in the country with
tribunals and courts swamped with
tax disputes being challenged by the
tax payers and/or by the tax
department. The present Income‐tax
Act (the Act) contains morethan 400
sections and even more sub‐sections,
Provisos and Explanations. For a
common man, it is virtually
impossible to decipher the Act.
The Indian Government is seeking to
initiate radical tax reforms by
proposing to enact a new Direct Tax
Code which will replace the existing
Income‐tax Act with effect from 1st
April, 2011 i.e. w.e.f. F.Y. 2011‐12.
The Direct Taxes Code Bill, 2009
(Code) was placed by the Finance
Minister for public debate and
discussion on 12th August, 2009. The
Code seeks to combine the law relating to all direct taxes i.e. Incometax
and Wealth‐tax under one roof.
The proposed DTC has been designed
with the objective of simplification of
the provisions of tax laws by having a
fresh look at the provisions of the Act.
After taking into consideration the
representations received on the
proposed provisions of the DTC, the
Government has now proposed to
modify the DTC and has issued a
revised Discussion Paper to this effect
on 15th June. This Tax Alert (running
into a series of Issues) is prepared to
place in your hands the salient
changes proposed in the Code after
taking into consideration the
amendments mentioned in the
revised Discussion Paper. The Direct Tax Code seeks to take a fresh look at the taxation of all heads and sources of income. In the existing
Income‐tax Act, the entire mechanism of taxation revolves around various heads of income under which there
would be different sources of income. This is graphically depicted as under:
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