"Evaluation of the necessity of direct tax code in the light of finance bill 2012"

The draft Direct Taxes Code (DTC), which aims to replace Income Tax Act, 1961 and Wealth Tax Act, 1957, was released, along with a Discussion Paper on August 12, 2009 for public comments. Since then, a number of valuable inputs on the proposals have been received from a large number of organisations and individuals. The inputs have been examined and the major issues on which various stakeholders have given their views have been identified. The Revised Discussion Paper addresses these major issues. The revised Direct Taxes Code (DTC-II) making changes in the earlier DTC (DTC-I), consequent to the issue of Discussion Paper-II (DP-II) was introduced in the Lok Sabha on August 30, 2010. The Bill shows that in DTC-II, not only the changes mentioned in DP-II have been made, but a host of other changes and new provisions, like those relating to settlement of cases and settlement commission have also been incorporated. This has made the DTC-II more voluminous vis-à-vis DTC-I.

Although the Government had planned to replace the five-decade-old Income-Tax Act, 1961 and Wealth Tax Act, 1957 with a brand new Code from April 1, 2011, then from April 1, 2012, is now expected to be introduced only from April 1, 2013.

This paper seeks to focus on the major points of differences between the existing provisions under the Income Tax Act, 1961, Wealth Tax Act, 1957 and the keenly awaited direct tax reform legislation Direct Tax Code (DTC). It also tries to highlight the corresponding amendments made in the existing IT Act, 1961 through the Finance Bill, 2012.