Direct Tax code by Finance Minister Pranab Mukheerjee

Direct Tax Laws are to become more “saral” for taxpayers as the government is to make a new direct tax code in a much simplified form which is going to simplify the tax payment scheme.

However the new direct tax will be effective from 2011 only.Former finance minister P Chidambaram said the new tax code would be a vast improvement over I-T Act 1961.

Finance Minister Pranab Mukherjee released a draft of the code in the presence of home minister and former finance minister P Chidambaram, who initiated work on it during his tenure. The new code that aims to change the face of how direct taxes in the country will replace the current Income-tax Act that was enacted about 50 years ago in 1961. It would provide for tax calculators—allowing taxpayers to calculate their own taxes, explain a tax provision in simple language.

The new code is likely to simplify the rules so that they become transparent and easily understood by both the tax collector and the tax payer in this category. The proposed tax code is also expected to include new measures to prevent abuse of some special bilateral taxation treaties between India and some nations.

The double taxation avoidance treaty, as it is known in technical parlance, allows taxpayers to pay a tax on their income only in one of the two countries which have signed the agreement.

Finance Minister Pranab Mukherjee said tax reform is a process, not an event. To moderate tax rate and simplify tax law all direct taxes including FBT and income tax would be brought under one code.

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