New Delhi, Aug 26 (IANS) The cabinet Thursday cleared a simplified Direct Tax Code to replace the 50-year-old Income Tax Act and free people from the clutches of chartered accountants and it is likely to be tabled in the ongoing monsoon session of parliament, informed sources said.
‘The cabinet has cleared the Direct Tax Code bill and it is likely to be tabled during the monsoon session of parliament,’ the sources said after a cabinet meeting chaired by prime minister Manmohan Singh.
‘However, the bill is likely to be referred to a parliamentary committee and it is likely to be passed in the winter session of parliament later this year,’ the sources said, adding that once that happens the new code will come into force from April 1, 2011.
The monsoon session concludes Monday and the winter session is likely to begin in mid-November.
Finance Minister Pranab Mukherjee had previously hoped that the bill could be passed during the current session. He had also said that deciding the slabs under the new code was the prerogative of parliament.
According to Mukherjee, direct taxes were now a major resource provider to the government and had grown at an average rate of 24 percent per annum in the past five years, trebling from Rs.132,771 crore in 2004-05 to about Rs.378,000 crore in the previous fiscal.
The share of such taxes has also increased from 4.1 percent to 6.1 percent of the gross domestic product (GDP), which was made possible by rationalisation of tax structure and improvement in administration that led to better tax compliance.
‘To improve compliance further, tax laws need to be simple, stable and robust. Tax rates should remain moderate. Multiplicity of tax exemptions and deductions must be gradually phased out in order to widen and deepen the tax base,’ Mukherjee said.
