News

Published: April 19, 2024
Updated: April 19, 2024

Major reform coming in India's Tax Landscape: Direct Tax Code Overhaul on the Horizon

Government's Prioritization

Official sources reveal that if re-elected, the Narendra Modi government intends to prioritize the implementation of the long-awaited Direct Taxes Code (DTC). Discussions are already underway within the finance ministry, with directives from the Prime Minister himself.

Simplification and Global Alignment

The objective behind this move is to simplify the regulations governing direct taxes and bring them in line with global standards. This overhaul will be based on a draft prepared by a task force back in 2019.

Addressing Long-standing Challenges

Key proposals include restructuring the capital gains tax regime and tackling various challenges related to tax deducted at source (TDS).

History and Evolution

Originally proposed during the UPA I government, the DTC saw a draft Bill presented in August 2009. However, subsequent administrations faced hurdles, leading to delays and revisions.

Continued Reform Efforts

Despite significant strides in easing compliance and adjusting tax rates, there are remaining areas for reform, particularly concerning capital gains taxation and simplification of tax laws.

Expert Insights

Experts emphasize the need for simplification, rationalization of tax rates, strengthening dispute resolution mechanisms, and streamlining personal income tax rules.

Sudhir Kapadia's Perspective

Sudhir Kapadia, Partner at EY India Tax & Regulatory Services, highlights the complexity arising from numerous amendments to the Income Tax Act over the years.

Alignment with Economic Goals

The forthcoming revamp of direct taxes aligns with the Modi government's directive to outline action plans for the first 100 days of Modi 3.0. The goal is to meet economic objectives and position India as a developed nation by 2047.

The proposed overhaul of the Direct Tax Code represents a significant step towards modernizing India's tax landscape. By simplifying regulations, addressing long-standing challenges, and aligning with global standards, the government aims to foster economic growth and development in the country.