Chartered Accountants Phone: 2686 8147
B-49, Gulmohar Park,
MAHESH KAPASI New Delhi-110 049
M. Com., LL.B., FCA, FICWA, FCS
Ex –Member: AMIMA, AMIBM, ACEA (London), MIIA (U.S.A.)
(Record Holder for “Most letters to editor”
in LIMCA BOOK OF RECORDS 2009)
Reference No: Dated: August 16, 2009
LAWYERS CLUB INDIA COM
Is it Simplified Direct Taxes Code?
Income Tax is one of most complicated tax law. In order to simplify it an attempt has been made by the government to simplify it so that common income tax payers can easily understand it and comply with it.
But the Direct Tax Code has 285 Sections and 18 Schedules. Can a common citizen make anything out of this voluminous Code-Sections and Schedules? There should not be more than 50 to 60 Sections .With the passage of time, there shall be more Income Tax Rules, clarifications, Circulars, Notifications etc, besides Court decisions on this Code too. Income Tax Laws shall always remain a faux paus for the taxpayers and government too. The services of tax practioners and chartered accountants shall always be needed for all taxpayers till there is income tax in India!
The scheme of Exempt Exempt Tax (EET) is most undesirable as it is a postponement of tax. The amount received on Retirement schemes shall be taxed on maturity or withdrawal. Those who shall retire and withdraw money from their investments shall be taxed and suffer too much financially-when they need the money most for their livelihood with no capacity to earn just because of their older age. It should be dropped in toto. Let the present deduction of Rs.100000 under section 80 C need not be changed and do away with proposed EET!
Even the government has no regard and concern for senior citizens of 60 years and more but less than 65 years as senior citizen under this Code is at 65 years only. It is against National Policy of age limit of senior citizens. It is high time 60 years be made as senior citizens. Or do away with the special concession to Women and Senior Citizens and have a basic exemption of Rs. 6 Lakhs for all the tax payers –i.e., including Women and Senior Citizens!
To collect more tax revenue and catch big tax evaders it is most desired to concentrate on big tax payers and put staff energy and strength on them. With increased number of tax payers’ paper work / data on computer and time is wasted without getting anything concrete on tax collections. For it raise the basic exemption limit to Rs.6, 00, 000-this is the amount which an average Metro family needs to break even. Exempt them totally from direct taxes. When wealth limit can be raised to 50 Crores than income tax exemption limit of Rs. 6 lakhs is nothing.
It is apparently shown in the Code that there shall be substantial saving of tax amount as rate for first slab between Rs. 1,60,000 to Rs.10,00,000 is only 10 %. But it is a misnomer and hardly any tax saving shall take place because of EET in the long run. Also many perks of Salaried class are to be taxed which at present are tax free. And Long Term Capital Gains from Shares are exempt at present but henceforth Capital Gains on Shares (the distinction between long term and short term is to be dispensed with) shall part of total income and taxed. Actual amount of tax savings in the long run- if any -as claimed under the Code -shall depend on composition of income, investments and savings of each individual.
Wealth Tax is reintroduced as it was earlier –some years back and it was a failure. To minimise number of tax laws also, it is suggested to do away with it. Wealthy people which includes most politicians are least affected by tax laws as end result of all probes and investigations are just zero. Also the share business is not that much attractive as it looks for wealthy people, as Shares shall be part of wealth Tax computation. It is in the interest of politicians also to do away with wealth tax!
For simplification also abolish Minimum Alternate Tax (MAT) too.
The TDS limits at present are too low. Raise it to practical limits –by four to five times of the present limits.
Deduction will be allowed to an individual, who is self-employed, for rent actually
paid for his residence, in excess of ten per cent of his gross total income from ordinary
sources. However, there will be a ceiling of rupees two thousand per month on the amount
allowed as deduction. This amount is very unrealistic either it should be scrapped or raised to Rs.20000 per month!
The present deduction for interest paid for Self occupied house of Rs. 150000 is withdrawn in this Code. It shall hit self -occupied house owners as they shall be required to pay interest on their housing loans which shall not get set off with deduction allowed under present Income Tax Act. In order to reduce housing shortage even more incentives should be offered on all types of houses –self -occupied and let out ones.
Depreciation on books is proposed in the Code on Books in general @ 25%, it must be raised to 100% as with technology change , resale value of most books is mostly nil! Also remember that ‘goods sold off are not taken back or even exchanged”
Interest for some defaults by assessees shall be charged to at 1% per month whereas government on their part of delay of refunds etc shall pay 0.5%, why this disparity?
Any amount exceeding Rs.20, 000 taken or accepted or repaid as loan or deposit
otherwise than by account payee cheque or draft shall be deemed to be income, and taxed. This limit is too low in the present inflationary times and must be raised to Rs. 50,000 at least.
The Time limit from 21 months for issuance of notice etc to the assessees must be reduced to 12 months to complete all assessments etc and issue refunds with 3 months from date of filing the Income Tax Return.
Rectification of Mistakes applications if not disposed off within 6 months it shall be deemed to be rejected. It is most unfair; The Rectification Order must be passed either way in writing and be communicated to tax payer for reasons for rejecting if so.
For Income escaping assessment -a case shall not be reopened after seven years from the end of the relevant financial year. The time limit should be reduced to four years only as the time limit of 4 years is more than enough to act for such cases.
The Code is silent on AIR / PAN Number requirement for investments etc. In view of continuing inflationary trends and to concentrate on high value transactions the limits for requirement of AIR /PAN must be raised suitable say 3 to 4 times from the present limits.
Where is one page simple “Saral” form to file the Income Tax Return in this code? IN LIGHTER VIEN let me say that -Because of Computerization –AIR etc the Income Tax Department gets most of the information of incomes and investments etc of almost all assessees .Therefore, I suggest the Income Tax Department to prepare the Income Tax Return of all the assessees on that basis-information gathered –and send a draft copy of their Income Tax Returns (and Wealth Tax Returns too wherever applicable) and ask them to sign and file that Income Tax Return with or without modifications or changes if any! Lo, who says I T Act is most complicated and troublesome for common Income Tax payers?