Paying and calculating taxes might soon become a less cumbersome and jargon-free exercise with the government proposing a series measures under a new Income Tax Code.
The code along with a discussion paper was released for public debate on Wednesday and a direct taxes code Bill will be introduced in Parliament in the Winter Session.
The new code is aimed at codifying the nearly five-decade-old Income Tax Act 1961. A few other legislations, including the Wealth Tax Act, will be subsumed under it.
“We have provided adequate flexibility…It is not an amendment to the Income Tax 1961, we wanted to present a new code,” finance minister Pranab Mukherjee said.
Interpreting the voluminous Income Tax Act, 1961 that has gone through several amendments has never been easy for common tax payers who are often forced to take professional help of chartered accountants.
Experts welcomed the move but said greater scrutiny was required before implementing the new code. “It is an extremely positive move by the government because it would clean up the existing act. The new structure would be simpler and more compliance oriented,” Shailesh Haribhakti, CEO of Haribhakti Group, told Hindustan Times.
UP Agarwal, president, Institute of Chartered Accountants of India (ICAI) said: “We at the ICAI will go through the entire code before commenting on it. The move is positive but we would come to know about the finer details only when we go through the entire document.”
The new code will simplify the rules and procedures with emphasis to make tax rules short, light, and easy to understand by removing redundant provisions and complex tax terminology.
The new code is equipped with tax calculators and simple formulae for calculating taxes. These would help common individuals avoid the arduous task of referring to voluminous explanations for every clause and sub-clause of the Income Tax Act.
Home minister and former finance minister, P Chidambaram, who has been one of the main architects of the new code, said the IT Act is outdated and it needs a revamp.
“The code is based on the underlying philosophy of the government which is to have a well regulated free market system,” Chidambaram said.