The draft Direct Taxes Code Bill seeks to consolidate and amend the law relating to all direct taxes and will replace the Income Tax Act, 1961. The draft Bill, along with a discussion paper, was released for public comments in August 2009.[1] Following inputs received, the government proposed revisions to the draft Bill in June 2010. The table below summarises these revisions. The government has not released the changes proposed in the form of a revised draft bill however, but as a new discussion paper. The note is based on this discussion paper.[2] The Code had proposed a number changes in the current direct tax regime, such as a minimum alternate tax (MAT) on companies’ assets (currently imposed on book profits), and the taxation of certain types of personal savings at the time they are withdrawn by an investor. Under the new amendments, some of these changes, such as MAT, have been reversed. Personal savings in specified instruments (such as a public provident fund) will now continue to remain tax-free at all times. The tax deduction on home loan interest payments, which was done away with by the Code, has now been restored. However, the discussion paper has not specified whether certain other changes proposed by the Code (such as a broadening of personal income tax slabs), will continue to apply.
| Issue | Income Tax Act, 1961 | Draft Direct Taxes Code (August 09) | Revisions Proposed (June 2010) |
| Minimum Alternate Tax (MAT) | MAT currently imposed at 18% of profits declared by companies to shareholders. | To be imposed on assets rather than profits of companies. Tax rate proposed at 2% (0.25% for banks) | MAT to be imposed on book profit as is the case currently. Rate not specified. |
| Personal Saving / retirement benefits | Certain personal savings, such as public provident funds, are not taxed at all. | Such savings to be taxed at the time of withdrawal by the investor. | Such savings to remain tax-exempt at all stages, as is the case currently. |
| Income from House Property | Taxable rent is higher of actual rent or ‘reasonable’ rent set by municipality(less specified deductions). Rent is nil for one self-occupied property. | Taxable rent is higher of actual rent or 6% of cost /value set by municipality (less specified deductions). Rent is nil for one self-occupied property. | Taxable rent is no longer presumed to be 6% in case of non-let out property. Tax deductions allowed on interest on loans taken to fund such property. |
| Interest on Home loans | Interest on home loans is tax deductible | Tax deductions on home loan interest not allowed. | Tax deductions for interest on loans allowed, as is currently the case. |
| Capital Gains | Long term and short term gains taxed at different rates. | Distinction between long and short term capital gains removed and taxed at the applicable rate; Securities Transaction Tax done away with. | Equity shares/mutual funds held for more than a year to be taxed at an applicable rate, after deduction of specified percentage of capital gains. No deductions allowed for investment assets held for less than a year. Securities Transaction tax to be ‘calibrated’ based on new regime. Income on securities trading of FIIs to be classified as capital gains and not business income. |
| Non-profit Organisations | Applies to organizations set up for ‘charitable purposes’. Taxed (at 15% of surplus) only if expenditure is less than 85% of income. | To apply to organizations carrying on ‘permitted welfare activities’. To be taxed at 15% of income which remains unspent at the end of the year. This surplus is to be calculated on the basis of cash accounting principles. | Definition of ‘charitable purpose’ to be retained, as is the case currently. Exemption limit to be given and surplus in excess of this will be taxed. Up to 15% of surplus / 10% of gross receipts can be carried forward; to be used within 3 years. |
| Units in Special Economic Zones | Tax breaks allowed for developers of Special Economic Zones and units in such zones. | Tax breaks to be done away with; developers currently availing of such benefits allowed to enjoy benefits for the term promised (‘grandfathering’). | Grandfathering of exemptions allowed for units in SEZs as well as developers. |
| Non-resident Companies | Companies are residents if they are Indian companies or are controlled and managed wholly out of India. | Companies are resident if their place of control and management is situated wholly or partly in India, at any time in the year. The Bill does not define ‘partly’ | Companies are resident if ‘place of effective management’ is in India i.e. place where board make their decisions/ where officers or executives perform their functions. |
| Double Taxation Avoidance Agreements | In case of conflict between provisions of the Act, and those in a tax agreement with another country, provisions which are more beneficial to the taxpayer shall apply | The provision which comes into force at a later date shall prevail. Thus provisions of the Code would override those of existing tax agreements. | Provisions which more beneficial shall apply, as is the case currently. However, tax agreements will not prevail if anti-avoidance rule is used, or in case of certain provisions which apply to foreign companies. |
| General Anti-Avoidance Rule | No provision | Commissioner of Income Tax can declare any arrangement by a taxpayer as ‘impermissible’, if in his judgement, its main purpose was to have obtained a tax benefit. | CBDT to issue guidelines as to when GAAR can be invoked; GAAR to be invoked only in cases of tax avoidance beyond a specified limit; disputes can be taken to Dispute Resolution Panel. |
| Wealth Tax | Charged at 1% of net wealth above Rs 15 lakh | To be charged at 0.25% on net wealth above Rs 50 crore; scope of taxable wealth widened to cover financial assets. | Wealth tax to be levied ‘broadly on same lines’ as Wealth Tax Act, 1957. Specified unproductive assets to be subject to wealth tax; nonprofit organizations to be exempt. Tax rate and exemption limit not specified. |
| Source: Income Tax Act, 1961, Draft Direct Taxes Code Bill (August 2009), New Discussion Paper (June 2010), PRS | |||
[1] See PRS Legislative Brief on Draft Direct Taxes Code (version of August 2009) at http://prsindia.org/index.php?name=Sections&id=6 [2] Available at http://finmin.nic.in/Dtcode/index.html
Mr. Ramnath Kovind completes his tenure as President in July. With the Election Commission of India expected to notify the election dates this week, we look at how India will elect its next President.
As the Head of the State, the President is a key part of Parliament. The President calls the two Houses of Parliament into session on the advice of the Council of Ministers. A Bill passed by the Lok Sabha and Rajya Sabha does not become a law unless assented to by the President. Further, when Parliament is not in session, the President holds the power to sign a law with immediate effect through an Ordinance.
Who elects the President?
The manner of election of the President is provided in Article 55 of the Constitution. Members of Parliament and Members of Legislative Assemblies (MPs and MLAs) including elected representatives from the Union Territories (UTs) of Delhi and Puducherry form the electoral college, which elects the President. At least 50 elected representatives must propose a candidate, who must then be seconded by 50 other electors to run for the President's office. Members of Legislative Councils and the 12 nominated members of Rajya Sabha do not participate in the voting process.
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The history behind having proposers and seconders To discourage the practice, candidates had to secure at least 10 proposers and seconders each to contest the elections from the 1974 election onwards. A compulsory security deposit of Rs 2,500 was also introduced. The changes were brought in through an amendment to the Presidential and Vice-Presidential Act, 1952. In 1997, the Act was further amended to increase the security deposit to Rs 15,000 and the minimum number of proposers and seconders to 50 each. |
How are the votes calculated?
The Presidential election uses a special voting to tally the votes. A different voting weightage is assigned to an MP and an MLA. The value of each MLA's vote is determined based on the population of their state and the number of MLAs. For instance, an MLA from UP has a value of 208 while an MLA from Sikkim has 7 (see Table 1). Due to a Constitutional Amendment passed in 2002, the population of the state as per the 1971 census is taken for the calculation.
The value of an MP's vote is the sum of all votes of MLAs across the country divided by the number of elected MPs.
How will the numbers look in 2022?
In the 2017 Presidential elections, electors from 31 states and the UTs of Delhi and Puducherry participated. However, in 2019, with the Jammu and Kashmir (J&K) Reorganization Act, the number of states were reduced to 30. The J&K Assembly was dissolved as per the Act and a new legislature for the UT of J&K is yet to be reconstituted. UTs with legislatures were not originally part of the electoral college for the election of the President. The Constitution was amended in 1992 to specifically include the UTs of Delhi and Puducherry. Note that for MLAs from J&K to participate in future Presidential elections, a similar Constitutional amendment would be required to be passed by Parliament.
Based on the assumption that J&K is not included in the 2022 Presidential election, the total number of votes of MLAs in 2022 elections will have to be adjusted. The 87 Jammu and Kashmir MLAs must be removed from the total number of MLAs of 4,120. Jammu and Kashmir’s contributing vote share of 6,264 must also be reduced from the total vote share of 549,495. Adjusting for these changes, 4,033 MLAs will participate in the 2022 elections and the combined vote share of all MLAs will add up to 543,231.
Table 1: The value of votes of elected MLAs of different states at the 2017 Presidential Election
|
Name of State |
Number of Assembly seats |
Population (1971 Census) |
Value of vote of each MLA |
Total value of votes for the state (B x D) |
|
A |
B |
C |
D |
E |
|
Andhra Pradesh |
175 |
2,78,00,586 |
159 |
27,825 |
|
Arunachal Pradesh |
60 |
4,67,511 |
8 |
480 |
|
Assam |
126 |
1,46,25,152 |
116 |
14,616 |
|
Bihar |
243 |
4,21,26,236 |
173 |
42,039 |
|
Chhattisgarh |
90 |
1,16,37,494 |
129 |
11,610 |
|
Goa |
40 |
7,95,120 |
20 |
800 |
|
Gujarat |
182 |
2,66,97,475 |
147 |
26,754 |
|
Haryana |
90 |
1,00,36,808 |
112 |
10,080 |
|
Himachal Pradesh |
68 |
34,60,434 |
51 |
3,468 |
|
Jammu and Kashmir |
87 |
63,00,000 |
72 |
6,264 |
|
Jharkhand |
81 |
1,42,27,133 |
176 |
14,256 |
|
Karnataka |
224 |
2,92,99,014 |
131 |
29,344 |
|
Kerala |
140 |
2,13,47,375 |
152 |
21,280 |
|
Madhya Pradesh |
230 |
3,00,16,625 |
131 |
30,130 |
|
Maharashtra |
288 |
5,04,12,235 |
175 |
50,400 |
|
Manipur |
60 |
10,72,753 |
18 |
1,080 |
|
Meghalaya |
60 |
10,11,699 |
17 |
1,020 |
|
Mizoram |
40 |
3,32,390 |
8 |
320 |
|
Nagaland |
60 |
5,16,449 |
9 |
540 |
|
Odisha |
147 |
2,19,44,615 |
149 |
21,903 |
|
Punjab |
117 |
1,35,51,060 |
116 |
13,572 |
|
Rajasthan |
200 |
2,57,65,806 |
129 |
25,800 |
|
Sikkim |
32 |
2,09,843 |
7 |
224 |
|
Tamil Nadu |
234 |
4,11,99,168 |
176 |
41,184 |
|
Telangana |
119 |
1,57,02,122 |
132 |
15,708 |
|
Tripura |
60 |
15,56,342 |
26 |
1,560 |
|
Uttarakhand |
70 |
44,91,239 |
64 |
4,480 |
|
Uttar Pradesh |
403 |
8,38,49,905 |
208 |
83,824 |
|
West Bengal |
294 |
4,43,12,011 |
151 |
44,394 |
|
NCT of Delhi |
70 |
40,65,698 |
58 |
4,060 |
|
Puducherry |
30 |
4,71,707 |
16 |
480 |
|
Total |
4,120 |
54,93,02,005 |
|
5,49,495 |
Source: Election Commission of India (2017); PRS.
The value of an MP’s vote correspondingly will change from 708 in 2017 to 700 in 2022.
Value of one MP's vote = Total value of all votes of MLAs = 543231 = 700
Total number of elected MPs 776
Note that the value of an MP’s vote is rounded off to the closest whole number. This brings the combined value of the votes of all MPs to 543,200 (700 x 776).
What is the number of votes required to win?
The voting for the Presidential elections is done through the system of single transferable vote. In this system, electors rank the candidates in the order of their preference. The winning candidate must secure more than half of the total value of valid votes to win the election. This is known as the quota.
Assuming that each elector casts his vote and that each vote is valid:
Quota = Total value of MP’s votes + Total value of MLA’s votes + 1
2
= 543200 + 543231 +1 = 1086431 +1 = 543,216
2 2
The anti-defection law which disallows MPs from crossing the party line does not apply to the Presidential election. This means that the MPs and MLAs can keep their ballot secret.
The counting of votes takes place in rounds. In Round 1, only the first preference marked on each ballot is counted. If any of the candidates secures the quota at this stage, he or she is declared the winner. If no candidate secures the quota in the first round, then another round of counting takes place. In this round, the votes cast to the candidate who secures the least number of votes in Round 1 are transferred. This means that these votes are now added to the second preference candidate marked on each ballot. This process is repeated till only one candidate remains. Note that it is not compulsory for an elector to mark his preference for all candidates. If no second preference is marked, then the ballots are treated as exhausted ballots in Round 2 and are not counted further.
The fifth Presidential election which elected Mr. VV Giri is the only instance when a candidate did not secure the quota in the first round. The second preference votes were then evaluated and Mr. Giri secured 4,20,077 of the 8,36,337 votes and was declared the President.
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The only President of India to win unopposed |
