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assets (currently imposed on book profits), and the taxation of certain types of personal savings at the time they are withdrawn by an investor.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
The Election Commission has announced the schedule for the election of the President of India. The last date for nominations is June 30, elections will be held on July 19, and counting will take place on July 22. The BJD and AIADMK have proposed the name of Mr. P.A. Sangma. The Samajwadi Party and Trinamool Congress have suggested three names. Other parties or alliances have not announced any contenders. Our calculations show that no single party or alliance has the numbers to unilaterally elect candidates of its choice. A candidate will need 5,48,507 votes to be elected as the President. If the UPA were to vote as a consolidated block, its vote tally would reach 4,49,847 (41% of the total votes). Among the Congress allies, Trinamool holds the largest number of votes (47,898). If Trinamool decides to support some other candidate, the UPA tally will fall to 4,01,949 votes (37% of the total). The votes held by the major alliances are given in the table below:
| Coalition | Value of votes | Percentage of total votes |
| UPA |
4,49,847 |
41.0% |
| NDA |
3,03,912 |
27.7% |
| Left |
52,282 |
4.8% |
| Bahujan Samaj Party |
43,723 |
4.0% |
| Samajwadi Party |
68,943 |
6.3% |
| Biju Janata Dal |
30,215 |
2.8% |
| AIADMK |
36,216 |
3.3% |
| Others |
1,11,874 |
10.2% |
| Total |
10,97,012 |
|
| Minimum required to be elected |
5,48,507 |
|
A detailed break-up of votes held by each party is given in the table below:
| Party | Value of votes | Percentage of total votes |
| Indian National Congress |
3,31,855 |
30.30% |
| Bharatiya Janata Party |
2,32,454 |
21.20% |
| Samajwadi Party |
68,943 |
6.30% |
| All India Trinamool Congress |
47,898 |
4.40% |
| Bahujan Samaj Party |
43,723 |
4.00% |
| Janata Dal (United) |
41,574 |
3.80% |
| All India Anna Dravida Munnetra Kazhagam (AIADMK) |
36,216 |
3.30% |
| Communist Party of India (Marxist) |
35,734 |
3.30% |
| Biju Janata Dal |
30,215 |
2.80% |
| Nationalist Congress Party |
24,058 |
2.20% |
| Independent |
23,830 |
2.20% |
| Dravida Munnetra Kazhagam (DMK) |
21,780 |
2.00% |
| Telugu Desam Party |
21,256 |
1.90% |
| Shiv Sena |
18,320 |
1.70% |
| Shiromani Akali Dal |
11,564 |
1.10% |
| Communist Party of India |
9,758 |
0.90% |
| Rashtriya Janata Dal |
8,816 |
0.80% |
| Others |
7,420 |
0.70% |
| Janata Dal (Secular) |
6,138 |
0.60% |
| Jammu and Kashmir National Conference |
5,556 |
0.50% |
| Rashtriya Lok Dal |
5,412 |
0.50% |
| Desiya Murpokku Dravida Kazhaga (DMDK) |
5,104 |
0.50% |
| Jharkhand Mukti Morcha |
4,584 |
0.40% |
| Muslim League Kerala State Committee |
4,456 |
0.40% |
| Indian National Lok Dal |
4,068 |
0.40% |
| All India Forward Bloc |
3,961 |
0.40% |
| Jharkhand Vikas Morcha |
3,352 |
0.30% |
| Asom Gana Parishad |
3,284 |
0.30% |
| Telangana Rashtra Samiti |
3,044 |
0.30% |
| Revolutionary Socialist Party |
2,829 |
0.30% |
| Bodoland People's Front |
2,808 |
0.30% |
| All India United Democratic Front |
2,796 |
0.30% |
| Praja Rajyam Party |
2,664 |
0.20% |
| Maharashtra Navnirman Sena |
2,275 |
0.20% |
| Kerala Congress (M) |
2,076 |
0.20% |
| All India Majlis-e-Ittehadul Muslimeen |
1,744 |
0.20% |
| Nagaland People's Front |
1,722 |
0.20% |
| Sikkim Democratic Front |
1,640 |
0.10% |
| Peoples Democratic Party |
1,512 |
0.10% |
| Bahujan Vikas Aaghadi |
1,058 |
0.10% |
| Lok Janasakti Party |
957 |
0.10% |
| All Jharkhand Students Union |
880 |
0.10% |
| Haryana Janhit Congress |
820 |
0.10% |
| Mizo National Front |
732 |
0.10% |
| Marumalarchi Dravida Munnetra Kazhagam |
708 |
0.10% |
| Swabhimani Paksha |
708 |
0.10% |
| Viduthalai Chiruthaigal Katchi |
708 |
0.10% |
| YSR Congress Party |
708 |
0.10% |
| Peasants and Workers Party |
700 |
0.10% |
| Pattali Makkal Katchi |
528 |
0.00% |
| Manithaneya Makkal Katch |
352 |
0.00% |
| Puthiya Tamilaga |
352 |
0.00% |
| All India NR Congress |
240 |
0.00% |
| J&K National Panthers Party |
216 |
0.00% |
| Communist Party of India (Marxist-Leninist) |
176 |
0.00% |
| United Democratic Party |
153 |
0.00% |
| Lok Satta Party |
148 |
0.00% |
| Loktantrik Samajwadi Party |
129 |
0.00% |
| J&K Democratic Party Nationalist |
72 |
0.00% |
| People's Democratic Front |
72 |
0.00% |
| Uttarakhand Kranti Dal |
64 |
0.00% |
| Maharashtrawadi Gomantak Party |
60 |
0.00% |
| People's Party of Arunachal |
32 |
0.00% |
| Total |
10,97,012 |
|
Notes: The electoral college for the Presidential election consists of the elected members of Lok Sabha, Rajya Sabha and all Legislative Assemblies. The winning candidate must secure at least 50% of the total value of votes polled. Each MP/ MLA’s vote has a pre-determined value based on the population they represent. For instance, an MP’s vote has a value of 708, an MLA from UP has a vote value of 208 and an MLA from Sikkim has a vote value of 7 (Note that all MPs, irrespective of the constituency or State they represent, have equal vote value). Parties in various coalitions: UPA: Congress, Trinamool, DMK, NCP,Rashtriya Lok Dal, J&K National Conference, Muslim League Kerala State Committee, Kerala Congress (M), All India Majlis-e-Ittehadul Muslimeen, Sikkim Democratic Front, Praja Rajyam Party, Viduthalai Chiruthaigal Katchi NDA: BJP, JD(U), Shiv Sena, Shiromani Akali Dal, Janata Party Left: CPI(M), CPI, Revolutionary Socialist Party, All India Forward Bloc
