India promises new direct tax law that all can understand

New Delhi, Aug 12 : Finance Minister Pranab Mukherjee Wednesday unveiled a draft of the new Direct Tax Code to replace the five-decade-old Income Tax Act with easy-to-comprehend provisions for average taxpayers, freeing them from the clutches of lawyers and experts.

The finance minister also placed on the ministry's website a discussion paper on the subject to invite opinion from the public before going to parliament with a proper bill for the legislative changes.

The code also proposes to bring under one umbrella provisions related to all aspects of direct taxes in the country, including corporate tax, personal income tax, fringe benefit tax and securities transaction tax.

'The language is very, very simple. By putting simple language and simple forms, we will eliminate litigations as far as possible,' Mukherjee told reporters here.

He said it would be possible for most taxpayers to file their returns easily, adding that there were several easy to comprehend illustrations to guide them through the entire process, which today is often seen as complex and confusing.

'I expect people will read it, there would be an informed debate. Of course, we will hold detailed discussions with large numbers of stakeholders.'

Mukherjee hoped to place the bill on the new code in parliament during the winter session and expressed optimism that it will become law by 2011, coinciding with the 50th year of the existing Income Tax Act.

Home Minister P. Chidambaram, who had initiated the Direct Tax Code in 2005 as finance minister in the previous United Progressive Alliance (UPA) government, said the changes were necessary in view of the previous code outliving its utility.

'In these 48 years, not only India has changed, the world has changed. Therefore, it is widely accepted that the present code is outdated,' Chidambaram said, adding: 'It became a happy hunting ground for lawyers.'

He said it was not a mere amendment of the Income Tax Act of 1961 but a brand new code that has been written from scratch.

'This will be a transformational law.'

People should not get perturbed by the large number of pages in the new draft, which runs into 256 pages, Chidambaram said, explaining that the direct tax code of the US ran into 2,000 pages.