‘Too radical’: Centre likely to implement DTC in parts

The wait for the proposed Direct Tax Code (DTC) could get longer because the government is of the view that the recommendations on it are too “radical” and require more deliberation.

In addition, it is in favour of implementing in parts the proposals made by the task force on the DTC. “The report is exhaustive and cannot be implemented at one go. Instead of making the report public, the government would pick some recommendations and implement them,” said a source privy to the government plan.

There were expectations that the finance ministry in the Budget would put the DTC in public for consultation and it might approve key proposals.

But there was no reference to the task force report in the Finance Bill or the finance minister’s speech. However, the source said some Budget proposals were part of the task force report. One was abolishing dividend distribution tax (DDT). While the Budget has abolished it, the tax liability has been shifted from the company declaring dividend to the receiver.

The new income tax regime is modelled on the task force’s recommendations. The report suggested doing away with deductions. The government, however, introduced the regime while keeping the old one.

A lot of considerations go into amendments to existing tax laws. The finance ministry has to consider revenue implications, the end-beneficiaries of the new regulations, the economic impact, etc. Then there are also political considerations and whether the changes are in line with the government’s overall plans. The report is being termed “radical” because many of its proposals are not in harmony with the finance ministry’s considerations.

The DTC aimed to overhaul the 60-year-old Income-tax Act, 1961, and make the tax system progressive. The government appointed a task force headed by former Central Board of Direct Taxes member Akhilesh Ranjan, who had submitted the report in August last year. The report, which is not yet public, is learnt to have proposed sweeping changes in the taxation structure.