Direct taxes are the taxes paid by an individual /organization directly to the imposing entity i.e. the incidence and impact of taxation falls on the same entity.
Direct Taxes are progressive in the sense that the proportion of tax liability rise as an individual or entity’s income increases.
Various direct taxes are income tax, wealth tax, corporate tax, securities transactions tax etc.
Direct taxation in India is governed by the Central Board of Direct Taxes (CBDT) under the Department of Revenue in the Ministry of Finance.
Recently, Akhilesh Ranjan headed task force to review the Income Tax Act, 1961 submitted a draft Direct Tax Code to government of India.
The direct tax code seeks to consolidate and amend the law relating to all direct taxes, so as to establish an economically efficient, effective and equitable direct tax system which will facilitate voluntary compliance and help increase the tax-GDP ratio. (i.e. higher tax buyoancy)
Another objective is to reduce the scope for disputes and minimize litigation.
SALIENT FEATURES OF THE CODE ARE AS FOLLOWS:
• Rejig of personal income tax slabs
• Surcharges should be temporary
• Corporate tax cut rate to 25% for all companies with an annual turnover over 400 crores
• Common tax rate for domestic and foreign companies for ease of doing business
• Reduce compliance burden by simplification of procedures
• Litigation Management
• Negotiated Settlements to settle a dispute through mediation
• Delinking of transfer pricing assessment with regular one
• Changes in Dividend Distribution Tax and Minimum Alternate Tax