Modi Government to Prioritize Direct Taxes Code Implementation if Re-elected

The Modi government plans to prioritize the implementation of the Direct Taxes Code, which aims to simplify tax laws, rationalize capital gains tax, and align India's tax system with global norms, potentially boosting compliance and investment.

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Rafia Tasleem
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Modi Government to Prioritize Direct Taxes Code Implementation if Re-elected

Modi Government to Prioritize Direct Taxes Code Implementation if Re-elected

The Narendra Modi government plans to make the implementation of the long-delayed Direct Taxes Code (DTC) a top priority if re-elected in the upcoming Lok Sabha elections. Discussions are already underway within the finance ministry to simplify the laws governing direct taxes and align them more closely with global norms.

A key proposal under consideration is the restructuring of the capital gains tax regime. The draft prepared by a special task force in 2019 will form the basis for the revamp. The task force had recommended radical changes, including the rationalization of personal income tax rates and stability in the tax system without annual changes in rates.

The DTC aims to streamline direct tax laws, rationalize tax rates on capital gains, strengthen alternative dispute resolution mechanisms, and simplify income tax regimes. Tax experts have stressed the need for simplification of tax laws, particularly in areas such as the capital gains tax and tax deducted at source (TDS).

Why this matters: The implementation of the DTC could have significant implications for taxpayers and the overall economy. Simplifying tax laws and aligning them with global standards could boost compliance, reduce disputes, and make India a more attractive destination for investments.

The Modi government has taken steps in recent years to ease compliance, reduce exemptions, and adjust tax rates. However, the DTC, originally proposed during the UPA I government, has faced delays despite revisions in 2012 and 2014. "The alignment of the exemption-free personal income tax with the task force's proposed slab structure and reliefs for incomes up to Rs 55 lakh/year also requires attention," noted a tax expert familiar with the discussions.

The forthcoming revamp of direct taxes aligns with the Modi Government's directive for ministries and departments to outline action plans for the first 100 days of the Modi 3.0 government. The objective is to meet economic goals and position India as a developed nation by 2047.

Key Takeaways

  • Govt plans to prioritize implementation of Direct Taxes Code (DTC) if re-elected.
  • Key proposal: Restructure capital gains tax regime based on 2019 task force draft.
  • DTC aims to streamline laws, rationalize tax rates, and simplify income tax regimes.
  • Simplifying tax laws could boost compliance, reduce disputes, and attract investments.
  • Revamp of direct taxes aligns with Modi govt's 100-day action plan for developed India by 2047.