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assets (currently imposed on book profits), and the taxation of certain types of personal savings at the time they are withdrawn by an investor.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 Prevention of Torture Bill, 2010 was introduced in the Lok Sabha on April 26, 2010, and was passed by the Lok Sabha on May 6 (See Bill Summary here). The Bill was not referred to a Standing Committee of Parliament. The Bill has been introduced to allow India to ratify the United Nations Convention against Torture and Other Cruel, Inhuman and Degrading Treatment or Punishment. The Convention against Torture requires member countries to bring their domestic legislation in conformity with the provisions of the Convention. The main features of the Bill, and the issues are highlighted below (For the PRS Legislative Brief on the Bill, click here). Main features of the Torture Bill
| Features | Explanation |
| Definition of ‘torture’ | A public servant or any person with a public servant’s consent commits torture if all three conditions are met:
|
| When is torture punishable? |
|
| Conditions under which courts can admit complaints |
|
The definition of torture The definition of torture raises the following issues:
Dilution of existing laws on torture The Bill makes it difficult for those accused of torture to be tried. This is because (a) complaints against acts of torture have to be made within six months, and (b) the previous sanction of the appropriate government has to be sought before a court can entertain a complaint.
| Relevant provisions in the Criminal Procedure Code and the Bill. | ||
| Subject | Criminal Procedure Code | Bill |
| Requirement of government sanction | Sanction needed if (a) a public servant is not removable except with the sanction of the appropriate government, and (b) the public servant was acting in the course of his duties. | Prior sanction of the appropriate government needed in all cases. |
| Time limits for filing complaints | Time-limits exist for offences punishable with maximum imprisonment of up to three years. No time limits for offences which are punishable with imprisonment of more than three years. | There is a time-limit though torture is punishable with maximum imprisonment of up to ten years. Complaints have to be filed within six months. |
| Sources: Sections 197 and 468 of the Criminal Procedure Code, 1973; PRS. | ||
Independent authority to investigate complaints There is no independent mechanism/ authority to investigate complaints of torture. The investigating agency in most cases of torture would be the police. In many cases, personnel of the police would also be alleged to have committed torture. In such cases, the effectiveness of investigations in incidents of torture will be affected.
| Independent authorities in other countries to investigate incidents of torture. | |
| Country | Authority/ Institution |
| France | Comptroller General of the places of deprivation of liberty |
| Germany | The Federal Agency for the Prevention of Torture |
| New Zealand | Human Rights Commission, Police Complaints Authority, Children’s Commissioner |
| United Kingdom | 18 different organisations, including Independent Monitoring Board, Independent Custody Visiting Associations, etc. |
| Sources: National Preventive Mechanisms, UN Subcommittee on Prevention of Torture; PRS. | |
Police Personnel sent for trials under existing laws, and convictions 
