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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assets (currently imposed on book profits), and the taxation of certain types of personal savings at the time they are withdrawn by an investor.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

   

In response to the COVID-19 pandemic, the central and state governments have implemented several measures to reduce the spread of the disease and provide relief for those affected by the it.  In this blog, we look at some of the key measures taken by the Government of Chhattisgarh with regard to public health, ensuring supply of essential commodities and providing relief to affected persons.  

COVID-19 cases in the State

As of April 21, 2020, Chhattisgarh has 36 confirmed cases of COVID-19.  Of these, 11 are active cases, and 25 patients have been cured or discharged.   This is illustrated below in Figure 1. 

Figure 1: Day wise COVID-19 Cases in Chhattisgarh

 image

Sources: Ministry of Health and Family Welfare, Government of India; PRS.

Key measures taken by the State Government

On March 13, 2020, the Department of Health and Family Welfare notified the Chhattisgarh Epidemic Disease, COVID-19 Regulations, 2020.   Key provisions of the regulations include: 

  • The district collector can take necessary actions such as sealing geographical area of the district and ban vehicular movement, in order to prevent the spread of the epidemic.  Further, the district administration may take measures such as closure of schools, offices and banning public gatherings. 
     
  • In order to avoid rumours and unauthenticated information, no person or institution can use any print or electronic media for information regarding COVID-I9 without prior permission of Health Department.
     
  • All health facilities (including private) should have COVID-19 corners for screening of suspected cases.  Further, they should record travel history of a person if he has travelled to an area affected by COVID-19.  

Movement restrictions:  Following these regulations, the government announced several additional measures to restrict movement of people to contain the spread of COVID-19.

  • On March 19, the Transport department stopped running of all inter-state buses in the state to restrict movement to and from the state.  On March 21, all city bus services in urban areas of the state were suspended. This was followed by stoppage of all transport including auto, taxi and e-rickshaws.
     
  • On March 22, the government announced a lockdown in all urban areas of the state till March 31 during which all offices, institutions and other activities were to remain closed.   Essential services such as medical shops, vegetable shops, petrol pumps, electricity and water supply services were open.    
         
  • On March 25, the central government announced on a 21-day country-wide lockdown till April 14.  On April 14, the lockdown was further extended till May 3, 2020. 

Essential Goods and Services: Following the lockdown, the government notified certain additional essential goods and services that will remain unaffected by the lockdown.   These are noted below:  

  • On March 13, 2020, the central government notified hand sanitisers, surgical masks and N-95 masks as Essential Commodities.  This implies that the government can regulate the product, supply and pricing of these items.   Following this, the state government notified that the district administration should monitor the price of surgical masks, N-95 masks and hand sanitisers in each district of the state.
     
  • On March 24, the state department of Food and Public Distribution notified certain additional essential goods and services under the Essential Commodities Act, 1955.  These include: (i) wheat and rice mills, (ii) operations of items used in acquirement or storage of items under the Public Distribution System, such as fertilisers, (iii) supply of Petrol, Diesel, CNG and LPG, among others.
     
  • On April 15, the Ministry of Home Affairs issued guidelines on the measures to be taken by state governments until May 3.  As per these guidelines, select activities will be permitted in less-affected districts from April 20 onwards to reduce the hardships faced by people.  Permitted activities include: (i) health services such as hospitals, clinics, and vets, (ii) agriculture and related activities such as fisheries and plantations, (iii) MNERGA work, (iv) construction activities, and (v) industrial establishments.

Relief measures:  During the lockdown, the state government announced several measures to provide relief to the affected individuals.  Key measures include: 

  • Rice for two months will be provided in April to all beneficiaries under the Public Distribution System.  Antyodaya & Annapurna ration card holders will also get sugar and salt for two months in April.  Two quintal of rice is allocated to every gram panchayat, which can be utilised for distribution to individuals without ration cards, subject to a maximum of 5 kg for an individual. 
     
  • 4 kg of rice at primary level and 6 kg at upper primary level will be provided to school children under the Mid-day Meal Scheme, on account of closure of schools.  Further, arrangements will be made to provide ready to eat take home rations for undernourished children between the age of 3 to 6 at Aanganwadi centres.  
  • The government approved sanction of MLA funds for corona virus prevention and other necessary arrangements and support.  The Chief Minister announced that there will be no mandatory deduction from salaries of state government officials and employees for pandemic relief. 
     
  • The state’s Labour Department sanctioned Rs 3.8 crore to aid labourers affected due to lockdown. 
     
  • Pending taxes, interest and penalties of bus and truck operators of nearly Rs 331 crore to be waived off.  

Health Measures:  Over the last few weeks, the government issued several guidelines and orders on containment of the virus, patient handling and protection of healthcare workers.  Some of these are noted below:

  • On March 23, the government of Chhattisgarh declared Corona Virus as a "Notified Infectious Disease" under the Chhattisgarh Public Health Act, 1949.  Further, it notified measures to be taken for prevention of spread of COVID-19 at industries and workplaces.  These included restricting the number of employees at workplaces, and ensuring sanitisation at workplace.  
     
  • Guidelines regarding bio-medical waste in quarantine homes and camps were notified.  These guidelines provide that all workers involved in waste collection should be provided with personal protective equipment.  Further, vehicles carrying such waste should be sanitised with 1% hypochlorite after every trip. 
     
  • On April 11, the Department of Health and Family Welfare made it mandatory to wear a mask for all persons while stepping out of their house for any public place. 
     
  • The department also released guidelines for patients cured of COVID-19.  These guidelines provide that such persons should be escorted to their home district from the hospital and regular monitoring and supervision of their health should be ensured by the district administration.   
     
  • Further, the department released guidelines for continuation of other hospital services during COVID-19 outbreak.  The guidelines provide that the patients should be advised on phone as far as possible, and should be given separate timings for in-person appointments to avoid congestion at hospitals.  On April 18, the Chief Minister announced an online health consultation website for patients, through which patients can seek free of cost advice from doctors.   

For more information on the spread of COVID-19 and the central and state government response to the pandemic, please see here.