India’s New Tax Code Announced

December 8, 2011 Taxation in India

Direct Tax CodeNEW DELHI – The new Direct Tax Code will be instated next year, bringing several major changes to the tax system of India.

While addressing the International Tax Dialogue conference in New Delhi on December 7th, the Finance Minister of India Pranab Mukherjee stated that on April 1st 2012 the country’s Income Tax Act would be replaced with the new Direct Tax Code.

The new legislation will introduce a number of long discussed proposals to change India’s tax system, with the primary aim of expanding the country’s tax base to cover a greater number of transactions and businesses, and modernizing outdated tax regulations. New measures will also be introduced to phase out currently offered tax exemptions and replace them with new tax credits and tax breaks, targeted at encouraging higher levels of capital investment and business start ups.

The Code will also herald the long awaited implementation of nationwide Goods and Service Tax (GST), which has been a heavily debated topic in India, due to disagreements between local governments over its effectiveness and implementation. During his address the Minister welcomed the new GST system, saying that it will bring a much needed uniformity in tax structure across India.

With the passage of the Code, India will expand its toolset for fighting tax evasion, as new measures will be introduced to modernize the country’s legislations regarding non-compliance. Pranab Mukherjee called for other countries around the world to follow suit and update their regulations regarding tax evasion, saying that standardization of tax rules across the globe would be an invaluable asset when fighting cross border tax evasion and international money laundering.

Photo by World Economic Forum