When archaic rules have to be replaced with new ones, the changes have to be dramatic and path breaking. The Direct Tax Code (DTC) endeavours to usher in an era of transparency and greater tax compliance. It signals a paradigm shift in the direct tax regime for the Indian economy and is touted as a replacement for the Income tax (I-T) Act, 1961, that would promote entrepreneurship, wherein the thrust would be on ‘regulated free markets’.
The complexity of the current Indian tax system is enormous. For several years, the numerous interwoven sections, sub-sections, clauses, sub-clauses, cross references, explanations, provisos, etc. have been the focus of discussions of various tax administrators, chartered accountants, tax counsels, and even tax payers. The amendments carried out from time to time through annual fiscal budgets and the multiple judgements (which are often contradictory) further add to the complexity.
The DTC is regarded as an attempt to completely revamp the direct tax system in India. It is seen as a way for promoting efficiency and equity in India’s tax system, while providing a stable source of revenues to fund government expenditures. However, the Code has garnered mixed reactions to its various proposals as while the objective of bringing equity may favor some interest groups, it may seem to be prejudicial to others.
From the perspective of the energy sector, the DTC aims to provide a plethora of reforms, the impact of which has been analysed hereunder.
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