The Income Tax (IT) Act of 1961, is the largest act in the Constitution of India. The Direct Tax Code 2009 (the draft of which is currently being available for public debate) will replace the Income Tax Act of 1961.This change is from the old to the new is perhaps quite overdue. With the huge amount of amendments made to IT Act through yearly exercise of the Finance Bill (aka The Union Budget), the sheer effort it takes the common man to understand the complex jargon and the multiple interpretations have made the IT Act extremely complex.The Direct Tax Code aims at simplifying the entire world of defining direct taxes in a language which is jargon free, simple to understand by the common man and possibly simpler to implement. For a country the size of India, the growing tax payer base a majority of which is ignorant of the impact of the direct taxes (Income Tax, Wealth Tax, etc), the Direct Tax code will hopefully be a welcome change. Despite the advent of the Internet and the speed at which information is disseminated, our understanding of taxation is limited to:
- the textbooks in school where we get a primer on taxation
- coffee table analysis of the annual budget
- taxation advice from friends and family
- tax computation by the employer or chartered accountant
- and in very rare cases, a personal intent to understand taxation (at least income tax)
