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Indian govt plans to replace income tax
February, 03rd 2010

Indian governments plan to replace the income tax with a new Direct Tax Code (DTC) has raised eyebrows with the opposition parties as well as experts expressing scepticism at the new proposal, which has been touted revolutionary and radical by its architects.

Main opposition, the Bhartiya Janata Party, on Tuesday said the proposal amounted to throwing taxpayers from the frying pan into the fire. The party in a detailed memorandum submitted to Finance Minister Pranab Mukherjee said 90 percent of individual taxpayers shall end up paying more taxes and their rights extinguished by a draconian regime giving arbitrary powers to the tax officials.

Another very disturbing and disquieting feature in the code is the rather thinly veiled attempt to destroy the charitable and religious institutions playing a stellar role in promoting education, health and other social welfare activities, the BJP said, opposing the ground shift in taxing them as a Machiavellian first step towards reckless commercialisation of education and health, for which these institutions are perceived to be road blocks.

Pressing for continuing the current exemption to religious trusts, the party opposed exemption limited to only those trusts or institutions that are registered with the government under the religious endowment acts and denying tax deduction to donors of such bodies.

A large number of trusts that are not registered under these acts will have to apply for registration, which may or may not be granted and may be used as a backhand move to seize control of these institutions, the party leaders asserted.

The party also expressed shock at the code seeking to force TDS (tax deduction at source) from every citizen whose income is below taxable limit, be he a cobbler, rickshaw driver, street vendor or a senior citizen and anyone having savings in post offices and banks.

The memorandum revealed as fault the abnormal and extraordinary powers given to the tax authorities by way of General Anti-Avoidance Rules (GAAR), reopening of assessments to harass taxpayers, no relief by way of stay of demand made by IT officers, deemed notice even if not served, seizure of stock-in-trade instead of current law permitting on inventorisation and no seizure, and harsh penalty and prosecution provisions.

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