New Direct Tax Code - Will it make taxation simpler & help businessman & taxpayers - Current affairs Video Lecture | Indian Economy for Government Exams (Hindi) - Bank Exams

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hello and welcome to study IQ in this
session we will discuss about the new
direct tax code direct tax code as we
all know taxes are divided into direct
taxes and indirect taxes and this tax
code the new direct tax code deals with
the direct taxes and we have already
seen the tax code for indirect taxes
that this GST it is a unified tax
structure so in this lecture we will be
discussing about the proposed new direct
tax code the proposed new direct tax
code draft will be ready by July and in
brief what is the aim of this new direct
tax code first of all it aims to extend
25 percentage corporate tax rate to all
firms gradually to all firms it means
that the corporate tax rate would be 25
percentage for all the firms and this is
the target of this tax code and this
will be done gradually not soon but this
will be done gradually and secondly this
code also aims to provide relief to
individual tax payers so relief to
individual tax payers so in brief these
two are the main targets of this new
direct tax code in this lecture let us
see the new direct tax code in detail
first of all let us see what is this and
why this is being brought so why and
what this new direct tax code aims to
replace the income tax act of 1961 the
income tax act of 1961 so the new direct
tax code will replace replace the income
tax act of 1961 the existing direct
taxes for example income tax corporate
tax and other levies like the capital
gains tax etc they have undergone
numerous changes since 1961 and the P
Prime Minister Shri Narendra Modi inform
the tax officials that all this Direct
Taxes needs changes so he said that
these are all old laws and the economy
has changed everything in the economy
has changed the structure of the
economic selfish genes so these are all
laws and these laws needs changes so
that is the reason why the new direct
tax code has been proposed first of all
in order to cope up with the economic
needs of the country so we have already
said that the economy has changed and
there has been tremendous change in the
structure of the economy so in order to
cope up with the economic needs there is
a needful direct tax code and secondly
in order to keep pace with the global
best practices so global best practices
it means that some international
examples are there some countries would
have excelled in their tax code so we
have to adopt the best practices in
order to get the best outcome so in
order to cope up with the global best
practices a new direct tax code is
essential another aim of this new direct
tax code is to ensure the economy
becomes more tax compliant so tax
compliant when the economy becomes more
tax compliant what will happen the tax
revenue in the economical go up so the
tax revenue in the economy will go up
this will increase the revenue of the
government and will bring down the
fiscal deficit of the country another
reason is to promote new business models
so new business models see what happens
when the tax rate comes down people will
be motivated to do business so there
will be new businesses in the economy
there will be more innovation more new
models of business will be adopted so
when the quantum of the business or
economic activity in an economy
increases there are more chances
there will be new models of business in
the economy so this will add to
innovation and new models in the economy
again another image to promote the
digital economy as well why because when
there is a new direct tax code the
government can easily bring them under
digitalization so in order to promote
digital economy see the case of GST
itself GST has improved digitalization
in the economy so likewise new direct
tax code can also improve the
digitalization in the economy another
advantage is that we can check
offshoring what is mean by offshoring
offshoring means relocation of a
business from one country to another
country this is relocation why is this
relocation done in order to avail the
tax benefits so tax benefits usually big
corporates what do they do they invest
in those countries where the corporate
tax rates are less why because it will
increase their profit so when corporate
tax rates are less the corporates will
earn more profit and as an entrepreneur
every corporate would be eager to earn
more profit so every business will aim
to earn more profit and in order to
maximize the profit the tax rate should
go down so what will the corporates do
they will prefer to invest in those
countries which have lesser corporate
tax rates so this will lead to
relocation and this is known as
offshoring so offshoring means
relocation of business from one country
to another so one reason can be
decreased tax rates so in order to check
the offshoring also the government can
use this direct tax code so with the
introduction of the new direct tax code
what are the aims or what are the
expectations of the government the
and expects that first of all the tax
net would increase the tax net would
increase how will the tax net increase
as the corporate tax rate comes down
there will be more investments in the
economy so more investments means more
tax returns so the revenue of the
government in the form of tax will
increase again the government aims for
an equitable rate of taxes for different
class of tax payers so you must remember
the word equitable it is not equal what
is the difference between equitable and
equal if suppose there is a cake and
there are four members in the family if
you are dividing this cake into four
equal parts we say these are equal but
suppose these four members one is the
father second one is the mother third
one is a kid who is just one and a half
years and fourth one a grandfather and
you have the same cake and who will
consume more the father and the mother
would be consuming more because the kid
can eat only lesser portion of the cake
and grandfather who is supposed to be an
old person he also will consume less and
if you are dividing the Cape like this
for the father for the mother and this
for the kid and for the grandfather this
is known as equitable equitable means
according to that person's need all
according to that person's capacity so
the government is trying for an
equitable tax rate for different classes
of taxpayers thirdly the government is
trying to make the businesses in the
country more competitive with the
introduction of new direct tax code how
can the government make the businesses
more competitive let us see first of all
lowering the tax rate so lower in tax
rate means more businesses will be
motivated to do business in the economy
because the tax rate is less they have
higher profits no so there will be more
activity in the countries secondly by
facing out the remaining tax exemptions
so remaining tax exemptions are also
phased out so so by this way the
government will improve the
competitiveness of the business in the
economy next the government is also
trying to define the key terms or the
key concepts in the taxation that is the
income and scope of taxation so the
government is trying to give a clear
definition for income and scope of
taxation now let us look at the global
picture if we look at a global scenario
what we will observe is that while when
the governments try to reduce the
corporate tax rate what happened in the
economy or what would happen in the
economies there will be an increase in
investment and also an increase in job
creation so from the global examples
this has been proved increasing
investment and increase in job creation
when the corporate tax rate comes down
we have already seen why this has
happened when the corporate tax rates go
down the corporates will have to pay
lesser tax
this means more profit for the
corporates so the profit of the
companies or the corporates will
increase so with more profit they will
make more investment in the economy more
investment in the economy leading to
higher job creation in the economy if in
particular if we take the u.s. example
in December 2017 the u.s. enacted tax
cuts and Jobs Act tax cuts and Jobs Act
so under this act the US government
lower the corporate tax from 35
percentage to 21 percentage so under the
tax cuts and Jobs Act the corporate tax
in the country was reduced you twenty
one percentage from the earlier thirty
five percentage and a month later what
happened was that Apple made an
announcement that Apple company would
invest thirty billion dollars thirty
billion dollars in order to expand
the US operations so early in us the
company would invest thirty billion
dollars in order to increase the US
operations so we can say that the
announcement by the company was on the
backdrop of this tax cuts and Jobs Act
so according to that act the corporate
tax rate in the company has come down
and the corporates will earn more profit
and this has led to higher investments
in the country and new job creation also
in the country similarly in India the
new direct tax code also proposes to
reduce the corporate tax rate to 25
percentage gradually so earlier it was
30 percentage and now according to the
proposal of the new direct tax code it
will be reduced to 25 percentage
gradually and two things you must
remember here is first of all this 25
percentage for all firms
irrespective of the profit that they
aren't so this 25 percentage will be for
all forms irrespective of their profits
and secondly the world gradually which
means that this 25 percentage will not
be implemented as soon as the new direct
tax code will be adopted no it is not
like that as the revenue collection of
the government improves the government
will do this so when the revenue
collection of the government increases
the government will reduce the corporate
tax rate to 25 percentage for all firms
but from the year 2018 19 from the
financial year 2018 19 this 25
percentage tax rate the corporate tax
rate will be applicable to all firms
whose sales are less than 250 crore
so from 2018 19 this 25 percentage
corporate tax rate will be applicable
for all firms whose sales are less than
250 crore and for all firms gradually as
the revenue collection of the government
improves so for the time being it's for
the firms whose sales are less than 250
crore coming to individuals individuals
have to pay
personal income tax individuals does
this direct tax code have any impact on
individuals let us see so the direct tax
code targets our aim to make personal
income tax more progressive so
progressive what is a meaning of
progressive what is meant by progressive
tax under the progressive tax system
what happens is the tax rate increases
with an increase in taxable amount
so when taxable amount increases the tax
rate also increases or we can say that
the tax rate progresses with an increase
in taxable amount when there is more
taxable amount the tax rate will also be
more and according to the direct tax
code this is trying to give some relief
to people in the 5 percentage and 20
percentage tax labs now let us see
whether this new direct tax code the
proposed direct tax code whether it is a
new idea in the country no it is not a
new idea this has been proposed by the
previous government also but this was
not passed in the previous Parliament
here you should remember that the
present government has adopted or
incorporated all the new ideas from the
previous proposals so let us see what
are those things
first thing decreasing corporate tax
rate we have already discussed what is a
decrease in corporate tax rate and how
it will impact the economy secondly
facing out tax exemptions so phasing out
tax exemptions third god GAA our general
anti-avoidance rules what a general
anti-avoidance rule these are the laws
to curtail the tax evasion so general
anti-avoidance rule tries to curtail the
tax avoidance
so this aims to check the revenue laws
of the government so revenue laws by the
way of avoidance so when taxes are of
order or evaded by people what happens
the revenue of the
government will come down so this will
lead to revenue laws for the government
so God tries to check this revenue laws
thirdly place of effective management
rules or oil rules poem stands for place
of effective management so what is the
purpose of these rules this rules tries
to determine the resident status of
corporations so residents status of
corporations they determine resident
status of corporations let us see this
in detail with an example if suppose the
effective management of a companies in
India so if the effective management of
a companies in India this company is
treated as an Indian resident so this
company will be treated as Indian
resident and as a result of this what
will happen the global income of the
company will be taxable in India so the
global income will become taxable in
India so according to the place of
effective management rules if a
company's effective management is is in
a particular country the global income
of the company will be accounted in that
particular country and the company will
be regarded as the resident of that
particular country let us see if there
is any criticism for this direct tax
code so the the only criticism for this
direct tax code is that it will be
difficult for the businesses to cope up
with the structural changes so this is a
structural change if direct tax code is
implemented there will be a structural
change for the direct taxes in the
economy so critics say that this
structural change would be difficult for
the businesses to cope up with on the
backdrop of GST GST has already
restructured the economy and economy is
only reviving out of the effects of GST
and again direct tax code will add on to
the burden this is the only criticism
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