IMPACT OF PROPOSED DIRECT TAX CODE ON INDIAN TAX PAYERS ABSTRACT

Finally the government has wakened to the long awaited issue of tax structure up gradation in the form of Direct Tax Code. The government aims at the simplification of the tax system and provide relief to individual and corporate by liberalizing the income tax and corporate tax norms. The Tax code proposes a significant increase in the tax slabs for personal income tax which, if implemented, will result in a meaningful increase in disposable income, especially benefiting FMCG and other domestic consumption stories. As the coin has two facets the direct tax code also has progressive and regressive aspects. This paper is intended to bring out the major highlights of the direct tax code introduced by the government and aims to reveal the impact of changes on various sector of the economy. The authors are: Dr. Sanjeev Kr. Agarwal (Sr. Lecturer) Address: F-2108 Rajaji Puram, Lucknow- 226017 Contact no.: 9415562916 Ms. Anjali Sisodia. (Lecturer) Address: F-3025, Rajaji Puram, Lucknow- 226017 Contact no.: 9956510062 Mr. Sameer Rastogi (Lecturer) Address: F-2108, Rajaji Puram, Lucknow- 226017 Contact no.: 9918081555

INTRODUCTION
The word tax is derived from the Latin word taxo, which means-I estimate
In common parlance tax is a financial charge levied by state, governments or legal bodies on the taxpayer. Taxation is not new for India; the concept existed in ancient times too. The primitive traces of taxation are found in ancient references such as Manu Smriti and Arthashashtra. In Manu Smriti, the legal framework allowed the king to levy taxes and cautioned him to avoid absence of tax and inflated taxation. Kautilya in Arthashastra has given a wide description of taxation, while describing international trade, he mentioned vertanam levied on foreign goods imported and levy called Dvarodaya paid by the businessman for the import of foreign goods. Kautilya also mentioned about Income tax levied by the state, which was a major constituent of states income. In present scenario the meaning of taxation has explored to a tremendous level and is of great importance and is indispensible for the development and existence of any economy. The taxes levied by the government may be direct or indirect: DIRECT Tax: - A tax that cannot be shifted onto others. A government levy on the income, property, or wealth of people or companies. A direct tax is borne entirely by the entity that pays it, and cannot be passed on to another entity. Examples include corporation tax, income tax, and social security contributions. INDIRECT Tax: - Indirect tax is one in which impact and incidence of tax fall on different people. Indirect taxes are the charges that are levied on goods and services. Examples include VAT (Value Added Tax), sales tax, excise tax, stamp duties and expenditure tax. As the nation is on the path of progress changes are indispensible-changes for the betterment and overall growth of the economy, for increasing the current pace of development and enable India to share the same platform, which the first world countries boast off. One such change offered by the Indian government is the introduction of the direct tax code. The direct tax code bill has been introduced with an intend to reduce the distortions of the current tax structure, introduce judicious levels of taxation, increase the tax base, enhance tax obedience, simplify the language so that it is easy for the tax payer to abide by the taxation laws.

As the coin has two facets the direct tax code also has progressive and regressive aspects. Through this paper we would like to highlight certain salient features of the direct tax code bill which would affect the Indian economy and common man at large. As we all know that amongst direct taxes the tax which attracts major concern of every person is the Income Tax. The Tax code proposes a significant change in Income Tax by making a considerable increase in the tax slabs for personal income tax which, if implemented, will result in a consequential increase in disposable income, this increase in personal disposable income would affect the consumption pattern of the Indian consumer a boost is likely to be visible in general expenditures specially benefiting FMCG and other domestic consumption sectors. The new slab which can bring about these changes in the economy states:

Thus the new DTC will reinstate the decades old Income Tax Act. Next issue to be considered is the abolishment of distinction between short term capital gain and long term capital gain. This move will discourage the investors to keep their money invested for a longer duration, as the non taxable long-term capital assets will be taxable under the new provision. The investor would try to book gain as early as possible and take home the profit irrespective of time. Now, this amendment will definitely hamper the long term savings. At present, the investments in securities and equity-oriented mutual funds which are held for more than 1 year are considered as long-term capital assets and are non taxable. Whereas income from short-term investments that are held for less than 12 months from the date of issue are taxable at rate of 15%. This proves to be discouraging and point should be reconsidered. One positive point for each individual and especially for senior citizen is the abandonment of the governments previous proposal on tax retirement benefits under Provident Fund. In the absence of a social security scheme, the new proposal provides for an Exempt-Exempt-Exempt (EEE) method of taxation for the government provident fund, PPF and recognized provident funds. Even pure life insurance products and annuity schemes are approved under tax exempted categories. Thus, the government has proposed not to impose tax on the earnings from investments, made by the people, with the purpose of saving taxes in long-term saving

instruments. However, withdrawals of savings above Rs. 3 lakh will be taxed. With this the government can achieve two-fold benefit, one that the money will remain invested for a longer duration and other that it will be tax exempt so it will attract huge volume of saving and investment. CONCLUSION Finally to conclude I would like to say that the direct tax code proposed by the government is a taxpayer friendly move. The soul of the DTC seems to be in conformity with the general public expectation. If implemented in full sway it is expected to bring a sigh of relief among Indian taxpayers. It will also keep the production cycle moving by increasing the real income and personal disposable income of the taxpayer and contribute towards the growth of the economy