Experts sum up the hits and misses of direct tax code dtraft

A draft version of the new Direct Tax Code for public distribution and comment was revealed on August 12. To discuss the salient features of what would create a completely new legislative for taxes in this country, CNBC-TV18 speaks to PricewaterhouseCoopers Tax Leader Dinesh Kanabar and Tax Advocate Porus Kaka

CNBC-TV18 shares with domain-b its exclusive interviews with Kanabar and Kaka.

What do you consider are the salient features or the big changes that this code brings in, both from the perspective of corporation taxation and individual taxation?
Kanabar: This is not a rehash of the earlier act and in that sense the finance minister was right when he said don't put the two legislations together and start comparing them. It's a complete rewrite. More important, the heads-on income under which income is computed has been kept as consistent and if you look at how provisions are written up, it's very different.

Just coming to corporates, one is the rate of taxes which are indicative; they have to be passed by the Parliament and therefore would be relevant for the succeeding year, but the rates of taxes have come down very significantly and so have the threshold limits gone up and with respect to corporates, a 25 per cent  rate of taxes is indeed comparable with the global rates and very interestingly, this is a single tax applicable both to domestic corporations as well as foreign corporations, coupled of that is a 15 per cent dividend distribution tax, which domestic companies would pay and a 15 per cent tax on branch profits that a foreign company operating in India would pay.

There is an exhaustive listing of several deductions that are available and certain items that are not tax-deductible. There are certain changes, which are likely to overturn the way we have been used to reading the law. We have this famous theory of no-cost no-capital gains tax if an asset has cost nothing, there are some court cases that have overturned it.

More important and very substantive is the anti-avoidance measures and I can put them in two baskets: the general anti-avoidance measures that have been introduced under this Direct Tax Code, where if a transaction is not regarded as a bonafide transaction, the tax authorities can rewrite that transaction and look at the substance of the transaction rather than the form of the transaction and there are a series of transactions that have been listed are including sale and lease back dealings between associated enterprises.