Direct Tax Code of India

Direct Tax means the tax paid by an individual or an organization which cannot be shifted from the individual or entity on which it is levied. In other words, the direct tax code means a tax that cannot be shifted to another person or entity. The taxes on income or assets are examples of direct taxes. The person or organization that runs or owns the object must pay the tax directly.

For the better understanding of the direct tax code let us see what indirect tax is too. In the indirect tax of sales, the seller pays the tax of the product to the government and later makes the customer to pay it to him. The cost of the product includes the tax. On the other hand, the direct tax code of India enables the customers pay the sales tax directly to the government. The definition of direct tax code and the definition of indirect tax code here make clear the difference between direct tax code and indirect tax code.

Now, let us see the difference between the existing tax code and the proposed direct tax code bill 2009. The Direct Tax Code India is expected to be in act by financial year 2011 – 2012. According to the Indian present tax code, an individual having an annual income up to 1.60 lakhs has to pay no tax at all. But, an individual having an annual income between Rs.1.60 – 3.00 lakhs must pay 10% of his total income as tax to the government of India. An individual having annual income between Rs.3.00 – 5.00 lakhs is expected to make the tax payment of Rs.14,000 + 20% of his total income and those having the total income exceeding Rs.5.00 lakhs must pay Rs.54,000 +30% of their total income to the government as tax.

On the other hand according to the proposed Direct Tax Code, one has more advantages. The ration between the existing tax code of India and the future tax code of India vary. The main advantage of the direct tax code to the Indian citizens is that they can save a lot. As in the current tax code India, even in the upcoming direct tax code also an individual is not subject to tax if his annual income is below Rs.1.60 lakhs. On the other hand the ratio between the Indian tax codes existing and future vary for those having annual income above Rs.1.60 lakhs. It is as follows. An individual having an annual income between Rs.1.60 – 10.00 lakhs must pay 10% of his total income as tax to the government of India. An individual having annual income between Rs.10.00 – 25.00 lakhs is expected to make the tax payment of Rs.84,000 + 20% of his total income and those having the total income exceeding Rs.25.00 lakhs must pay Rs.3,84,000 + 30% of their total income to the government as tax. This makes clear how far the Indians have gone in financial growth. The value of Indian currency is understood from the difference between the existing and proposed tax codes of India.