The DTC is meant to be transparent, efficient and extremely simple, which would replace the Income Tax Act 1961.
The DTC would provide straight forward tax laws, while removing various exemptions on Income Tax. However, there have been several delays in introducing the Bill with Finance Minister P Chidambaram now saying that the DTC would be introduced in the Budget Session of parliament, as it remains was work in progress.
The Direct Tax Code has been delayed primarily on account of tax laws that have been largely controversial, say for example the retrospective taxes. This is why it was referred to the parliamentary standing committee.
While presenting the Union Budget, Finance Minister Chidambaram has said that the DTC is not intended to be an amended version of Income Tax Act, 1961 but a new code based on the international practices that will be compatible with the needs of a fast developing economy.
He said the standing committee on finance has submitted its report on the Bill and the government attaches great weight to its recommendations.
"My team in the Ministry of Finance is examining the recommendations and I intend to work with the Standing Committee and its Chairman in order to finalise the official amendments.
"I shall endeavour to bring the Bill back to this House before the end of the Budget Session," the Finance Minister said.
There are reports that the Standing committee has recommended hiking the exemption limit on Income Tax to Rs 3 lakhs, while also hiking the savings exemption limit. It now remains to be seen as to when the Direct taxes Code would be passed in parliament.