Former Finance Minister P Chidambaram today suggested the replacement of the Income Tax Act with a Direct Tax Code for simplification of the tax law while welcoming the trend towards indirect tax collections getting larger than the direct tax revenues.

He was participating in the Rajya Sabha discussion on the Appropriation Bill, 2022, and the Finance Bill, 2022, already passed by the Lok Sabha. The Bills were moved in the Upper House by Finance Minister Nirmala Sitharaman.

Chidambaram said the Income Tax Act had become too complex after repeated amendments over the years and a simplified Direct Tax Code would help everybody.

None benefits from the existing Income Tax law, except the chartered accountants or the lawyers, he said. The faceless assessment system was introduced few years ago, but the faceless assessing officers’ lack of information about the tax payers’ history could create problems, he said.

The Congress leader said the Finance Bill indicated that tax cases could be re-opened even up to 10 years after filing, in extension of the three years’ limit so far. This was a regressive amendment and could cause huge hardship, he said.

Chidambaram said the past few years had shown the direct taxes collection ratio to GDP was increasing, but in the coming financial year it was shown as getting lower than the indirect tax collections. This was welcome, he said.

However, a decreasing share of the direct tax collections indicated that people were accumulating wealth and were not paying taxes, he said.

Chidambaram said the international economic situation had several problems and the GDP projections made by the Government could not hold good now.

He said if the Rs 7.50 lakh capital investment expenditure proposed by the Government included Rs 1 lakh crore borrowing by the States, then this expenditure should be treated as Rs 6.50 lakh crore expenditure. The Government should encourage private investment to supplement the capital expenditure efforts, he said.

Former Bihar Chief Minister Sushil Kumar Modi (BJP) said the Modi Government’s initiatives saved lakhs of lives threatened by Covid. The GDP collections were more than Rs 1.30 lakh crore per month in the past five months.

He said the Government had acted against bank frauds and non-performing assets, and none would escape from the law. The economy was doing well with India having much lower inflation rate than several developed countries in the aftermath of Covid. International ratings showed Prime Minister Narendra Modi to be the most popular leader in the world.

Sukhendu Sekhar Roy (Trinamul Congress) said economic inequalities were growing as the number billionaires went up from 103 to 142. T K S Elangovan (DMK) said the common man was ignored in the Budget proposals. Amar Patnaik (BJD) said the size of the middle class was shrinking.