Tax compliance strengthened through measures to curb evasion, expand overseas information units and upgrade tax administration.
The Finance Minister urges strengthening tax compliance and curbing evasion so increased direct tax revenues fund social development; proposes law simplification via the Direct Taxes Code, phased removal of excessive exemptions, and moderate rates to widen the tax base; mandates expansion of overseas tax units for cross-border information exchange and anti-evasion; directs capacity building through officer training and technology use; and calls for upgraded green infrastructure and the operationalisation of an Income Tax Welfare Fund for employee welfare.

Direct Tax Code revisions: MAT on book profit, savings EEE/EET adjustments, capital gains, residence, NPOs, wealth tax and GAAR.
The Revised Discussion Paper narrows the DTC tax base and revises key regimes: MAT will be computed with reference to book profit rather than gross assets; existing provident and specified pension/insurance instruments retain EEE treatment while EET is applied prospectively for new arrangements; centralized Retirement Benefits Accounts and the Capital Gains Savings Scheme are not introduced; actual rent, not presumptive notional rent, determines house property income with limited interest deductions for self occupied homes; capital gains are generally taxed as ordinary income with a specified deduction for listed equity held over one year and the cost base reset to 1.4.2000 for other assets; FIIs' equity market gains are treated as capital gains (advance tax, no TDS); nonprofit taxation is restructured around charitable purpose with registration, cash accounting and limited carry forward; residence of a foreign company is tied to place of effective management and CFC provisions and a calibrated wealth tax and GAAR with safeguards are proposed.

Direct Taxes Code tax base reduction proposes narrower base and invites public comments before finalising rates and exemptions.
The Revised Discussion Paper narrows elements of the proposed Direct Taxes Code tax base in response to stakeholder feedback and sets out revised proposals on key topics-including Minimum Alternate Tax, savings taxation, employment income, house property, capital gains, non-profit taxation, SEZ units, corporate residence, DTAA interaction, Wealth Tax, and GAAR-while indicating that tax rates, slabs and monetary thresholds will be recalibrated and inviting public responses online before finalising the Bill.

Asset-based Minimum Alternate Tax risks burdening loss-making and long-gestation firms, prompting a shift to book-profit calculation.
The paper critiques the DTC proposal to compute Minimum Alternate Tax (MAT) on the value of gross assets-comprising gross block, capital works in progress and book value of other assets less depreciation-and notes MAT would be a final tax. It records stakeholder concerns that an asset based MAT burdens loss making and long gestation companies, includes non revenue assets, causes cascading effects in multi tier groups, conflicts with investment linked incentives, and lacks carry forward relief. Consequently, the paper proposes computing MAT with reference to book profit.

Taxation of house property: gross rent based on actual rent for let-out properties; notional presumptive rent removed.
The proposed DTC treats gross rent for let-out house property as the rent received or receivable, abolishing the presumptive notional-rent computation tied to rateable value or construction cost. Gross rent for non-let properties is nil and ordinarily attracts no deductions for local taxes or interest. An exception allows individuals and HUFs to claim an interest deduction for capital borrowed for acquisition or construction of one self-occupied house within a prescribed ceiling, with corresponding adjustment of overall savings-related limits.

Non-profit tax regime: new eligibility, registration, cash-basis surplus taxation and revised exemption and compliance rules.
The DTC restructures NPO taxation by defining eligibility for charitable purpose status, requiring registration and prescribed accounting and audit compliance; taxing a cash-basis surplus (gross receipts less specified outgoings) plus capital gains on financial investment assets; prohibiting investments in associate concerns; allowing limited carry-forward of surplus; treating public religious and partly religious/charitable institutions under specified conditions; retaining cash accounting; and empowering the government to notify exempt public-interest NPOs.

Profit-linked deductions grandfathering preserves existing SEZ developer and unit deductions for unexpired periods under DTC.
The Discussion Paper excludes area-based exemptions from the DTC while grandfathering existing exemptions under the Income Tax Act, and treats profit-linked deductions as distortionary without extending them; it provides grandfathering for SEZ developers' unexpired deductions and will incorporate similar protection for units operating in SEZs to preserve their unexpired profit-linked deductions.

Place of effective management determines foreign company residence, with CFC rules attributing undistributed passive income to resident shareholders.
A foreign company is resident in India if its place of effective management is in India, defined as where the board or executive directors make key decisions or where executive officers perform functions routinely approved by the board. The paper replaces the wider "wholly or partly" control test with this internationally aligned standard. It also proposes Controlled Foreign Corporation rules to attribute undistributed passive income of foreign companies controlled by Indian residents to those residents as deemed dividends for taxation.

Limited treaty override retained for anti avoidance measures, affecting DTAA preferential status under the DTC framework.
The Paper proposes that neither a DTAA nor the Direct Tax Code enjoys automatic precedence; the later-in-time provision prevails. It retains the prevailing rule that the option more beneficial to the taxpayer applies between domestic law and a relevant DTAA, but institutes a limited treaty override: DTAAs will not prevail where domestic anti avoidance measures apply, specifically under the General Anti Avoidance Rule, Controlled Foreign Corporation rules, or when a Branch Profits Tax is levied.

General Anti-Avoidance Rule targets arrangements lacking economic substance, permitting tax consequences to be adjusted when misuse or abuse is found.
General Anti-Avoidance Rule covers arrangements aimed at obtaining a tax benefit that are not at arm's length, misuse Code provisions, lack commercial substance, or are not employed for bona fide business purposes; the Commissioner may require information, follow natural justice, declare arrangements impermissible, determine tax consequences by disregarding or recharacterising the arrangement, and issue binding directions to the Assessing Officer.

TDS and TCS procedural amendments streamline payment timing, certificate issuance and periodic reporting obligations under income tax rules.
Amendments to the Income Tax Rules revise procedural obligations for Tax Deducted at Source and Tax Collected at Source, standardising the time and mode of payment to government accounts, updating requirements for furnishing certificates of deduction and collection, and prescribing periodic reporting including quarterly statements and specific collection statements under section 206C, with certain rules amended, inserted or omitted to implement these compliance changes.

TDS compliance: revised identification and reporting require TAN PAN return receipt linkage and mandatory electronic filing of statements.
Forms for TDS certificates now record the deductor's return receipt number so that TAN, PAN and the TDS return receipt number together constitute the unique identification for allowing tax credit; Government pay and accounts authorities crediting TDS by book-entry must electronically file a monthly statement in Form No. 24G with the designated systems agency, and due dates for TDS returns and certificate issuance have been advanced and clarified.

Tax filing facilitation: special counters and e filing promoted to ease return submission; TDS receipt number effective next year.
The CBDT directed the Income Tax Department to set up special and additional counters, including large temporary facilities and dedicated senior citizen and women counters, in major centres to receive returns on the due date when it falls on a weekend and during the final days before the deadline, providing services such as free forms, PAN assistance, e filing support and help desks. The department also promotes e filing for faster, error free filing and clarifies that the Receipt Number on TDS certificates is mandatory from the next year, though not required for the current assessment year.

Tax administration reform urged to modernize systems and expedite refunds while improving cadre management and service delivery.
The address calls for strengthening tax administration by modernizing IT systems, expanding training and infrastructure, pursuing cadre restructuring and delegation of financial powers to field formations, and instituting a Directorate of Finance; it urges timely resolution of vigilance cases, prompt monthly revenue reporting, and operational reforms to expedite refunds and overhaul TDS administration to ensure uniform, taxpayer-friendly service.

Mutual Agreement Procedure encouraged to reduce taxpayer litigation and unlock revenue tied up in appeals.
The Finance Minister directed the CBDT to formulate a comprehensive proposal to reduce unwanted taxpayer litigation and to realise revenue locked in appeals, endorsing active use of Mutual Agreement Procedure as an alternate dispute resolution mechanism and recommending strengthening of the Settlement Commission and Dispute Resolution Panels to limit litigation and expedite recovery of contested tax demands.

TDS filing and certification rules revised: identification, electronic credit statements and earlier quarterly return and certificate deadlines.
Revised TDS compliance requires TAN, PAN and the TDS return receipt number to form the unique identifier for tax credit claims; TDS certificate forms are updated accordingly. Government pay offices crediting TDS by book-entry must electronically file a monthly credit statement in a new prescribed form with the authorised systems agency. Quarterly TDS return due dates have been advanced to mid-month following each quarter and year-end return and certificate timelines have been moved earlier.