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Abstract:
The new Direct tax code is going to replace the existing income tax act of 1961 in India.
It is expected to be passes in the monsoon session of 2010 and is expected to be enforced
from 1st April 2011. It will completely overhaul the existing tax proposals for not only
individuals but also for corporate houses and foreign residents. Tax rates and slabs
have been modified. It proposes a significant increase in the tax rates and slabs for
persona income tax and the tax deduction limit available on savings from Rs. 1 lakh at
present to Rs. 3 lakh. It has also proposed to reduce the corporate tax rate from 33%
(including surcharge) to 25% which will benefit various sectors in the economy. Retail
industry is also one of the industries which are going to be affected by the new direct tax
code with the change in disposal income with the individual and change in corporate tax.
In the given research paper, researcher has found that the Direct Tax Code will have a
positive impact on the retail industry as it would help the Indian Retail Industry to face
the challenges likewise to get more investment and better infrastructure but at some point
it will be neutral so the net effect will be the positive one for the Indian Retail Industry .
The new direct tax code is said to replace the existing Income tax act of 1961 in
India and expected to be passed in the monsoon session of 2010 and is expected to be
enforced from 2011. During the budget 2010 presentation, the finance minister Mr.
Pranab Mukherjee reiterated his commitment to bringing into force the new direct tax
The new Direct Tax Code will completely overhaul the existing tax proposals for
not only individual tax payers, but for the corporate houses and foreign residents. The
most striking feature is the rationalization level of tax slabs at various levels. The tax
1. The concept of Previous Year has been replaced with Financial Year.
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iii. Income from house property
3. Any losses arisen due to ordinary sources can be set off or carried forward against
income from Ordinary sources without any time limit. In the same manner, it is
etc, up to March 31, 2011. Money that accrues from April 1, 2011 will be taxed
2010.
5. There is no difference between short term capital gain and long term capital gain.
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7. The upper limit on tax savings based investment has been hiked from Rs. 100000
to Rs. 300000.
9. Deduction towards interest payment of house loan for self occupied property
10. Deduction for Rent and Maintenance would be reduced from 30% to 20% of the
gross rent.
11. Dividend will continue to be tax free in the hands of the investors.
12. Tax rates and slabs have been modified of which a comparison is given below:
Income- tax rate Income tax slab for Men Income tax slab for Men
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Indian Retail Industry
The Indian retail industry is the fifth largest in the world. Comprising of organized and
unorganized sectors, India retail industry is one of the fastest growing industries in India,
especially over the last few years. Though initially, the retail industry in India was mostly
unorganized, however with the change of tastes and preferences of the consumers, the
industry is getting more popular these days and getting organized as well. With growing
market demand, the industry is expected to grow at a pace of 25-30% annually. The India
retail industry is expected to grow from Rs. 35,000 crore in 2004-05 to Rs. 109,000 crore
With the economy now on the revival path, organized shopping centers and malls have
considerably increased retail presence in Key Urban Towns and the Rest of Urban India,
The Ernst and Young report said that the percentage of growth in the number of malls in
Key Urban Towns were more than double, at 55 per cent, than that of metros, which
The report, titled ‘The New Market Sheers: Tapping Potential Beyond the Metros’,
identified the trends in consumption patterns and marketing spends in small-town India.
Consumers in Key Urban Towns show an increasing preference for premium products
and services of established mass brands. The sale of consumer goods like LCD TVs is
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also on the rise in Key Urban Towns, given the significant uptake in leisure and lifestyle
The report said that men were utilizing wellness services now, more than ever before, not
just in the big metros but also in tier II and III cities.
Women in small towns are more willing to pay large sums of money for procedures
pertaining to age correction, body sculpting and removal of skin imperfections, etc, it
added.
Ashok Rajgopal, Ernst & Young, Partner, Media and Entertainment Practice, said, “We
are witnessing enormous opportunities in non-metro urban markets, which were only
marginally affected by the recession and now have enhanced purchasing power.”
The report said that the share of Key Urban Towns and Rest of Urban India in newspaper
advertising (by volume of activity) in 2009 was higher than 50 per cent across most
categories.
The report said that while metros and Key Urban Towns were driving the growth in later-
stage consumption (higher transaction value products and discretionary goods), Rest of
Urban India was the force behind early-stage consumption (necessities and products with
This trend is likely to continue with the changing consumption pattern of consumers,
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Growth of Indian Retail
Kearney, India retail industry is the most promising emerging market for investment. In
2007, the retail trade in India had a share of 8-10% in the GDP (Gross Domestic Product)
of the country. In 2009, it rose to 12%. It is also expected to reach 22% by 2010.
According to a report by North bride Capita, the India retail industry is expected
to grow to US$ 700 billion by 2010. By the same time, the organized sector will be 20%
of the total market share. It can be mentioned here that, the share of organized sector in
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The Future
The retail industry in India is currently growing at a great pace and is expected to
go up to US$ 833 billion by the year 2013. It is further expected to reach US$ 1.3 trillion
by the year 2018 at a CAGR of 10%. As the country has got a high growth rates, the
consumer spending has also gone up and is also expected to go up further in the future. In
the last four year, the consumer spending in India climbed up to 75%. As a result, the
India retail industry is expected to grow further in the future days. By the year 2013, the
With the passage of time, national income has risen from US $754,849.44million
The impact of Direct Tax Code (DTC) on the retail industry will be:
• Direct impact
• Indirect impact
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• Corporation tax has been reduced to 25% which was earlier 33%, it will result in
the increase in after tax profits available with the industry. With the increase in
more profits, industry will have more investment prospects resulting in the growth
of the industry. Due to reduction in the corporate tax, the net impact on after
• More profits after tax will results in the either in investment or in the distribution
of more dividends to investor. More investment into new project directly leads
dividends will have indirect impact in the growth of economy as it will result in
• Basis for computing Minimum Alternate Tax (MAT) has been changed from
P&L A/c.
It will be 2% of gross assets and will be final tax and will not be available as tax
Now, it will lead to more efficient and effective utilization all the resources
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Indirect impact of Direct Tax Code on Indian Retail Industry
• Direct Tax Code is supposed to increase the tax slabs as given at above in the
given research paper, resulting the people to pay less tax which leads to increase
in their disposable income. With the increased disposable income, people will
demand more products which will have a positive impact on the FMCG industry
Y= C + S (I)
Where,
Y = Income
C = Consumption
S = Saving
I = Investment
We assume that total income earned, will be either consumed or saved and
all the savings will be invested in the economy. With the increase in investment,
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1. Corporate tax has been reduced to 25% from 33% to provide the tax benefit to
2. With the increase in savings and more investment in various sectors, it will also
industry may also provide adequate infrastructure to the retail industry for the
proper functioning.
3. Direct Tax Code has tried to reduce the dissimilarity in consumer group by
charging low taxes from low income group and providing more deductions on
4. Direct Tax Code has no impact on the FDI in retail, so it will be neutral about the
impact on FDI.
5. Direct Tax code will be neutral for the more retail study options as it is not going
6. It will also be neutral about providing the skilled and trained management skill to
Conclusion:
At last, we can say that Direct Tax Code (DTC), will have a positive impact on the Indian
retail industry as it increases the demand for the products of the industry by increasing
the after tax income of the individual. It also increases the opportunity for the investment
as the residual profits with the industry increases with the reduction in various tax rates
like wise reduction in the corporate tax, wealth tax and STT and more investments will
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also be there with the increase in savings of the individuals. Direct Tax Code will help
the Indian retail Industry but it will not entertain the retail industry to face the all
Bibliography
• www.economictimes.indiatimes.com/articleshow/5599418.cms
• www.ibef.org
• www.equitymaster.com
• www.financeminister.in/Income-tax-slab-2009-2010
• www.stockmarketsreview.com/news/india_direct_tax_code_2009_review_analysi
• www.pankajbatra.com/india/new-direct-tax-code-dtc-highlights
• www.deccanherald.com/content
• www.business.rediff.com/report/2009/aug/12/new-direct-taxes-code-
realeased.htm
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• www.epaper.hindustandainik.com
Authored by:
Singh Indraprastha University, New Delhi) & Ph.D research scholar, Pt. J.L.N.
Dr. M.K. Gupta (Associate Professor, Pt. J.L.N. Govt. PG college, Faridabad,
Haryana, India)
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