Govt may scale down tax relief proposed in DTC draft

New Delhi, May 14 (PTI) People with more than Rs 10 lakh
annual income may not get the tax relief originally proposed
in the Direct Taxes Code, as India's Finance Ministry is for
tweaking slabs across the board to offset concessions
elsewhere.
Under the first draft of DTC -- which when implemented
will replace the archaic Income Tax Act, 1961 -- income of Rs
10 lakh to Rs 25 lakh was to attract tax at the rate of 20 per
cent, but the final draft expected by June 15 may propose
slapping 30 per cent tax on any income above Rs 10 lakh per
annum, according to sources.
This is to make up for the possible concessions the
ministry may extend in other areas like exempting long term
savings from tax at the time of withdrawal and the way Minimum
Alternate Tax is calculated, sources said.
As such, the relief on highest tax slab would not be
much, since under the present regime too, 30 per cent tax is
imposed on income of more than Rs eight lakh a year.
Sources said the ministry is reworking the August 2009
draft following feedback from stakeholders. Under this, the 10
per cent tax proposed on income up to Rs 10 lakh may now stand
scaled down to Rs five lakh a year.
And income of Rs five-10 lakh a year would attract 20 per
cent tax, although the first draft proposed slapping this rate
on Rs 10-25 lakh income.
However, the threshold level of income that is exempt
from tax may be raised to Rs two lakh from Rs 1.6 lakh at
present. The first draft had propopsed retaining the threshold
limit at Rs 1.6 lakh.
Sources said the government has to generate tax revenue
for meeting its expenses and it might yield to the "genuine"
demand of MAT being imposed on book profits rather than on
gross assets as suggested in the first draft.
"Gross assets also include the debt portion of a company
and it is highly illogical to tax debt," said a source.
MAT is a tax imposed on profit making companies who do
not fall under any tax because of various exemptions.
Further, the ministry might also agree to retain the
current provision of following exempt-exempt-exempt (EEE)
model for long term savings like provident fund and pension,
instead of changing to exempt-exempt-tax (EET). EET model
implies that tax would be imposed on long term savings at the
time of withdrawal.
On tax exemptions on home loans, on which the first draft
is completely silent, sources said that there might be no
rebates in the second draft as well, since the individual tax
exemption limit on savings like insurance and others is
proposed to be hiked to Rs three lakh from the current Rs one
lakh.
"This more than compensates" for doing away with tax
rebates on the housing loans, the source said. MORE PTI MG
MRD


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