The Cabinet on Thursday deferred the much-awaited Direct Taxes Code (DTC) Bill, presumably because a proposal to levy a super-rich tax on those earning above Rs 10 crore yearly did not find favor with some senior officials.
Planning Commission officials, apparently, took up with Prime Minister Manmohan Singh the proposal to impose the super-rich tax, proposed to be levied at 35 per cent on those earning above Rs 10 crore.
The Prime Minister intervened and Cabinet deferred the Bill, officials said. They said calls were made to former finance ministry officials who were instrumental in framing the original Bill, followed by a call by Planning Commission Deputy Chairman Montek Singh Ahluwalia to Prime Minister Manmohan Singh. However, this could not be verified. The thinking within a section of the government is that bringing in a super-rich tax at this juncture might not be a good idea, given the depressed economic sentiments.
Just hours before the Cabinet meeting, Finance Minister P Chidambaram had told reporters the Bill was indeed in Thursday’s Cabinet agenda. It is a huge Bill and some issues could be raised on some provisions, he said, adding he could not say in advance if the Bill would be cleared by the Cabinet.
The Prime Minister’s Office said Manmohan Singh did not prevail upon his Cabinet colleagues to defer the Bill.
The super-rich tax proposal was not proposed in the original Bill, nor in the one tabled in Parliament in 2010. It was also not part of the Standing Committee’s recommendation on the Bill. The provision was included in the Cabinet note despite the finance minister saying in the Budget that a special measure on the rich in this year’s Budget was a one-time measure.
In Budget 2013-14, Finance Minister P Chidambaram had imposed a surcharge of 10 per cent on those earning at least Rs 1 crore in a year. There are only 42,800 such people in India. Those earning more than Rs 10 crore would be lesser.
With the super-rich tax proposal, there will be four tax slabs for personal income. Taxpayers may not get any breather in the form of higher exemption limit, as amendments to the Bill have not incorporated Standing Committee on Finance proposal on widening tax slabs. The Parliamentary panel had suggested raising the exemption limit to Rs 3 lakh from Rs 2 lakh at present.
The current slabs are Rs 2-5 lakh, Rs 5-10 lakh and Rs 10 lakh & above. The standing committee had suggested three slabs — Rs 3-10 lakh, Rs 10-20 lakh and Rs 20 lakh & above, and said these should move with inflation. But the proposed amendments are not likely to include that. The current rates of 10, 20 and 30 per cent on income tax might not be changed.
The finance ministry is learnt to have accepted over 150 of the 190 recommendations of the panel headed by BJP leader Yashwant Sinha. Finance Minister P Chidambaram has broadly stuck to the 2010 Bill, tabled in Parliament by his predecessor Pranab Mukherjee, instead of reverting to his own version of 2009. This means taxpayers might continue to enjoy exemption on maturity some of their investments and industry could pay Minimum Alternative Tax (MAT) on book profits, instead of gross assets.
Some of the provisions of the DTC Bill, such as the General Anti-Avoidance Rules and Advance Pricing Agreements, have already been incorporated in the Income Tax Act.
The Bill is one of the eagerly awaited pieces of tax reform legislation, the other being the Goods and Services Tax (GST). When enacted, the DTC bill will replace the archaic Income Tax Act of 1961.
source:
http://www.business-standard.com/article/economy-policy/dtc-bill-deferred-113082200580_1.html
