Fresh push to DTC bill in winter session
Oct 29 2013 , New Delhi
A draft, acceptable to both UPA & BJP, being worked on to pass crucial reform bill
A workable draft for both UPA and BJP is in the works so that the crucial tax reform bill does not face further opposition.
Finance minister P Chidambaram presided a meeting of finance ministry officials on Tuesday to fine tune the draft bill that will be taken up by cabinet ahead of the Parliament session.
“Most recommendations of the Parliamentary standing committee on finance have been accepted,” FM said. He also hinted that they would be incorporated in the revised DTC bill.
In August this year, cabinet had deferred a decision on DTC bill pending a mutually acceptable piece of legislation for the opposition. BJP senior leader and former finance minister Yashwant Sinha heads the parliamentary panel.
Direct tax code is an attempt to simplify 52-year old tax laws that have come into operation beginning 1961. The proposed bill has 319 sections and 22 schedules against 298 sections and 14 schedules in the existing I-T act.
The most contentious clause between UPA and the BJP has been the exemption limit for levy of income tax. While the government proposes to retain it at present level of Rs 2 lakh level, the parliamentary panel had mooted that 10 per cent income tax be levied on all those above the Rs 3 lakh income threshold.
Finance ministry is not very keen on increasing the exemption limit, as the annual revenue loss could be a staggering Rs 60,000 crore in medium term as per one estimate.
Initial move to link the tax rates to consumer price index also seems to have been dropped all together to make the impost simple and straight. However, there seems to be agreement on taxing the super-rich with an income of Rs 10 crore and above at 35 per cent. Both the ruling coalition and the BJP seem to have agreed on taxing those with an income of over Rs 50 crore at an even higher rate. But, the main opposition party seems to be insisting on increasing the exemption limit in the lower bracket.
“Ultimately, there would be a trade off between BJP and UPA on the tax rates to be incorporated in the new DTC bill to be introduced in the Lok Sabha later next month,” said an official.
Initially, finance ministry accepted about 153 out of 190 recommendations of the parliamentary panel. But, the UPA government seems to have become “more flexible” to accommodate the BJP recommendations to ensure smooth passage of DTC bill.
The bill also proposes levy of 10 per cent income tax on all dividend income above Rs one crore annually. Even on this, the government and BJP may have a meeting point.
DTC may also specify a threshold limit of 20 per cent ‘indirect transfer’ of assets outside India. But, assets transfer up to 5 per cent may not attract any tax.
The idea seems to avoid litigation and disputes in transfer of Indian assets abroad and leave small overseas transactions, mergers and acquisitions untouched from tax angle.