New Delhi, April 1: The finance ministry does not favour a hike in the income tax exemption limit to Rs 3 lakh as proposed by a parliamentary panel even as it wants to lower the age of tax exemption for senior citizens to 60 from 65.
In the revised draft of the Direct Taxes Code Bill, the ministry has retained the exemption limit at Rs 2 lakh, while introducing a fourth slab of 35 per cent for the super-rich with income exceeding Rs 10 crore.
The final view on the draft, prepared by finance minister P. Chidambaram, will be taken by the new government.
The draft has also suggested that foreign companies with more than 20 per cent assets in India be taxed under domestic laws.
Rejecting the recommendations of the standing committee on finance to raise the exemption limit to Rs 3 lakh, the finance ministry observed that it will lead to an annual loss of Rs 60,000 crore to the government.
The standing committee, headed by senior BJP leader Yashwant Sinha, had proposed zero tax on income of up to Rs 3 lakh per annum; 10 per cent for Rs 3-10 lakh; 20 per cent for Rs 10-20 lakh and 30 per cent on annual income beyond Rs 20 lakh.
The BJP election manifesto in 2009 had promised that income up to Rs 3 lakh would be exempt from tax, even as women and senior citizens would receive an additional exemption of Rs 50,000.
The BJP will come out with its manifesto for the 2014 election in a day or two and may retain its promise on the tax exemption limit.
Under the current structure, there is no tax on income of up to Rs 2 lakh per annum; 10 per cent on Rs 2-5 lakh; 20 per cent on Rs 5-10 lakh and 30 per cent on income beyond Rs 10 lakh. Those earning more than Rs 1 crore have to pay a surcharge of 10 per cent.
The revised DTC was to be taken up by the cabinet in August 2013, but differences over introducing a fourth slab for the super-rich stalled it.
“To maintain overall progressivity in the levy of income tax, the revised code provides for a fourth slab for individuals, HUFs ... if the total income exceeds Rs 10 crore, it is proposed to be taxed at 35 per cent,” the draft said.
The draft proposes a 10 per cent tax on dividend earnings of over Rs 1 crore and a wealth tax of 0.25 per cent on assets of individuals, HUFs and trusts exceeding Rs 50 crore.
The draft has rejected aplan to do away with the securities transaction tax saying “STT is required to regulate day trading”.
To provide parity in the treatment of insurance and mutual fund products, the draft proposes to levy income distribution tax on equity linked insurance products on the lines of equity oriented mutuals.
The revised DTC says the provisions of “income from house property” shall not apply to the property used for commercial purposes.
On the General Anti Avoidance Rules, the draft said they should be reviewed to bring in more clarity and the onus of proof should be on the tax authority.
- Retain I-T exemption limit at Rs 2 lakh
- Introduce fourth tax slab of 35 per cent on the super rich with income above Rs 10 crore
- Cut age for tax exemption for senior citizens to 60 from
- Tax foreign companies with more than 20 per cent assets in India