Saturday October 10, 02:47 AM

Source: Indian Express Finance

Pranab promises to revisit seven proposals in tax code

By fe Bureaus
Finance minister Pranab Mukherjee on Friday told industry that the government would re-examine seven crucial proposals in the draft Direct Taxes Code, including those relating to the minimum alternate tax (MAT) and the exempt-exempt-tax (EET) regime for savings. The review of these seven before they become part of India s largest rejig of the Income Tax Act of 1961 is expected to accommodate the concerns of both India Inc and the aam aadmi. The draft code has proposed to make all savings schemes, including Public Provident Fund and retirement savings, taxable at least once under the EET system. This means people will have to pay a tax at the time of withdrawing their savings. Now, most such schemes are totally tax-exempt. Mukherjee also promised to revisit the shift in the concept of MAT, based on the gross assets of a company instead of its gross profit. The proposal will sharply expand the tax payable by industry. Mukherjee, however, explained that the rationale for the shift is to ensure that there is no under-utilisation of scarce resources in the economy, even as chambers claimed it would hurt capital formation and stifle investments. It has been our endeavour to incorporate best practices prevailing across the globe and to use innovative methods for attaining equity while framing the new direct tax regime. But a more detailed examination is throwing up some areas of concern , the minister noted in his speech at a seminar on the code, organised by industry body CII. The code aims to bring far more certainty to the domestic tax laws to create space for industries to plan their outgo for several years. While there has been sizeable improvement in tax administration in recent years, the 2009 edition of the World Banks Doing Business in India puts the number of yearly payment for tax related purposes at about 60, far above the OECD average. Responding to the minister s suggestion, CII president Venu Srinivasan said despite the concerns, We have decided to look at the big picture and would, therefore, like to make a constructive contribution to the process of finalisation of the code. The code was released for public discussion in August. Revenue secretary PV Bhide said the final Bill could be tabled in Parliament in the winter session that begins in November for the code s eventual rollout in April 2011. The other proposals that would be reviewed include capital gains taxation in the case of non-residents; the double taxation avoidance agreements; general anti-avoidance rle (GAAR); issues relating to effective management control and taxation of foreign companies in India, and taxation of charitable organisations.