Taxes Code To Be Implemented From 2011-12: FM
The government plans to implement the Direct Taxes Code (DTC) from 2011-12 after addressing all concerns relating to controversial proposals like taxation of retirement benefits, weeding out incentives for housing sector and changes in the Minimum Alternate Tax (MAT).
The proposals in the Code are only "illustrative" and are open for discussion and there is no need to think that these "have been decided," Finance Minister Pranab Mukherjee said.
Giving the roadmap for the Code that will replace the Income Tax Act of 1961, he said, "It will be implemented from 2011. So, the finance bill of 2011-12 would be appropriate."
The government, Mukherjee said, has identified seven critical areas of concern in the Code and would take suggestions on board before finalising it.
The critical areas of concern include shifting the base for computation of Minimum Alternate Tax (MAT) from book profits to assets; capital gains taxation in case of non-residents; double tax avoidance agreements; General Anti-Avoidance Rules (GAAR); taxation of foreign companies; taxation of charitable institutions; and shift to EET system for taxation of savings.
On the issues relating to taxation of savings at the time of withdrawal, the Minister said, "Whether it will be EET (exempt, exempt, tax) or ETE (exempt, tax, exempt) ... is to be finally arrived at a decision. So one need not rush to the conclusion that it has been decided. That is the short point that I would like to make it clear."
DTC has proposed that all savings schemes should be taxed at the time of withdrawal. Under the current dispensation, the savings schemes like Public Provident Fund (PPF) and General Provident Fund (GPF) are not taxed at all, while in some schemes like National Savings Certificate (NSC) only interest accruals are taxed.
The Code is also silent on tax incentives for housing sector as against the current practice of provide rebate on repayment of interest and principal on home loans.
As regards the MAT, the Code proposes to levy minimum tax on assets instead of book profits. The proposal evoked sharp reaction from the industry which described the move as introducing wealth tax on enterprises.
Referring to his interaction with the representatives of the industry on the Code at Delhi and Bangalore, Mukherjee said, "I told them to express (their) views candidly ... final decision will be taken after obtaining inputs from various stake holders and in depth discussions.
Source:PTI
Comments
As per the bill, the following items are taxable.
1. Commuted pension, gratuity & VRS emoluments. - The bill says these terminal benefits are exempted from Income tax only if the same are invested in a government approved saving scheme. As we are all aware such investments will have a lock-in period. Again when the said investment is withdrawn, the poor retired employee would land up in trouble as he is liable to pay tax. This is nothing but taking away whatever is due to theemployees.
2. Presently contribution to GPF, LIC, PLI are exempt. Also as per the present income tax law, the final accumulated amount is also tax-free. However, the Bill seeks to amend this exemption provision. As per the proposals, any accumulated amount corresponding to the amount invested from date of enactment of the bill is taxable when the same is withdrawn. On one hand Government is giving paltry 8% on GPF. As the name suggests it is for the provident of an employee. This benefit is taken away now.
3. The following items which were not part of the income earlier will now become part of theIncome.
* Value of LTC.
* Amount of encashment of un-availed Earned Leave.
* Medical Reimbursement
* Value of concessional Medical Treatment paid for or provided by the employers
I feel these are only reimbursements for the amount actully spent by the employee. The reason for including these reimbursements as income of the employee is best known only to the brain behind this bill.
Also, there is no mention about deduction of Principal & Interest component of Housing Loan. So, your dream home will ever become a DREAM.
On the other hand, these are all what the business and affluent community gets.
* Loses can be carried forward for set off against future income for unlimited years
* Wealth tax limit increased to 50 Crores from 30 Lakhs
* Rate of wealth tax reduced from 1.0% to 0.25%
* Financial assets like Shares, Bonds, etc are to be valued at lower of cost or market value
* They can get deduction of any amount towards repair of Plant & Machinery.
The proposed Tax code is inhuman for the reasons that the medical reimbursements are proposed to be treated as income. When business men are allowed deduction towards repair of Plant & Machinery in addition to depreciation, why not the Employees for whom their physical body is their plant & machinery.
I feel the Government is not interested in the savings of the employees. However, for many a decade India is running a deficit Budget and the Government is badly in need of cheap money from the market. The savings schemes such as GPF, PLI etc., provide the government considerable liquidity at a very reasonable interest rate. If the Government wants to treat maturity Benefits of these saving schemes as income, it’s akin to killing the goose, which is laying golden egg every day.
The Government does not want their employees to retire peacefully. An Employee would save the money for retirement in anticipation of fulfilling his/ her dreams. Actually the second life of any person will start after retirement. But Government is not allowing this by treating the retirement benefits as income.
I hope our beloved technocrat Prime Minister MANAMOHAN SINGHJI will look in to the matter & set aside the anomalies created by the tabled DIRECT TAXES CODE BILL, 2009. Hope he will remove tax liablity on
* Commuted pension
* Retirement gratuity
* VRS emoluments
* Matured value of GPF, LIC, PLI
* Value of LTC
* Amount of encashment of unavailed Earned Leave.
* Medical reimbursement.