FM promises revised DTC draft to India Inc

The government has assured India Inc that it would come out with a revised direct taxes code (DTC) draft and seek their comments before finalising it.

"We will prepare a revised draft (of DTC) and that will be placed in the public domain for getting comments ... but that will be for a shorter period," Finance Minister Pranab Mukherjee said while addressing the concerns of India Inc at a joint post-Budget meeting organised by industry chambers Ficci, CII and Assocham here yesterday.

The government, he further said, will consider suggestion of the industry to raise savings limit for personal income tax payers next year.Currently, individuals can seek tax exemption on savings up to Rs 1 lakh in a year, in addition to Rs 20,000 in infrastructure bonds.

The government had come out with the draft DTC which will replace the Income Tax Act of 1961 last August and had sought comments from various stakeholders.

The industry had expressed concerns over the provisions of the DTC, including the new method for computing minimum alternate tax (MAT).

Mukherjee said, he will finalise the legislation only after taking into account the comments of the industry.

The Government may introduce the bill during the Monsoon session, finance minister Mukherjee said, adding thereafter it would go to the standing committee for further scrutiny.

Once the report is received from the standing committee, hopefully by the end of the Winter session, he said, the law would be placed before Parliament for final approval.

Besides MAT, concerns have also been raised about the DTC provisions relating to taxation of savings and exemption for housing loans. The DTC proposed that MAT should be levied on gross assets of a company rather than on book profit as is the current practice.

Describing the proposal as retrograde, the chambers said the proposal amounting to imposing wealth tax on productive assets.

The Budget proposal to raise the incidence of MAT from 15 per cent to 18 per cent evoked sharp reaction from the industry with chambers requesting him to withdraw it. As regards savings, the DTC proposed to introduce the EET (exempt, exempt, tax) model which means all savings be taxed at the time of withdrawal by subscriber.

Currently, savings schemes like public provident fund are not taxed at any stage. The DTC is silent on tax exemption on repayment of home loans. Currently, the repayments up to prescribed limit enjoy tax exemption.