Finance minister P. Chidambaram released for public discussion the Direct Tax Code (DTC), 2013, that proposes extra taxes on the super rich, a lower-than-earlier proposed threshold for taxing offshore sale of Indian assets and a review of the General Anti-Avoidance Rules (GAAR).
P. Chidambaram reiterated his appeal to political parties to pass in 2014-15 the DTC Bill that was originally introduced in Lok Sabha in August 2010. The Bill would lapse with the current Lok Sabha and needs to be re-introduced by the next government for its passage.
P. Chidambaram decided to revise the original 2010 code to take into account several legislative changes that happened subsequently, instead of proposing separate amendments to the code.
The major changes proposed in the revised Bill include a 10% additional tax on those who receive dividends of more than Rs 1 crore a year.
The idea is to tax high-flying corporate captains who spend enough time abroad to avoid paying taxes on their worldwide income in India. Promoters and large shareholders of many big companies thus pay only 15% tax in India on the dividend they receive and no income tax.
The new proposal, if becomes law, will make them pay an extra 10% tax on the dividend they receive.
Another proposal is to introduce a fourth slab of 35% tax rate for individuals and Hindu Undivided Families (HUFs) with income of over Rs 10 crore. Tax on wealth at the rate of 0.25% on assets above Rs 50 crore is proposed on all physical and financial assets with the exception of a few.
In the revised code, the finance ministry has accepted 153 of 190 recommendations made by a parliamentary standing committee, which includes lowering the age for tax exemption for senior citizens to 60 years from 65. It, however, did not accept the Yashwant Sinha committee's suggestion that income tax exemption limit could be raised to Rs 3 lakh and the remaining slabs could be relaxed.
As per the exisiting structure, there is no tax on income of up to Rs 2 lakh per annum; 10% on Rs 2-5 lakh; 20% on Rs 5-10 lakh and 30% on income beyond Rs 10 lakh.
The new DTC 2013 draft is more of an announcement by the government that it has completed its work on the code, which has been in process from 2010. From here, whichever government assumes, it can take it forward in