In what may bring relief to personal income tax assessees from the next financial year, Finance Minister Pranab Mukherjee on Tuesday said many recommendations of the Parliament standing committee on the Direct Taxes Code (DTC), expected to come into effect from 2013-14, would be accepted.
The committee, headed by Bharatiya Janata Party leader Yashwant Sinha, had recommended raising the tax exemption limit from Rs 2 lakh a year to Rs 3 lakh, besides much wider tax slabs.
Given the next Budget would be the last of the UPA-II government, tax experts feel the finance minister may give relief to individual tax payers, despite constraints on the fiscal front.
In his opening remark on the Finance Bill in the Rajya Sabha on Tuesday, Mukherjee said he would table the DTC Bill in the monsoon session of Parliament. Officials said if the Bill was tabled in the monsoon session, it could be affected from the next financial year, provided it was passed in Parliament.
"I will have the opportunity, after the Budget session is over, to go through all the recommendations (of the standing committee) and after the approval of the Cabinet in the next monsoon session, bring the DTC Bill for approval of both the Houses," Mukherjee said. "And at that stage, many of the recommendations of the standing committee would be accepted," he said.
He said he could not go through all the recommendations of the standing committee on DTC, as the report was given on March 9, and the Budget was tabled on March 16.
The committee also recommended 20 per cent tax on annual income of Rs 10-Rs 20 lakh, against the current provision of Rs 5-8 lakh and DTC Bill provision of Rs 5-10 lakh.
Neeru Ahuja, partner, Deloitte, Haskins & Sells, said if DTC was enacted from April 1, 2013, the government might announce tax relief for individual tax payers, keeping an eye on the general elections. This is despite the Centre's fiscal deficit widening to 5.9 per cent of the gross domestic product in 2011-12, against the Budget Estimate of 4.6 per cent. For the current financial year, fiscal deficit is pegged at 5.1
Though the government has been providing relief to individuals, it may act tough with companies, she said. The General Anti-Avoidance Rule, a part of the DTC, was earlier proposed to be advanced a year in the Budget, but was postponed by a year to give more time to companies and the tax administration.
The government, however, stuck to the retrospective amendments to the Income Tax Act, though the finance minister reiterated retrospective amendments to the Act would not be used to re-open cases in which assessment orders had already been finalised.
On the corporate tax front, the standing committee had recommended retaining the tax rate at 30 per cent, but without cess or surcharges, which is the case today. It also recommended doing away with the Securities Tax Transaction.
Participating in the debate, the BJP attacked the government over its economic policies, saying there was "complete absence" of coherent decision making. Piyush Goyal (BJP) said the telecom and power sectors were in a "complete mess" and there was a "total policy failure".
"We are concerned and pained from the issues that have arisen from this Bill. The gloom in the economy is deepening and there is no confidence among people and investors about the economy," he said.
He added the finance minister had stated he would be cruel to be kind in the Finance Bill, but he was cruel and "kind only in certain parts".
CPI(M) leader Tapan Kumar Sen said the government's "pro-gambler policies" should be stopped, adding "pro-worker policies" should be introduced. On the concessions recommended under the DTC, Sen asked, "You can give Rs 4,000-crore (Rs 40-billion) relief to a handful of companies, but can't you enhance contribution to pension, which would benefit 50 million workers?"
He added according to a Comptroller and Auditor General report, the number of tax defaulters had increased 138 per cent. "I accuse the government of allowing tax theft and opening the doors to FIIs (foreign institutional investors," he said.
