The government on Thursday said it will address concerns of corporate and other tax payers on issues like taxation on the salaried, long-term savings and minimum alternate tax before putting the new direct tax regime, which will replace the archaic Income Tax Act, in place.
"Government will make all efforts to meet the aspirations and expectations of the taxpayers and the corporate sector before finalisation of the Direct Taxes Code," Finance Minister Pranab Mukherjee told a Parliamentary panel.
He said the next steps in this direction would be taken only after a comprehensive review of the draft Direct Tax Code by taking on board the suggestions received.
"We are trying to bring the new taxation regime, which can last for another 50 years. Therefore, our endeavour is to see that new taxation system should include the basic features and time tested procedures of existing act, which have survived judicial security over the years," he added.
The Finance Minister told Parliamentary consultative committee attached to his ministry that he has started discussions within the Central Board of Direct Taxes on the suggestions received so far. "The outcome of the discussion would be used for modifying the proposals contained in the draft Direct Tax Code," he said.
On the basis of feedback, he named critical areas in the code as -- minimum alternate tax, capital gains taxation in the case of non-residents, double taxation avoidance agreement, taxation of foreign companies in India, taxation of long term savings, taxation on the salaried.
Certain proposals of draft direct taxes such as the levy tax on long-term savings at a time of withdrawal against the current practice of exemptions evoked sharp reactions in the feedback.
As regards the MAT, the code proposes to levy minimum tax on assets instead of book profits. The proposal was resented by the industry, which described the move as introducing wealth tax on enterprises.
The draft code intends to lower taxes and reduce exemptions.
The Finance Minister said the code proposes to levy 10 per cent personal income tax on income up to Rs 10 lakh instead of Rs three lakh at present.
Also, the income up to Rs 1.6 lakh would be exempted from tax with upper exemption limit in case of women tax payers and senior citizens.
Twenty per cent tax is proposed to be levied on income of Rs 25 lakh against the present Rs five lakh and 30 per cent on income of more than Rs 25 lakh against the present more than Rs 5 lakh.
Mukherjee said the proposed slab rates for personal Income Tax would put more money in the hands of consumers.
The Finance Minister said rationalisation of deductions and exemptions are proposed in the code for reducing the 'rent seeking behaviour'.
He said the draft also proposes clauses to check the misuse of treaty between India and other nations by third party residents.
