FinMin against hike in I-T relief limit

FinMin against hike in I-T relief limit

35 pc tax on incomes over Rs 10 cr

FinMin against hike in I-T relief limit

Amid the BJP’s promise to rationalise personal income tax (I-T) if it comes to power at the Centre, the Ministry of Finance has retained income tax exemption limit at Rs 2 lakh and introduced a fourth slab of 35 per cent on the super-rich, whose income exceeds Rs 10 crore.

As per the revised draft of the Direct Taxes Code (DTC) Bill, 2013, posted in the Ministry of Finance on Tuesday, the age for tax exemption for senior citizens has been reduced to 60 years from 65 years.

Though the fresh draft of the DTC Bill was prepared by Finance Minister P Chidambaram, the final view will be taken by the new government which comes to power after the polls.

The ministry has rejected the recommendations of the Standing Committee on Finance, headed by senior BJP leader Yashwant Sinha, to raise the income tax exemption limit to Rs 3 lakh, and to adjust other slabs, saying it will lead to an annual loss of Rs 60,000 crore to the exchequer.

As per the current structure, there is no tax on income of up to Rs 2 lakh per annum; 10 per cent on Rs 2-5 lakh; 20 per cent on Rs 5-10 lakh and 30 per cent on income beyond Rs 10 lakh.

The committee had proposed no tax on income of up to Rs 3 lakh per annum; 10 per cent for Rs 3-10 lakh; 20 per cent for Rs 10-20 lakh and 30 per cent on annual income beyond Rs 20 lakh.

The DTC proposes 35 per cent tax for individuals and Hindu Undivided Families (HUFs) having income exceeding Rs 10 crore.

“With a view to maintaining overall progressivity in levy of income tax, the revised code provides for a fourth slab for individuals, HUFs and artificial judicial persons. In their case, if the total income exceeds Rs 10 crore, it is proposed to be taxed at the rate of 35 per cent,” said the ministry. 

The revised DTC also says income from a house property not used for business or commercial purposes will be taxed under the head “income from house property”. Another major step the draft has suggested is that foreign firms with more than 20 per cent assets in India will be subjected to domestic tax laws.

Wealth tax is proposed to be levied on individuals, HUFs and private discretionary trusts at the rate of 0.25 per cent. The threshold for the levy of in the case of individuals and HUFs is proposed at Rs 50 crore.

On deduction for CSR expenditure in backward regions and districts, the ministry said it can't be allowed as a business deduction, as it is an application of income.