Finance Minister Mr. Pranab Mukherjee did a complete “U” turn on the Direct Tax Code Bill. The first draft released in August-2009 [See here] had proposed some very drastic changes raise the individual income tax limits in 3 big slabs of 1.6 Lakhs to 10 Lakhs, 10 Lahks to 25 Lakhs and 25 Lakhs & above. Get rid of all exemptions as well as total savings was encouraged to take it upto Rs 3 lakhs.
The Second draft [See here]had also proposed to tax capital gains from stock markets currently 100% exempt. However, the draft bill that received Cabinet Nod to be tabled in the parliament in the next few days is nothing but current tax structure with negligible modifications in a new bill and differentiated legislative powers to control any modifications.
Why we are unhappy ? [Based on Media Reports, but it seems like none have seen the Final Bill]
There in no change on the capital gains tax while corporate tax rates have been reduced to 30% without any additional surcharge or cess. The treatment of the capital gains tax has been kept unchanged, which is a positive for FIIs as the initial proposal would have required them to pay taxes for their transactions in securities, especially those who so far reported their capital gains as business income. Letting out Foreigners invest Tax Free in Indian equities, the best performing asset class in the World is unacceptable to us.
MAT has been set at 20% of book profits, including a surcharge so no effective change. Corporate tax rates have been reduced from the current 33% to 30%; in addition, there would be no additional surcharge or cess that would be levied on corporate taxes.
Tall claims and Vocal statements to Plug Investments from Tax Free heavens find no mention in the draft bill. Honest Tax Paying Indian Citizens, be prepared to under go the Dual Torture of Inflation and Higher Tax slabs while Foreigners make you work and redeem their investments Tax Free! Thank You Mr. Mukherjee.