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The >Budget is a multi-stage exercise, Finance Minister P. Chidambaram has said, adding that more measures and decisions will be announced during the passage of General Budget and Finance Bill.
He has also said Tax Residency Certificate (TRC) will not be enough to claim benefits under the Double Taxation Avoidance Agreement (DTAA), a move to prevent tax evasion under the garb of treaties. The provision over TRC has caused havoc in the market where Sensex tanked by over 290 points and Nifty by 100 points.
Addressing a post-Budget press conference, he said Budget is not a one-stop or one-step measure and is a continuing process. “The economy is indeed challenged, challenged in a number of ways. The Economic Survey lists those challenges. Another set of decisions and measures will be announced in reply to Budget discussion and Finance Bill in Parliament,” he said.
The Government is expected to reply on the General Budget within next few days, while the debate and reply over the finance bill will take place after the recess during the budget session.
Chidambaram justified the 10 per cent surcharge on ‘super-rich’ saying it has been done for just a year because revenues are under pressure. “We have to bring the fiscal deficit to 4.8 per cent (of GDP) in 2013-14. Once tax revenues grow, a year later we don’t need the surcharge. It is like a bridge,” he said while objecting to the media description of ‘super-rich’ appended to those with income above Rs 1 crore.
“I have not used the word super-rich,” he said, adding that the surcharge would not encourage tax evasion. He said the bulk of the Rs 13,300 crore gains projected from direct taxes in the Budget to come from the 10 per cent surcharge imposed on 42,800 super-rich individuals.
Tax Residency Certificate
The Finance Bill has proposed to amend Sections 90 and 90A in order to provide that submission of a tax residency certificate is a “necessary but not sufficient” condition for claiming benefits under the agreements referred to in sections 90 and 90A. The Section relates to DTAAs entered into with various countries to avail relief from double taxation, exchange of information and recovery of taxes.
Clarifying the provisions, Chidambaram said, “All that the Section (90 A (4)) intends to say is, if you produce a TRC that is a complete answer to your status as a resident. But, whether you are the beneficial owner is a separate issue. The TRC certifies that you are a resident. It does not certify you are a beneficial owner.” These amendments will take effect from assessment year 2013-14.
Chidambaram said tax treaties contain two conditions, residency and beneficial ownership.
“As far as residency is concerned, we will accept the certificate of residency that he produces from that country. As far as beneficial ownership is concerned, that is a question of fact. We are not doing anything unfriendly to the foreign investor. You have to satisfy two conditions,” he said.
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