Education

DTC — Will Pranab go with Sinha?

| Updated on November 15, 2017

BL21TAXSNIPPET1

BL21TAXSNIPPET2



Finance Minister Mr Pranab Mukherjee recently announced in the Rajya Sabha that the Direct Taxes Code Bill will be brought to Parliament in the coming monsoon session for the approval of both Houses. The Finance Minister also indicated that the recommendations of the Parliamentary Standing Committee on DTC will be considered and most of them will be accepted. If both Houses of Parliament approve the DTC Bill, it will, in all probability, be implemented with effect from April 1, 2013, replacing the five-decade-old Income Tax Act, 1961.

In this context, it is interesting to note that the Standing Committee on DTC had presented its report on March 9, 2012. It suggested many welcome measures for individual taxpayers such as raising the tax exemption limit from Rs 2 lakh a year to Rs 3 lakh, tax rate of 20 per cent on annual income of Rs 10-20 lakh as against the proposed slab of Rs 5-10 lakh in the current DTC Bill, raising the limit on investment in tax savings schemes to Rs 3.2 lakh and so on.

If the Finance Minister accepts most, even if not all, of these recommendations it will bring great relief to individual taxpayers. For corporates, however, no substantial relief has been provided and the corporate tax rate has been retained at 30 per cent.

The Finance Minister had also proposed in Budget 2012 to introduce the General Anti-Avoidance Rules, earlier part of the DTC, under the current law.

However, responding to concerns raised by industry, Mr Mukherjee has through amendments not only diluted the previously far-reaching provisions of GAAR but also extended its applicability by another year.

With this development, GAAR provisions are expected to be introduced along with DTC, as envisaged earlier.

Expat workers come under IT lens

With an intention to unearth black money stashed in bank accounts outside India and undisclosed assets held abroad, the Finance Minister in the Financial Bill 2012 proposed an amendment to Income-tax Act 1961 requiring residents other than those not ordinarily resident in India to compulsorily file IT return for any asset (including financial interest in an entity) or signing authority in any account located outside India from assessment year 2012-13.

The income-tax return would be mandatory irrespective of whether the taxpayer has taxable income or not in India. The new income-tax return forms prescribed for assessment year 2012-13 contains a schedule for disclosing details of foreign assets and foreign accounts.

This amendment is likely to cause hardship to expatriate employees working in India and their family members because of additional disclosure requirements. The Finance Bill 2012 will become law once it receives President's assent. It is already approved by both Houses of Parliament.

Extra cost on NRI remittances

The Government of India has announced its intention to introduce the Place of Provision of Services Rules, 2012. The rules specify that service tax would be levied on services provided by a money transfer agent to an overseas principal. This extra cost will have to come from the pockets of non-resident Indians who work overseas in countries such as Gulf, the US and so on.

NRIs transfer more than $65 billion annually to dependents in India. Levying service tax on money transfer charges would act as a disincentive for NRIs transferring money to India. Currently, the Indian economy is facing problems due to a depreciating rupee and reduced foreign exchange inflow. In this scenario, any fall in foreign exchange inflow from NRIs would add to the problem.

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Published on May 20, 2012
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