Direct taxes
Rates |
Rates of income
tax, both corporate and non-corporate, have remained largely stable since 1997. As
stability and continuity are commended as virtues in tax regimes, I intend to be virtuous.
Corporate tax structure will, therefore, be left as it is; except that the 5 per cent
surcharge, levied last year in connection with the security of India, will be halved in
the case of corporate assessees, firms, foreign companies, cooperatives, and local
authorities. In the case of individuals, Hindu Undivided Families (HUF), and Association
of Persons etc., this surcharge will be removed entirely, except in the case of those
earning an income above Rs.8.5 lakhs. From them, that is those earning above Rs.8.5 lakh,
I will collect a 10 per cent surcharge on the tax, which works out to less than 3 paise
out of an income of a rupee. But, I have provided some relief to them, as well, for
example, in standard deduction.
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Standard
deduction |
There are more
salaried taxpayers at income levels of Rs.2 lakh and above than the non-salaried. I do
often wonder, why? That is why the salaried always complain, saying they do not have -
that clich� phrase - a level playing field; I agree, they do suffer a more exacting
regime. Therefore, as already announced, their standard deductions are raised.
Individual
taxpayers having income from dividends, interest, etc. are given a general deduction of
Rs.9,000. As promised by me earlier, this deduction has now been increased to Rs.12,000.
An additional deduction of Rs.3,000 is allowable in respect of interest from Government
securities. Thus, the total deduction available under Section 80L will be Rs.15,000.
Though dividend will not be taxable in the hands of the recipient from next year, I
propose to retain this deduction at Rs.15,000 for next year also.
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| Tax deduction at source |
A lot of
unintended difficulties are caused by certain provisions dealing with tax deductible at
source (TDS); much too tedious to elaborate here. I want to correct this. Therefore, in
simple terms, it is now provided that individuals and HUF carrying on business or
profession need not deduct tax at source, from payments made by them for personal
purposes.
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| Not ordinarily resident |
There is a
category of taxpayers in India ordinarily not found elsewhere - the ‘not ordinarily
resident’. They do not normally have to pay tax on their foreign sourced income.
There has been confusion on this provision in the past due to differing legal
interpretations. To set matters at rest, the relevant definition has been suitably amended
so that the benefit will now be available to persons for two years in case they remain
non-residents for the last nine out of 10 years.
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| Administrative reform |
In the area of
tax administration, Government has initiated a whole basket of reforms, mainly on the
basis of the recommendations of the Kelkar Committee. Some of the principal ones are:
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outsourcing of
non-core activities of Income Tax Department, namely allotment of PAN, and creation of
data bank of high value transactions through tax information network;
immediate
abolition of present discretion-based system for selection of returns for scrutiny; this
will be replaced by a computer generated, intelligent, random selection of only 2 per cent
of the returns, annually;
expanding the
scope of taxpayer services, including extension of interactive voice response system to
more cities and software for preparation of returns;
direct crediting
of all refunds to the bank account of the taxpayer, through electronic clearance system;
but obviously only if the taxpayer furnishes a bank account number;
reduce the
compliance cost of the taxpayer, through halving the number of forms presently used in
furnishing of applications, returns, etc., for the purposes of tax deduction and tax
collection at source, from the present 42 to just 22. Hon’ble Members, if in only one
attempt I could halve this headache, please reflect upon the immense possibilities that
lie on this route;
- immediate introduction of a one-page
only return form for individual tax payers, having income from salary, house property and
interest, etc. This has already been devised, and will come into operation from April 1
onwards;
the Income Tax
Act is being amended to enable electronic filing of returns;
abolition of
tax-clearance certificates currently needed by a person leaving India, or any person
submitting a tender for a government contract. Henceforth, only expatriates who come to
India in connection with business, profession or employment, would have to furnish a
guarantee from their employer, etc. in respect of the tax payable before they leave India.
An Indian citizen, before leaving India, will only have to give his/her permanent account
number, and the period of his/her intended visit abroad to the emigration authorities; and
simplifying the
procedure and methods employed during search and seizure, and during survey by the Income
Tax department. First, hereafter, stocks found during the course of a search and seizure
operation will not be seized under any circumstances. Second, no confession shall be
obtained during such search and seizure operations. Third, no survey operation will be
authorized by an officer below the rank of Joint Commissioner of Income Tax. Finally,
books of account impounded during survey will not be retained beyond ten days, without the
prior approval of the Chief Commissioner.
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These,
Hon’ble Members, are only a few steps on this long road called simplification and
rationalisation of taxation. It is not for nothing that even Albert Einstein had ruefully
observed that he found ‘Income Tax the most difficult thing upon Earth to
understand’.
- Mr. Speaker, please sympathize with
me. I endeavour to make easy that which Einstein found so difficult.
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