Notwithstanding that the Lok Sabha polls are less than a week away, the finance ministry on Tuesday put up the draft Direct Taxes Code (DTC) Bill 2013 that proposes to bring in sweeping changes in India’s income tax regime including a higher 35% tax for the super-rich for those who earn more than `10 crore a year, rejigging the existing slabs and a wealth tax on host of assets such as expensive paintings.
It has also proposed to reduce the age for tax exemption for senior citizens to 60 years from 65 years.
It has, however, rejected a Parliamentary Standing Committee’s recommendation to raise the income tax exemption limit to `3 lakh and to adjust other slabs saying that it will lead to an annual loss of `60,000 crore to the exchequer.
At present, there are three tax slabs. Those with an income of less than `2 lakh a year are exempt from paying taxes.
Those earning between `2 lakh and `5 lakh annually are taxed at 10%, those between `5 lakh and `10 lakh at 20% while anybody earning more than `R10 lakh pays a tax of 30%.
In last year’s budget (2013-14) finance minister P Chidambaram, for the first time, introduced a “super-rich tax”.
“Relatively prosperous” persons with a taxable income of more than `1 crore — and there are supposedly only 42,800 of them in India — now pay an additional surcharge of 10%.
Under the draft DTC Bill, which incorporates 153 of the 190 recommendations of the Parliamentary Standing Committee, proposed to introduce a higher tax slab for those with an annual income above `10 crore.
The DTC Bill, which is aimed at replacing the five-decade old Income Tax Act 1961 with contemporary legislation with well-defined rules, was first introduced in Parliament in 2010.
The draft, however, is only proposal as the new government will likely bring in a new set of proposals and table it in Parliament.
In his Budget speech, Chidambaram had said that revised DTC Bill incorporating amendments recommended by the Parliamentary Standing Committee was ready and will be placed in public domain for discussions.
“With a view to maintaining overall progessivity 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 `10 crore, it is proposed to be taxed at the rate of 35%,” the finance ministry added in a note placed along with the draft Bill.
The revised DTC also said the income from a house property, which is not used for business or commercial purposes, will be taxed under the head “income from house property”.
The ministry said the revised Code captures all assets for wealth-tax, whether physical or financial, “thereby removing the distinction between physical and financial assets”, which discriminated against those taxpayers who are conservative and put their money in physical assets.
The Bill has proposed to levy wealth tax at the rate of 0.25%. The threshold for the levy of in the case of individual and HUF is proposed at `50 crores.