Finance minister Arun Jaitley on Friday offered a marginal relief to the mutual fund (MF) industry as he announced that the increased tax rate of 20% on debt mutual funds (MFs) will not apply to units sold between April 1 and July 10.
“I propose to move a government amendment today in the Finance Bill itself that the new tax regime will not be applicable to transaction of sale of units (of debt MFs) which have taken between April 1 and July 10 this year,” Jaitley said while replying to the debate on the Finance Bill in the Lok Sabha.
The minister said he was accepting a suggestion made by Congress leader Jyotiraditya Scindia and some other members as it amounted to levying tax with retrospective effect for about three months.
The Lok Sabha later passed the Finance Bill, 2014, completing the budgetary exercise in the Lower House.
Units of debt-oriented MFs sold after July 10 will, however, attract 20% capital gains tax against 10% earlier.
In his budget proposals, Jaitley had proposed raising long-term capital gains tax on debt-oriented mutual funds to 20% from 10%, to bring parity with banks and other debt instruments. He also proposed raising the period of holding for long-term debt funds units from 12 to 36 months.
Jaitley also offered relief for those who pay penalty for late filing of income tax returns.
“For late filing of returns there is a provision, which has become onerous as huge penalty (is levied) per day and there are no power of waiver itself,” he said.
“So if somebody says it’s filed after a year, then per day the penalty used to become extremely exorbitant. So some discretion is given to the CBDT with regard to that penalty where cases of late filing of returns were involved. The penalty as such will remain.”
Jaitley also said that lower taxes and duties were aimed at improving savings for investment and making manufacturing competitive to revive growth.
“Ours is not a high-tax government. High-tax government will not encourage business and industrial activity in India. It will never be able to create jobs, a low-cost manufacturing situation...ultimately what do consumers want to buy. They want to buy products. They don’t buy taxes,” he said. “We are interested in creating a situation where the sentiments in regard to the Indian economy, which had been disturbed in the eyes of investors in comparison to the global economy, is revived.”
He also widened the scope of Settlement Commission.
In an attempt to reduce tax litigation, the finance minister proposed setting up of more benches of advance ruling to deal with transfer pricing disputes.
The finance minister also reiterated the government’s commitment to bring back black-money stashed abroad. “When my colleague Nishikant Dubey spoke (on Thursday), prehaps he spoke very well. But he said that black money cannot return to India in his lifetime. We all pray for his long life but he will not have to wait for this (return of black money) for a long time,” Jaitley said.