Finance minister P Chidambaram on Tuesday ruled out levying wealth tax on agriculture land and eased residency norms for investors from countries such as Mauritius in a move that boosted stock markets, but refused to roll back the duty hike on sports utility vehicles leaving a section of automakers disappointed.
The government also cut tax rates to 5% from 20% on government and corporate bond income of foreigners, a move aimed at attracting more overseas capital into India battered by a decade-low slide in economic growth.
The announcements were part of the finance bill — passed in Lok Sabha on Tuesday amid a boycott by opposition leaders.
“There was apprehension that wealth tax was being imposed on agricultural land. Let me make it clear that the policy of the UPA government is not to impose wealth tax on agriculture land,” Chidambaram said.
The proposal to levy 1% wealth tax on the value of the agricultural land that fell within eight kilometers of the municipal limits of a city had triggering protests across political parties.
On investments from tax havens such as Mauritius the finance minister clarified that “TRCs issued by a foreign government will be accepted as a certificate of residence,” assuaging anxious investors.
On the demand for removal of higher duty on SUVs, Chidambaram said the proposed increase is very small. “By increasing the duty from 27% to 30 %, we are only partially recovering (the subsidy)...from rich people who use SUVs.”
A senior executive of an SUV maker, however, said the government should have raised taxes on diesel rather than on SUVs and three percentage point rise in taxes is a significant hike.