The second draft of the direct tax code (DTC) may drop the exempt-exempt-tax (EET) proposal for taxation of savings, reports CNBC-TV18, quoting sources. The first draft had proposed a exempt-exempt-tax versus an exempt-exempt-exempt (EEE) for savings.
Sources said EET may not apply to retirement benefits and would imply double taxation of income over Rs 3 lakh.
The tax liability under EET may exceed the relief obtained. The liability would be higher if taxpayers hit the higher slab in terminal year.
It is also difficult to segregate sums deposited prior to March 2011. The first draft of the DTC had proposed 2011 as cut-off year. Sources said the cost of maintaining records of interest is high.
The revenue foregone due to EEE is Rs 25,743 crore for 2007-08.
Further Redrafting the Direct Taxes Code (DTC) is proving to be an uphill task for the finance ministry, bombarded with comments from various stakeholders. The Central Board of Direct Taxes (CBDT) has received about 10,000 suggestions on the code, which seeks to replace the Income Tax Act of 1961. “We have got approximately 10,000 suggestions in the form of emails, letters and presentations. Out of these, only about one-fourth of the comments were sent online.
Maximum queries are on Minimum Alternate Tax (MAT) and the exempt-exempt-tax (EET) regime. Our officials have to go through all the suggestions,” said a ministry official on condition of anonymity. The suggestions, most of which are “repetitive”, are being vetted by a seven-member task force on DTC. The task force was formed only two months ago and is left with just two weeks to go through the suggestions and take them into consideration while drafting the code.
Revenue Secretary Sunil Mitra has already said the revised draft of DTC would be released for public debate in the first week of June. The government plans to introduce the code in the monsoon session of Parliament, where it will first be taken up by the Standing Committee on Finance. The official said comments were received from various quarters, including government departments, and most of these revolved around the nine areas finance minister promised to revisit such as capital gains tax, Double Taxation Avoidance Agreement, taxation of charitable organisations and foreign companies in India, retirement benefits and income from house property.
This is for the first time the finance ministry has received so many suggestions on a proposed legislation. Finance ministry officials say this is because before DTC, no other Bill was released for public discussion. Another official said the code at this stage was witnessing frequent changes and once a final decision was taken with regard to the amendments, more officials of CBDT would join the task force to prepare the draft in the stipulated time. “We will start the paperwork once things are finalised,” he said. The redrafted code would be open for public discussion for 15 days. Officials of the revenue department will have to take into account the comments received during this period while finalising the code. The task force, which operates from an income-tax office at Saket in South Delhi, consists of officers in the grade of commissioner and joint commissioner of income-tax posted as officers on special duty