Income-tax rates could be reduced in the proposed Bill for new Direct Taxes Code (DTC). The revised discussion paper on DTC had relaxed many of the key proposals of the original draft, leaving taxpayers to infer that the rates would not go down. However, the Central Board of Direct Taxes (CBDT) Chairman, Mr S. S. N. Moorthy, today sought to allay such apprehensions by indicating that rates could be reduced even at this stage. While releasing the revised discussion paper in June 2010, the Finance Ministry had also said that the rates and income slabs spelt out in the original DTC draft were indicative only and that they could be changed in the light of relaxations agreed to for many of the key proposals.
Reducing I-T rates
“We are in the process of reducing our income-tax rates. The Direct Taxes Code is a good example in that direction. We will come down (in terms of rates) to a realistic platform where the rates will be almost in agreement with international standards,” Mr Moorthy told an Assocham seminar on tax deduction at source (TDS) and DTC in the Capital today. He also said there was scope for reducing TDS rates, in particular. There are indications that the Government will introduce the DTC Bill in the ongoing monsoon session of Parliament. Meanwhile, Mr Moorthy expressed concern that the TDS collection growth rate so far this fiscal has been slightly lower than the growth seen last year. Currently, TDS accounts for nearly 40 per cent of the Centre's direct tax revenues. In 2009-10, the Centre collected Rs 1.4 lakh crore through TDS, or nearly 37 per cent of the total direct tax receipts of Rs 3.80 lakh crore. “This fiscal, the rate of growth of TDS collections is not adequate. There are still leakages in the form of short-deduction of taxes, non-deduction of taxes and non-remittance of taxes deducted. There has to be step up in TDS provision compliance if we are to achieve overall direct tax collections of Rs 4.3 lakh crore in 2010-11,” Mr Moorthy noted. The CBDT chief also underscored the need for more sensitisation of TDS provisions among banks and public sector entities, stating that there are lot of mismatches in the transactions handled by banks. He also ruled out a rethink on the current system of quarterly filing of TDS returns by deductors. Mr Moorthy highlighted that lower the rates of tax, better the compliance. The boom in direct tax collections in the recent years is proof that moderate rates are beneficial to the economy and the Exchequer, he noted. For domestic corporates, the original draft of the DTC had proposed a direct tax rate of 25 per cent against the existing 30 per cent. In the case of foreign companies, there was also a branch profits tax of 15 per cent besides the proposed rate of 25 per cent. For personal income-tax, the DTC had proposed that the 10 per cent rate would apply on taxable income between Rs 1.6 lakh and Rs 10 lakh, 20 per cent for Rs 10 lakh to 25 lakh, and 30 % thereafter.