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The Parliamentary standing committee on finance has recommended an increase in basic tax exemption limit to Rs 3 lakh and another Rs 3.20 lakh rebate for eligible investments and spending in its report on the direct taxes code, or DTC. The panel is not for any relief for corporate tax payers and has recommended retaining the corporate tax rate at 30% as against 25% proposed.
If the government accepts these recommendations income tax exemption enjoyed by taxpayers would go upto Rs 6.20 lakh as against a maximum of Rs 4.85 lakh including the rebate for housing loans. "The committee has adopted the report..." a member of Parliament who attended the meeting of committee told ET.
If the recommendations are accepted by the government, the higher rebate will yield a saving of nearly Rs 42,000 a year for those in the highest tax bracket. Though, some members had favoured an increase in basic exemption to upto Rs 5 lakh during discussions they converged on keeping it at Rs 3 lakh in the final report.
The Direct Taxes Code Bill had proposed the basic exemption limit of Rs 2 lakh. The report would be submitted to Parliament within a week, the MP, who did not wish to be named, said.
The senior BJP leader Yashwant Sinha headed panel that looked into the bill has also asked the government to continue with higher exemption limit for women. The panel has suggested retaining the three-slab structure of 10%, 20% and 30% for personal income tax.
The DTC Bill, introduced in Parliament in August 2010, seeks to replace the over 50 year old Income Tax Act, 1961. Though the bill is not likely to be passed by Parliament in the budget session, the government, pending could introduce some of its measures contained in the bill in the Budget for 2012-13 that will be presented on March 16.
Discussions are on within the finance ministry on increasing basic exemption limit in line with the DTC Bill this budget. A final decision is expected to be taken closer to the budget after weighing revenue concerns and urgency for increasing exemption limit now.
The panel has also asked the government to bring in adequate safeguards before implementing General Anti Avoidance Rule, or GAAR.
The rule empowers tax authorities to disregard any arrangement entered into with the main purpose of obtaining a tax benefit.
The panel has prescribed safeguards at the behest of Indian Banks Association in the law itself to ensure that the rule is applied in appropriate cases and does not lead to any harrassament.
Assessing officer would need to record his reason in writing after hearing the assessee. GAAR should be applied only after an independent panel of tax officers gives its approval to that effect.
The rule empowers tax authorities to disregard any arrangement entered into with the main purpose of obtaining a tax benefit.
The panel has prescribed safeguards at the behest of Indian Banks Association in the law itself to ensure that the rule is applied in appropriate cases and does not lead to any harrassament.
Assessing officer would need to record his reason in writing after hearing the assessee. GAAR should be applied only after an independent panel of tax officers gives its approval to that effect.
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