The cabinet minister discussed the new revised tax code for direct tax. The revised bill for direct tax proposes a new higher slab of Income tax for all individuals, partnership firms, HUFs, & companies who earn more than INR 10 crore on annual basis. The minimum income of INR 2 Lac as the first tax slab to be kept as it is though taxation on second home might go up.
As of now, India is one of the highest tax-charging nations with the highest income tax slab for Individuals and corporate sector at 30 percent of the Income.
The STT will not be abolished and will regulate day trading rather direct tax on insurance plans linked to equity has been incorporated for a premium of more than 10 percent of sum assured will be levied. However, the instruments if pure insurance will remain untouched as of now.
The provisions of wealth tax will undergo change as well. All financial as well as physical assets will be covered under wealth tax for HUFs, Private trusts along with individuals. The minimum set limit for wealth tax is INR 50 Crore at 0.25 percent.
The proposed tax Bill even has clauses that include an anticipated additional tax on dividend distribution over INR 1 crore. Apart from amendments in capital gains and indirect transfers of assets it includes the tax liability pertaining to capital market investments by HNIs.
Indirect transfers tax for global assets at 50 percent to be abolished ant the new set limit to be at 20 percent of assets in India to be taxed. An exemption up to 5 percent for transfer of small share holds has been proposed.
Housing rented property with rental value more 6 percent of annual rateable value will be taxed though the vacancy allowance shall be allowed.
The weighted deductions for in-house scientific research lowered at 150 percent and for research donation at 125 percent.
Business incurring losses to be written off in 7 years, this includes losses of capital gains, due to speculation as well as horse races.
Investment modes of NGO to be regularized as well as per the new proposed tax bill.
The standing committee that consisted of Finance minister P Chidambaram along with Parthasarathi Shome (advisor, Finance Ministry) recommended 190 revisions in the new direct tax code (DTC) bill. At present, the cabinet is considering 153 of the said recommendations and if they approve the proposed changes, it would be presented in Lok Sabha for next level of clearance.
All recommendations by standing committee to abolish cess and provide tax relaxation have been negated altogether. Even the standing committees suggestion to link the minimum income slab to CPI was rejected.