Unfortunate times for 'Yeh Hai Mohabbatein' actress Divyanka
Why are Neelu Vaghela, Pooja Singh distracted on the sets of 'Diya Aur Baati Hum'

Debt MF tax will be made prospective, finmin won’t appeal retro tax verdicts

The Rajya Sabha will consider the Finance Bill for passage on Wednesday.

FM Arun Jaitley on Friday iterated the Modi government’s promise to keep tax rates low and ruled out any new retrospective taxes. FM Arun Jaitley on Friday iterated the Modi government’s promise to keep tax rates low and ruled out any new retrospective taxes.

Finance minister Arun Jaitley on Friday iterated the Modi government’s promise to keep tax rates low and ruled out any new retrospective taxes when he replied to the debate on the Finance Bill, 2014, in the Lok Sabha, which passed it later.

Stating that the government will not interfere with the judicial proceedings regarding tax notices issued with respect to indirect transfer of Indian assets under the 2012 retrospective changes to the Income Tax Act, Jaitley removed an irritant by making the higher long-term capital gains tax rate on debt mutual funds proposed in his Budget strictly prospective.

The minister had in his maiden Budget announced a new committee under the Central Board of Direct Taxes to look into each fresh case that may be found by field-level tax officers on taxation of indirect transfers to decide whether it needed to be pursued. Showing his displeasure with retrospective taxes introduced by the previous UPA regime and intent to relent on this to the extent legally possible, the finance minister had said in the Rajya Sabha on Thursday that this was a a difficult knot to untie.

The minister, who said he did not have time to review the position on the dreaded General Anti-Avoidance Rules (GAAR) during the Budget-making exercise, said he would apply his mind on it now. GAAR provisions are feared by investors given the additional powers it would give the taxman to influence their tax planning by lifting the corporate veil.

Under industry pressure, the UPA had deferred GAAR’s implementation to April 1, 2015.

The Rajya Sabha will consider the Finance Bill for passage on Wednesday.

As per the amended Finance Bill passed in the Lower House, capital gains on debt mutual fund investments held for a year and redeemed between April 1 and July 10 this fiscal would be taxed only at the earlier long-term capital gains tax rate of 10%.

Jaitley had originally proposed to increase the holding requirement for long-term assets to 36 months and tax them at 20% from April 1 onwards, which unnerved many investors.

Mutual fund industry players described the relief as partial as the revised rate will be applicable for investments redeemed after July 10.

As per the amended Bill, only debt mutual fund investments redeemed after July 10 would be denied the option to pay tax at a lower rate of 10% if indexation benefit (accounting for inflation in the capital gain made) is not availed of. “The finance ministry should now work with Sebi to make amendments to fixed maturity plans (FMP) regulations and allow these to become open-ended, else investors in FMP will unfairly be taxed on short-term basis though when they invested the rules were different,” said Sudhir Kapadia, national tax leader, EY.

In the amendments to the Finance Bill, Jaitley also sought to reduce the impact of his Budget proposal of making it compulsory for businesses to deposit 7.5% of excise or customs duty or the penalty demanded in assessment orders if they are to appeal to with commissioner (appeals). In the case of appeals at tribunals, the deposit requirement was 10%. As per the changes proposed to Central Excise Act and the Customs Act, businesses would be paid interest at the rate of 5-36% a year from the date of deposit if it is to be returned.

Amendments to the Finance Bill passed on Friday also provided for appointing a former Supreme Court judge as chairperson for the Authority for Advance Ruling that would give advance ruling on direct and indirect tax liabilities of domestic companies. So far, the facility was available to non-residents and public sector units. “High taxes drive consumers away. Consumers buy products, they don’t buy taxes,” said the minister, defending his decision to extend the excise duty cuts on capital goods and automobile sectors. Asserting that taxes forgone weren’t taxes lost, Jaitley said, “Ours is not a high-tax government.”

Jaitley also said the higher personal income tax exemption limit, investment limit and higher deduction on housing loan repayments announced will help in boosting savings. “Certainty in tax law reduces compliance costs and makes the tax regime investment-friendly. However, legislative actions should be equally supported by administrative actions,” said SP Singh, senior director, Deloitte Haskins & Sells.

Jaitley also promised to take discussions on the proposed goods and services tax (GST) forward. “We will hope to have the law ready for GST by the end of this year,” the minister said. Recovering unaccounted wealth kept abroad by Indians is also a priority for the government.

fe Bureau | The Financial Express

Do you like this story