The Direct Taxes Code (DTC),expected to be tabled in Parliament in the Monsoon session,could suggest raising the minimum alternate tax (MAT) on companies to 20 per cent from the current rate of 18.5 per cent. The code is also likely to put in some provisions for relaxing the tax guidelines for insurance and banking companies,an official told The Indian Express. It would also mean long-term personal savings schemes like provident funds will continue to be tax exempt. The proposals are what the parliamentary standing committee on finance recommended in its report last year. The reasons are obvious,said an official connected with the exercise. Of the three DTCs that have been written by the tax department,only one,ie the second version reached Parliament. The options are limited for us, the official explained. If the standing committee report is junked,the finance ministry will have to send the third version to the committee again,which will mean the DTC will lapse. The current Lok Sabha could be prorogued sooner,this year. The government is therefore trying to keep the provisions consistent with the committee report and making changes in the details instead. For instance,while the first draft proposed calculation of the tax levied on companies that claim zero profit on their gross asset,the second draft suggested retaining the book profit method. The former has been recommended by the current adviser to the finance minister Parthasarathy Shome but is proving difficult to reinstate. Among the other provisions,the official said,special economic zones will too have to continue paying MAT. The commerce ministry would be asked to modify the SEZ Act to harmonise the two legislations. The standing committee had considered the draft presented by the then finance minister,Pranab Mukherjee,in 2010,that was completely different from the one presented in 2009 by finance minister P Chidambaram. While the first version promised to usher in a complete overhaul of the Income Tax Act,1961,the revised version by Mukherjee toned them down which now continue in their current version in the I-T Act. Many of the suggestions of DTC have already been implemented,especially those pertaining to general anti-avoidance rules (GAAR). GAAR was introduced in last years budget and had created quite a furore among investors,both foreign and domestic. The government had to set up a committee to review the provisions. The provisions are now proposed to come in effect from April 2016.
