Faced with stiff opposition from the industry and other stakeholders about the two most contentious issues in the proposed Direct Tax Code Minimum Alternative Tax (MAT) and Exempt-Exempt-Tax (EET) the government is likely to stay away from making any changes in the existing regime for both.
Sources told The Indian Express that the proposed DTC,a re-draft of which is to be unveiled soon,is likely to retain the existing practices of levying MAT on book profit as against the proposal to levy it on gross assets.
Also,the government is not likely to tax long-term savings at the time of withdrawal,the sources said. The code proposed that the long-term savings would though be exempt from tax at the time of investment and accrual,they would yet be taxed at the time of withdrawal.
Instead,the current practice of taxation exempt-exempt-exempt on long-term savings such as provident funds,approved super superannuation funds,and New Pension Scheme is likely to stay,the sources added.
The draft code placed in the public domain last August had created a huge uproar over many issues. The finance ministry drew a lot of flak from the opposition,the industry and individual tax payers over several of its radical suggestions such as EET and MAT on gross assets.
In fact,the Prime Minister had also expressed concerns over taxing long-term savings. So relief may be in sight for companies,mainly infrastructure firms,which were worried about the ramifications of the suggested MAT regime involving taxing gross assets.
As per the current practice,MAT is levied on the book profit of companies at 18 per cent.
MAT is payable by companies having large profits but which do not pay taxes to the government due to various incentives provided in the Income-tax Act. The sources said that the new discussion paper on the code would mainly focus on the nine areas of concern raised by finance minister Pranab Mukherjee. All areas of concerns raised by the stakeholders have been addressed, the sources added.
The nine areas were: MAT on gross assets,capital gains tax in case of non-resident Indians,Double Taxation Avoidance Agreement,General Anti-Avoidance Rule,taxation of charitable organisations,effective management control and taxation of foreign companies in India,shift from the exempt-exempt-exempt (EEE) to the exempt-exempt-tax (EET) taxation system for savings and investments,taxation of income from house property in case of self-occupied property by the individual,and deductions in case of retirement benefits.