Finance Minister Pranab Mukherjee today rejected criticism of the revised draft Direct Taxes Code over the proposal to restore exemptions in income tax, saying the tax rates are indicative and not final. Changes (made in the revised draft Code) cannot be presumed as “progressive or regressive”, he told PTI in an interview making it clear that final tax rates are the prerogative of Parliament to decide.
He was replying to a query about criticism that the revised draft is a throwback to the days of exemptions, dumping the reforms proposals and whether the government had developed cold feet on reforms to toe a populist line.
“You know, when the draft tax code was placed before the public it was draft. I stated myself that this is a draft proposal. So far as the taxation are concerned, this is prerogative of Parliament,” Mukherjee said.
“If somebody assumes that the indicative rates in the direct tax hood in the final rate; it is for them to come to the conclusion, that is far from reality. What rate of taxes will be there it as only Parliament can decide. Nobody else.”
The revised draft DTC, released earlier this month, has dropped the contentious issues of the first discussion paper — imposing tax on provident and pension funds at the time of withdrawal, imposing minimum alternate tax (MAT) on the basis of gross assets of companies, and withdrawing income tax rebates on the interest payment of homeloans.
Mukherjee said that the new draft addresses 11 grievances expressed by stakeholders to the proposals in the first discussion paper and it has been placed for public comment till June 30.
Many have criticised the changes proposed in the revised draft in respect of MAT. The revised draft retains the current position of imposing MAT on the basis of profits, and not gross assets, which was suggested in the first discussion paper. MAT is imposed on profitable companies which do not fall under tax net because of various exemptions.
“That’s why every year Finance Minister states before Parliament and seek the approval that this will be the rate of taxes. So what is progressive, what is populist, who are to judge over it … this is the draft. Therefore, you cannot presume that this is progressive, this is regressive,” Mukherjee said.
The revised proposal has also made it clear that tax incentives on housing loans will continue. The earlier draft was silent on housing loans.
Mukherjee had promised in his Budget speech to implement the new direct tax laws from next fiscal.