BackNew income-tax code to be tabled before December
New income-tax code to be tabled before December
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New Delhi: The new income tax code, which will simplify and replace a nearly five decade-old law, will be introduced in Parliament in the next four months amid indications that there may be “fine-tuning" of taxes but no “radical" changes in the current structure.
Over the weekend, finance minister P. Chidambaram has been working on drafting the code, which, after being introduced in Parliament, will have to go through a time-consuming process before it is passed.
Chidambaram said the salaried class pays the maximum taxes and the honest taxpayer need not worry about harassment. But the long wait for refunds will end once the refund banker system (RBS) is extended throughout the country.
“Yes, I even worked on Saturday and Sunday," he told PTI. “Before the end of the calendar year, we will introduce it [the revised IT code] in Parliament."
Chidambaram said the code would begin from a zero base and would seek to simplify the provisions of the income tax law.
It would completely replace the Income Tax Act of 1961.
The history of income tax in modern India dates back to 1860 when the first I-T Act was introduced. After independence, based on the Law Commission’s report, the current income tax law was enacted in September 1961.
Asked about his recent statement on lowering tax levels, Chidambaram said, “All I said was if compliance improves and the tax base gets wider there is scope for reduction. And I added that we must always work on the premise that lower tax rates could nevertheless enhance revenues."
Asked if taxpayers could expect a break in the next budget, the finance minister said that would depend on what the revenue picture is in the first week of February.
To a question as how close the country was to the Asean levels of low taxes, Chidambaram said on customs, the country was “more or less there." On excise, VAT and service tax, no major changes could be expected until India had a goods and services tax (GST) in place.
“There will be some fine-tuning but there will no major radical changes in these taxes," he said.
On income tax, Chidambaram said the rates are quite reasonable and moderate.
To a query on the apparent contradiction between attempts to lower tax levels and levying of surcharge, Chidambaram said the government had not raised any surcharge except on education.
“Only in education we have raised the surcharge for a specific purpose," he said.
“You can’t in one breath say you must spend 6% of the GDP on education and also say don’t find funds for education." he added.
Chidambaram said with a tax-GDP ratio of 11.8%, it is difficult to fund education only from tax. “Then, half of it will go for education," he said. “There are claims from other sectors such as health and internal security."
The finance minister said successive budgets have removed tax exemptions.
On complaints of delays in refunds, Chidambaram said the government has already introduced the RBS in the national capital and was in the process of extending the system to two more cities.
Eventually, taxpayers throughout the country will benefit from the scheme, he added.
“Under the RBS, the day an assessment is made, three days after that refunds will be credited," he said. “At the moment, after the assessment, it takes three months, six months and one year. We plan to cut down delays through this system."
Chidambaram denied that a salaried taxpayer would have problems with getting a refund.
On tax evasion, he said the solution lay only in the use of technology and information with which evaders could be identified easily and quickly.
Asked about the 9% growth rate projections for India by the International Monetary Fund and the Prime Minister’s economic advisory council, and the 8.5% growth outlook projected by RBI, Chidambaram said, “RBI is generally conservative. I think it is good to have one institution that takes a conservative view."
Responding to criticism that economic growth was not percolating down to the common man, the finance minister said the perception is inaccurate. There is no connection between the two, he added.
“Figures show that more people have got jobs in the last three years than before," he said. “They also show that absolute number of unemployed has increased because the entry into the labour force has increased very high."
Chidambaram said somebody must be benefiting from the 9% growth and it cannot be that nobody is being rewarded.
“In construction, if there is a boom, civil engineers must be employed like masons, and carpenters also will get employed," he said. “If 937,000 education loans have been given out, then these families must have benefited. All that I am pointing out is that clearly some sections must have gained out of this 9% economic growth. I am not saying all sections have gained."
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