New Delhi: A high-level BJP delegation today met finance minister Pranab Mukherjee to protest against the proposed Direct Tax Code, which it claimed would adversely impact the small and middle income group and discourage savings, social security and capital formation.
The delegation, comprising Leader of Opposition in Lok Sabha Sushma Swaraj, her counterpart in Rajya Sabha Arun Jaitley and others, said Mukherjee had assured them that DTC was only at the drafting stage and discussions were still on.
“The finance minister said he would not do anything (on DTC) for a year...till 2011-12,” Swaraj claimed.
The BJP leaders gave their observations about DTC to Mukherjee and also put forward their demands on the issue.
“Our basic objection to the Direct Tax Code is that it increases the tax liability of the small and middle income group.....It also discourages savings which goes against the ethos of the middle class,” Jaitley said.
In the memorandum submitted to Mukherjee, BJP asserted that DTC is “unreasonable and harsh” on the small tax payer, small traders, senior citizens and women. BJP leaders termed it a “blind pursuit of ideas and concepts from the West”.
However, BJP insisted that it favoured reforming of the 50-year old income tax system but it should be “simple, progressive and imbued with the vision of 21st Century”.
BJP’s concern about DTC arises from the fear that the middle class, traders and the urban populace, which form its core votebank, would be affected by this tax.
BJP leaders argued that the proposed Direct Tax Code would hit hard the “cultural, charitable and religious institutions” by taxing them.
“All contributions to the social security schemes including that of Provident Fund, LIC shall also become taxable,” Swaraj said.
“By shifting from Exempt-Exempt-Exempt to Exempt-Exempt-Tax, it ignores the senior citizens who constitute 10 per cent of our population,” she said.
Others objections raised by the BJP include giving “arbitrary discretionary powers” to tax officials and increasing the tax burden on the common man, which constitutes 90 per cent of the total individual tax payers.
The main opposition has demanded that under DTC government should not tax houses provided to government employees, make individual tax rate 25% instead of the present 30%, exempt taxes on interest upto Rs25,000 received by women and senior citizens and remove the proposed harsh provisions on Tax Deduction at Source (TDS).
BJP favours long term capital gain through encouragement and protection to own a house and investment in housing. It has demanded that tax benefit for housing loan and interest should be maintained.
“Security Transaction Tax should be removed,” it said.
In the memorandum, it has also stated that the DTC proposal to levy 2% Minimum Alternate Tax (MAT) on the asset would be a deadly blow on the infrastructure sector and instead the present system of MAT on profit earning should be continued.