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NEW TAX CODE AGAINST INDIAN CORE VALUES, BJP TELLS PRANAB
From Our Delhi Bureau
NEW DELHI: The Bhartiya Janata Party on Tuesday cried foul at horrors in the new Direct Tax Code (DTC) proposed to replace the Income Tax Act, urging the UPA government not to hurl the taxpayers from frying pan to fire by effecting the proposed sweeping changes.
Its worry is the common man, the small assessees constituting 90 per cent of individual taxpayers shall end up paying more taxes and their rights extinguished by a draconian regime giving arbitrary powers to the tax officials, raising the spectre of abuse and harassment. It called for bringing down the highest tax rate for all individuals, firms and companies from 30 to 25 per cent.
A detailed memorandum submitted by the BJP leaders to Finance Minister Pranab Mukherjee here, based on wide internal discussions in the party as also with various stakeholders, accused the government aping the western and developed economies, ignoring the fact that India is a developing country and the basic philosophy of the code runs counter to its own core values, social, political and cultural.
"In one stroke, some of the fundamental principles, which constitute the core of our current taxation policy and have stood the test of time have been jettisoned" by discouraging savings and capital formation
that are so important for social security in view of India having no state-sponsored social security system alike the western countries, the memorandum asserted.
"Another very disturbing and disquieting feature in the Code is the rather thinly veiled attempt to destroy the charitable and religious institutions playing a stellar role in promoting education, health and other social welfare activities," the BJP said, opposing the ground shift in taxing them as "a Machiavellian first step towards reckless commercialisation of education and health, for which these institutions are perceived to be road blocks."
Pressing for continuing current exemption to religious trusts, the party opposed exemption limited to only those trusts or institutions that are registered with government under the religious endowment acts and denying tax deduction to donors of such bodies. A large number of trusts that are not registered under these acts will have to apply for registration which may or may not be granted and may be used as a backhand move to seize control of these institutions, the party leaders asserted.
The party also expressed shock at the code seeking to force TDS (tax deduction at source) from every citizen whose income is below taxable limit, be he a cobbler, rickshaw-wala, street vendor or a senior citizen and anyone having savings in post offices and banks. It will be an ordeal for the 'Am Admi' (common man) to claim refunds from the department by filing returns.
Pointing out adverse impact on small and middle income taxpayers, the party said the code paints a picture of lower taxes for all, but the devil lies in the detail as they will end up paying more because of withdrawal of tax incentives to savings and withdrawal of the fringe benefit tax.
Seeking changes in the tax structure to ensure the small and middle income groups are not adversely hit, the party sought the minimum exemption limit raised to Rs 3 lakhs and that for women and senior citizens up to Rs 3.50 lakhs and Rs 4 lakhs respectively. It also demanded that valuation of perquisites rationalised by dropping the proposal to tax leave travel concession and leave salary and levying no tax on reimbursement of expenses.
As regards implications for government employees, it said "the code suffers from the mindset 'one size fits all' by proposing valuation of perquisites such as housing, conveyance etc at market rates. Present taxation norms for government employees need not be disturbed, it stressed.
Parliament Opposition leaders Sushma Swaraj and Arun Jaitley, who led the BJP delegation to the Finance Minister, included senior party leader S S Ahluwalia, former Mumbai MP Kirit Somaiya, party MPs Anant Kumar Hegde and Nishikant Dubey, and BJP CA cell national convener Gopal Aggarwal.
They stressed on not discontinuing incentives to taxpayers to own a house or invest in house property to maintain a sustained fillip to the housing sector and rather enlarge the scope for even smaller players to invest in housing projects. Incentive to individuals to build apartments on a single plot of land larger than a certain size will unlock the vast untapped potential of individual investors in this sector, they urged.
Their memorandum also urged Mukherjee to desist from taxing pension, savings in provident fund and life insurance policies to let individuals build their own safety net as the state does not have one unlike the western countries that they need in the twilight of life.
BUSINESSES: Turning to small and medium entrepreneurs, the memorandum says the presumptive tax of 8 per cent on turnover on businesses having turnover up to Rs 1 crore is excessive and need revised to a lower rate by taking a more realistic view. The code exempts them from maintaining regular books of accounts, but they will be compelled to maintain them to justify their turnover is actually below Rs 1 crore.
The memorandum also wanted the provision declaring any receipt or payment of loan or deposit exceeding Rs 20,000 as income unless paid by draft or account payee cheque revised to Rs 50,000 as the threshold of Rs 20,000 fixed in 1989 was not realistic after two decades. It said the proposed procedure to compute business income is also cumbersome and harrowing for small businesses.
It wonders how small traders will be able to comply with the code requiring them to maintain vouchers and receipts of items of over Rs 50. They are supposed to keep carbon copies or counterfoils of serial numbers of receipt containing name and address of the buyer purchasing any edible or non-edible items costing more than Rs 50 a kilo like pakoras, dosas, idli, vegetables and dals.
Other issues raised in the memorandum include:
--No taxing of financial transactions and continuing capital gains tax as also lower tax on long term gains as against short term ones as they help individuals plan for their social security by investing savings in these assets and gaining long term appreciation.
--Special incentives to women and senior citizens.
-- MAT (minimum alternate tax) of 2 per cent on gross assets base is very detrimental, especially for those engaged in infrastructure sector like power generation, roads, airports and ports construction.
-- NRIs (Non-Resident Indians) who are exempted from taxation are sought to be denied minimum exemption limit of Rs 1.60 lakhs and the new flat rates of taxes have prompted many whether they have now become "non-required Indians) as henceforth their interest and investment income would be taxed at 20 per cent, capital gains at 30 per cent and residual income at a whopping 35 per cent.
-- Exemptions to cooperative sector should not be diluted in any manner while the code seeks to exempt only primary agricultural cooperatives and not even agricultural produce marketing committees and boards.
-- News agencies enjoying exemption from taxation should not be taxed as it goes against the Constitution providing guaranteed freedom of speech.
-- Universities, educational institutions and hospitals should be allowed to continue exemptions instead of taxing them as they do contribute immensely to the socio-economic development in the Country.
The memorandum also fault the abnormal and extraordinary powers given to the tax authorities by way of General Anti Avoidance Rules (GAAR), reopening of assessments to harass taxpayers, no relief by way of stay of demand made by IT officers, deemed notice even if not served, seizure of stock-in-trade instead of current law permitting on inventorisation and no seizure, and harsh penalty and prosecution provisions.