TAX NEWS - June 2010

Revised DTC likely to raise taxation rates

The revised draft Direct Tax Code has brought cheers to the taxpayers by rolling back the proposal to tax long-term savings such as provident fund and the PPF at the time of withdrawal, but taxpayers should gear up to fork out more in the form of taxes as the rates illustrated in the first draft DTC are unlikely to be as generous in the final DTC.

According to the revised DTC draft released yesterday, the tax rates would be calibrated. This may translate into higher tax rates compared to what was proposed in the first draft DTC because the roll back of exempt-exempt-tax scheme and computation of minimum alternative tax (MAT) on gross value of assets, would reduce the tax base substantially. Thus, there are strong chances that the tax rates may go up if compared to the first DTC.

According to sources in the finance ministry, corporate tax rate could be more than 25 per cent but would be less than 30 per cent as against the 33 per cent effective rate paid by corporates currently. In the first draft discussion paper, the DTC had proposed that the tax rate for corporates would be substantially reduced to "a uniform rate of 25 per cent".