Chidambaram signals stable tax regime in February budget
December, 20th 2012
Govt fully committed to provide best possible facilities to taxpayers: PC The Union budget for next fiscal to be presented by finance minister P Chidambaram on February 28 may not tinker with tax rates signalling a stable tax regime to investors. Finance minister hinted at this on Wednesday.
“Our focus is to have a reasonably stable tax regime, which is in the interest of taxpayers and tax collectors,” Chidambaram told the parliamentary consultative committee on finance.
Chidambaram as a finance minister in 1996-97 brought down tax rates and introduced the three-slabs of 10, 20 and 30 per cent for income tax in his budget that was widely acclaimed as “dream budget”.
Those slabs have stuck on and even the proposed direct tax code has retained those slabs even as it suggested hiking income tax exemption limit and wider slabs.
The parliamentary standing committee that went into DTC bill has recommended raising the income tax exemption limit to Rs 3 lakh, first slab of 10 per cent on taxable income of Rs 3-10 lakh, second slab of 20 per cent for those earning between Rs 10-20 lakh and third slab at 30 per cent on income beyond Rs 20 lakh. It has also proposed that corporate tax rate be retained at 30 per cent.
Chidambaram also said that the government is fully committed to provide best possible facilities to the taxpayers for better tax compliance and revenue augmentation.
Finance minister stressed the need for systematic changes, which include strengthening of tax information system for better collection of taxes. He said that at present 3.5 crore people are filing income tax returns.
Only 14.6 lakh people have declared their income of Rs. 10 lakh and above for tax purposes which is not “realistic”.
He said we have moderate rate of income tax as compared to various developed countries. Our peak rate of taxation is 30 per cent at present. Therefore, there is lot of scope for better tax compliance and tax collections.”
In a recent statement urging tax assesses to promptly pay advance tax, revenue secretary Sumit Bose, said, “Sooner than later, the information available with the income tax department will lead the department to the doors of such persons (not revealing true income)…. There is no advantage in suppressing the true income or avoiding paying income tax that is due.”
In its pre-budget memorandum, industry body Assocham has proposed increase in income tax exemption limit to Rs 3 lakh and lowering of corporate tax rate to 25 per cent.
It is not yet clear if the two reforms, DTC for direct taxes and Goods and Services Tax dubbed, as single impost would be implemented from April 1, 2013. At the moment it looked difficult as the DTC bill and constitution amendment bill on GST are yet to be passed by Parliament.
Chidambaram, however, is working overtime to hasten implementation of the two major tax reforms from next financial year. He informed the consultative committee members that about 50 per cent of taxpayers are filing their return through e-mode.
The finance minister said that there was a need for more and more tax payers to electronically file their return as it well help in expediting tax processing and refund process.
The target for collection of direct taxes this fiscal is set at Rs. 5,70,251 crore, a growth of 15 per cent over the previous year. Some members also suggested that efforts be made to keep the tax rates low for better compliance.