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BJP raises objections on Direct Tax Code
February, 02nd 2010

A high-level BJP delegation on Tuesday 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 Ms. 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 201112, Ms. Swaraj claimed.

The BJP leaders gave their observations about DTC to Mr. 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, Mr. Jaitley said.

In the memorandum submitted to Mr. Mukherjee, the 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.

The BJPs concern about DTC arises from the fear that the middle class, traders and the urban populace, which form its core vote-bank, 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, Ms. 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 per cent instead of the present 30 per cent, exempt taxes on interest upto Rs 25,000 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 per cent 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.

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