The election code of conduct notwithstanding, the finance ministry has proposed significant changes to the Direct Taxes Code (DTC) Bill, including a 35% tax on those earning more than Rs 10 crore and making a company liable to tax on indirect transfers if 20% of its global assets are in India. It has not accepted Parliamentary Standing Committee recommendation on widening of tax slabs.

The changes, however, cannot move forward as a final call will have to be taken by the next government.

Ironically, the DTC Bill 2010 is pending before the Lok Sabha and with the dissolution of the House due to elections the Bill is going to lapse since it was not taken to the Rajya Sabha.

The finance ministry said widening the tax slabs and linking the exemption limit with consumer price inflation, as suggested by Parliamentary panel head & BJP leader Yashwant Sinha, was not acceptable as a change in slabs would result in revenue loss of Rs 60,000 crore.

The current income tax slabs are Rs 0-2 lakh, Rs 2-5 lakh, Rs 5-10 lakh, and Rs 10 lakh & above. The panel had suggested four slabs of Rs 0-3 lakh, Rs 3-10 lakh, Rs 10-20 lakh and Rs 20 lakh & above.

In the revised code, which proposes to replace the Income Tax Act of 1961, the provision to increase threshold of global assets to be located in India for taxation of income from indirect transfer from 50% proposed in DTC 2010 to 20% now has surprised the industry.

"This threshold is too high. There could be a situation that a company has 33.33% assets in three countries but it will not get taxed anywhere. Accordingly, the revised Code provides for a threshold of 20%. Besides, exemption is provided for transfer of small share holdings (up to 5%) outside India," the finance ministry emphasised.

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Ketan Dalal, joint tax leader, PwC said a 20% threshold for underlying company in India is very low and there is an expanded list of more stringent provisions in relation to penalties and prosecution.

"Those relating to the onus of proof with regard to GAAR, transition provisions with respect to tax losses and MAT credit are welcome proposals. While there is a proposal to relax small shareholdings from the net of indirect transfers, the reduction of threshold from 50% to 20% for substantial value may continue some uncertainties," said Jayesh Sanghvi, National Leader-International Tax Services, EY.

The revised also proposed to include financial assets under wealth tax compared to only physical assets at present, reduce the age for tax exemption for senior citizens to 60 years from 65 years, and levy of tax on income from a house property not used for business or commercial purposes, among others.

The finance ministry has also turned down Standing Committee's recommendations on abolition of Securities Transaction Tax, keeping the rate of tax for life insurance companies at 15% instead of the proposed 30%, levy of Dividend Distribution Tax on policy holder's investments, and deduction for CSR expenditure in backward regions and districts.

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As the finance ministry invited comments on the Bill barely a week before the polls, experts said it could be an attempt by Finance Minister P Chidambaram to make a statement that he completed the process of getting feedback and keeping a draft ready for the next government, putting the ball in their court.

"We have got ready DTC that will serve us for at least the next twenty years. I intend to place it on the website for a public discussion without partisanship or acrimony. I appeal to all political parties to resolve to pass the GST laws and the DTC in 2014-15," Chidambaram had said in interim Budget speech.