The finance ministry has ruled out a change in tax slabs and said that income tax will continue to kick in at Rs 2 lakh, arguing that the modifications suggested by a parliamentary panel will leave a Rs 60,000 crore dent in the exchequer.
The parliamentary standing committee headed by former finance minister Yashwant Sinha had suggested that the 10% slab should begin at incomes above Rs 3 lakh. But the proposal has been rejected by the finance ministry in the Direct Taxes Code (DTC) Bill that is to be placed before Parliament during the current session.
The suggestion to link exemption limit to consumer price inflation has also been turned down by the finance ministry in the new DTC Bill.
The Bill that will rewrite the 50-year-old Income Tax Act was to be discussed by the Union cabinet on Thursday was not taken up, information and broadcasting minister Manish Tiwari said.
While it has proposed a higher levy on the super-rich, the finance ministry has also suggested norms that will make life tougher for individuals with undisclosed income. Sources said that two new sections have been introduced that make a distinction between "ordinary sources" of income and "special sources". Ordinary sources include income from employment, business, house property and capital gains. In contrast, special sources will include unaccounted deposits, unaccounted investments, unaccounted expenditure and goes on to explicitly mention income from sources such as hundis. In these cases the proposed law will not allow any deductions, making it tough for tax evaders to get away.
The latest Bill has also said that the securities transaction tax should continue and incorporated the changes in the general anti-avoidance rules (GAAR), whose implementation was deferred to placate foreign investors.