Industry chamber Assocham today suggested the government to introduce the equalisation levy as part of Indian Income Tax Act itself and not as a separate chapter in the Finance Act as it would only increase cost of doing business.

"Introducing equalisation levy separately under Finance Act and not incorporating it as a part of the existing Income Tax Act would only increase cost of doing business for Indian companies, as foreign companies would insist that this being a domestic levy should not affect payments made to them, as such domestic companies would be required to gross up equalisation levy while making payments, thereby adding to the cost," Assocham said in statement.

The committee set up by the Central Board of Direct Taxes (CBDT) earlier this month had suggested that Equalisation Levy of 6-8 per cent be imposed on amount paid to non-resident by an Indian resident for specified digital services. It also suggested that this Levy should not be a part of the Income Tax Act.

The specified services would include online advertising or any services, rights or use of software for online advertising, including advertising on radio & television, designing, hosting or maintenance of websites, digital space for website, e-mails, blogs, facility for online sale of goods or services or collecting online payments.

"Whereas, if this levy is introduced as part of the Income Tax Act itself, it would not add to the cost of business to Indian company as it would be in nature of regular withholding," it said.

Besides, the Organisation for Economic Cooperation and Development ( OECD) had explicitly communicated that countries could introduce 'equalisation levy', provided they respect their existing treaty obligations.

On the issue of retirement funds, Assocham has recommended that all stipulations relating to taxability of accumulated balance/annuity for recognised provident fund and superannuation fund as well as the financial limit of Rs 1.50 lakh for employer's contribution to Superannuation Fund be withdrawn.

As per a recent government clarification in respect of the accumulated balance in the recognised provident fund, the taxability of stipulated 60 per cent balance will not apply in case the same is invested in an annuity.

"This is an extremely controversial suggestion since money (lump sum) is generally utilised from the provident fund for various important purposes like construction of house, wedding and others and the salaried class cannot be forced to invest in any annuity scheme for tax saving purpose when lump sum money is required post-retirement," it said.