A Parliamentary panel has recommended that the corporate tax rate be retained at 30 per cent even when the new Direct Taxes Code comes into effect.
In its report on the Direct Taxes Code Bill, just ahead of the Budget, the Standing Committee on Finance, headed by Mr Yashwant Sinha, has also in principle endorsed the proposed transition to investment-linked incentives/exemptions with focus on crucial sectors of the economy. Area-based incentives may be considered on an investment-linked basis, the report says. The panel is of the view that the effective tax yield for companies will approximate to the nominal rate with the proposed transition to focussed investment-linked incentives/exemptions. Currently, the effective tax yield for companies is about 21 per cent.
For life insurance companies, the Standing Committee recommends that the tax rate may be raised to 15 per cent from the current level of 12.5 per cent, instead of the proposed 30 per cent.
Securities tax
The Committee has also recommended the abolition of the securities transaction tax (STT), a tax levied on equity trades.
The distinction between listed and unlisted securities should be removed, the panel has said.
The Government had introduced the STT in 2004 on transactions in different types of securities.
The rate varies from 0.025 per cent to 0.25 per cent, depending upon the type of security traded and the transaction — whether sale or purchase.The Standing Committee has also suggested that the wealth tax ceiling be substantially increased to Rs 5 crore to reflect the current realities. Beyond this limit, tax should be payable on a slab basis.
Corporate tax
For all the taxes — personal, corporate and wealth tax — the Parliamentary panel has suggested that a built-in mechanism embedded in the statute itself may be devised for automatically adjusting the tax slabs for inflation.
On the corporate tax side, the tax collected is Rs 44,016 crore in the slab of 0 to Rs 100 crore, Rs 23, 421 crore in the Rs 100-500 crore slab and Rs 54,558 crore in the above Rs 500-crore slab.
The extent of revenue foregone for these slabs has been found to be Rs 23,200 crore, Rs 11,779 crore and Rs 27,895 crore respectively.