New Delhi: A proposal to tax the super-rich at a higher income tax rate of 35 per cent in the Direct Taxes Code (DTC) Bill was not taken up by the Cabinet today.
While the Bill proposes to keep exemption limit at Rs 2 lakh for individual tax unchanged, it proposes to introduce a fourth slab of 35 per cent tax rate for those with an annual income of over Rs 10 crore.
"The DTC Bill was not taken up by the Cabinet today," Information and Broadcasting Minister Manish Tewari told reporters after a meeting of the Union Cabinet chaired by Prime Minister Manmohan Singh.
While Tewari did not give reasons for the Cabinet not taking up the Bill today, sources said it was possibly due to paucity of time and would be taken up at the next meeting.
Earlier in the day, Finance Minister P Chidambaram said the approval for the Bill was listed in the Cabinet agenda. "Lets see what the Cabinet members decide," he said.
Among other things, the Bill proposes to levy a 10 per cent tax on dividend income of more than Rs 1 crore.
Besides, Minimum Alternate Tax (MAT) may be levied on book profit and not on gross assets, sources said. Further, the Securities Transaction Tax (STT) is likely to be retained, as against the recommendation of the Standing Committee on Finance that the levy be abolished.
At present, tax is levied on income between Rs 2-5 lakh at 10 per cent, Rs 5-10 lakh at 20 per cent, and above Rs 10 lakh at 30 per cent. Further, those earning more than Rs 1 crore have to pay a surcharge of 10 per cent.
Sources said the government has accepted most of the 190 recommendations made by the Standing Committee on Finance, headed by Senior BJP leader Yashwant Sinha.
The first draft prepared by Chidambaram in 2009 had proposed income-tax slabs of Rs 1.6-10 lakh, Rs 10-25 lakh and Rs 25 lakh and above. Besides, corporate tax was proposed at 25 per cent.
This was followed by the draft DTC Bill prepared by the then-Finance Minister Pranab Mukherjee in 2010, which proposed the slabs at Rs 2-5 lakh, Rs 5-10 lakh and Rs 10 lakh and above and corporate tax at 30 per cent.
The Standing Committee suggested slabs of Rs 3-10 lakh, Rs 10-20 lakh and Rs 20 lakh and above. On corporate tax, it recommended the rate be retained at 30 per cent.
The DTC bill, which aims to rationalise tax rates to bring more people and companies under the tax net and overhaul the I-T Act of 1961, was introduced in Parliament in 2010.
The Bill has retained the 30 per cent tax on corporates, which was also the recommendation of the Standing Committee.
The first draft of the Bill was prepared by Finance Minister P Chidambaram in 2009, followed by a second draft by the then-Finance Minister Pranab Mukherjee, which was later sent to the Standing Committee for their recommendations.
