IS NEW TAX CODE AGGRESSIVE ATTEMPT TO HAVE AN EQUITABLE TAX SYSTEM?

Hello readers,

Does the new tax code which is going to get implemented from the financial year 2011 is going to lead us to the equitable , progressive and balanced economy?Does it going to reduce the ambivalence which was prevailing under current Income Tax Act, 1961? Its the million dollar question ruling in the minds of millions of Indians.

First Let us consider the proposed changes and its impact on average individual under new tax code:

• The first slab continues to start at Rs. 1.6k(unchanged) and extends upto 10lakhs which is a welcome step but with the abolition of various exemptions, deductions and most of the tax payers who will end up paying higher taxes than they pay right now. On the other side of the coin persons falling under slab rate of 25 lakh will end up in paying less tax bills. Is it justifiable?

• People falling under low income category will also be hit by the proposal to abolish the exemption on HRA , home loan benefits and home loan interest...and other soaps.

• House hold savings which accounts for more than 35% are also going to be adversely affected by the introduction of Exempt Exempt Tax(EET) and over the above taxing capital gains which is definitely going to discourage domestic savings.

• I am unable to understand how Indian economy is going to catch the growth track without higher savings and investments.

• The tax payers falling in the Rs. 5-6 lakhs are going to get effected adversely where people in the highest income bracket are going to reap the maximum gains.....which may be good for certain companies operating in retail, financial services and entertainment but is going to effect realty, non banking finance companies.

• Considering the restricted scope of tax exempted savings, an average tax payer will be forced to invest in Public Provident fund or EPF but ......PAR PICTURE ABHI BAAKI HEIGH MEREY DOST.......interest earned on investment in EPF or PPF at the time of maturity or withdrawal will be taxable at the time of withdrawal or maturity.

• One of the major incentives for equity investors at present is tax exemption on capital gains earned on investments in equities or equity oriented fund for more than one year. However as per the proposed draft long term capital gains on equity shares could be taxable!

So, i hereby conclude by saying that tax liability on individual is going to become an influential factor in the future days to come.

CS N.ch Rangakrishna