Hike in corporate tax on the anvil; individual slabs could be tweaked

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The discussion paper on Direct Taxes Code (DTC) has removed a few irritants for the taxpayers, but the government is mulling a higher rate of tax for corporates—more than the 25% prescribed in the initial DTC draft, and also a restructuring of the tax slabs for individual taxpayers, official sources indicated."The corporate tax rate could be over 25% but less than 30%. MAT also could be moved up. On securities transaction tax (STT), we would take a call after a decision on the structure and rates of capital gains tax," a finance ministry official said."We're going to calibrate all rates. It would be between the current rates and (what was prescribed in the first draft)," the official told FE.The personal income tax slabs also might be tinkered with. "The slabs can be widened as the exemptions on savings and interest payments on home loan have been retained, said another official.While the method for computation of Minimum Alternate Tax (MAT) has been retained to calculate it at book profits, the difference between long-term and short-term capital gains is also present in the second discussion paper of the DTC.The silence on tax rates and slabs in the discussion paper has led India Inc to speculate that the tax rates may be hiked. The ministry officials have now confirmed 'rates and slabs can be calibrated again'.On being asked if there could be revenue loss because of the changes in the second draft, an official said, " There would not be any loss compared to the current tax regime, but when compared with the first draft, there would have been." Again, this confirms that rates would have to be hiked as the changes from the original draft proposed in the discussion paper would amount to a lower tax base than what was proposed in the initial draft.The original draft had proposed four slabs : nil tax for income up to Rs 1.6 lakh; a tax rate of 10% for income between Rs 1.6 lakh and Rs 10 lakh; 20% for income between Rs 10 lakh and Rs 25 lakh and 30% for income above Rs 25 lakh.Further, he explained that the revenue implication (though a notional one) would be on the asset base and the profit base tax while computing the MAT.The first draft of the DTC had proposed calculating MAT on gross assets of the firm, a move that had not gone well with the corporates. The difference between long-term and short-term capital gains had also been erased while calculating capital gains tax. Also, the exemptions on savings and interest on home loan had been taken away, that had hurt the individual tax payers.

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