Shaktikanta Das, Secretary, Economic Affairs, Government of India, today told the Executive Committee Members of the Federation of Indian Chambers of Commerce and Industry (FICCI), that the Finance Minister is closely considering the suggestions and representations of industry and other sections that if the amount of 60% of corpus under recognized Provident Fund if not invested in the annuity products, the tax should belevied only on accumulated returns on the corpus and not on the contributed amount.
“An announcement in this regard will be made by the Finance Minister in Parliament very soon,” he said while addressing the National Executive Committee Meeting of FICCI.
Das explained that in Union Budget 2016-17 proposals the change in tax regime was to encourage more number of private sector employees to go for pension security after retirement instead of withdrawing the entire money from the Provident Fund Account. Towards this end, the Finance Minister announced that 40% of the total corpus withdrawn at the time of retirement will be tax exempt both under recognized Provident Fund and NPS.
The Finance Ministry expected that the employees of private companies would place the remaining 60% of the Corpus in Annuity, out of which they can get regular pension. When this 60% of the remaining Corpus is invested in Annuity, no tax is chargeable, thus making the entire corpus will be tax free, if invested in annuity.
Das said keeping in line with the recently launched ‘Start-up India’ campaign, the Budget gives 100% deduction of profits for 3 out of 5 years for start-ups set up during April 2016 to March 2019 and Minimum Alternative Tax will be applicable in such cases. This move would allow ease of doing business and encourage entrepreneurship.
Speaking on non-performing assets (NPAs), Das said that to provide relief to the stressed public sector banks suffering from high levels of NPAs, the government was addressing the issue with alacrity. The Finance Minister has therefore allocated Rs. 25,000 crore towards recapitalization of public sector banks.Speaking on ‘Implications of Budget on Manufacturing’, Ramesh Abhishek, Secretary, DIPP, said that DIPP has played the role of a facilitator and would continue to do so. He informed that soon a dashboard would be launched to constantly monitor the implementation of plans on the ground. He added that the government will launch a portal for startups by next week and begin the registration process with a view to encourage budding entrepreneurs and promote ease of doing business.
Abhishek said that DIPP had issued the definition of startups and was making it easier for startup to file intellectual property rights by providing them with concessions. He added that DIPP was working with the state governments to ensure that self-certification work in case of labour and skill development laws were put in place for startups.
Highlighting the government’s intention of fast tracking dispute resolution, Ram Tirath, Member (Budget), CBEC,said that 11 new benches of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) would be set up. He added that the government has made an effort to address the issues of duty inversion and retrospective legislations for enhancing ease of doing business.
Rani Singh Nair, Member (L&C), CBDT, clarified that Minimum Alternate Tax (MAT) would not be levied on new manufacturing companies incorporated on or after March 1, 2016 who opt for being charged at 25% plus surcharge and cess, provided they do not claim profit linked or investment linked deductions and do not avail of investment allowance and accelerated depreciation.
Harshavardhan Neotia, President, FICCI, said that there is an urgent need for expansion of the tax base. A wider tax base is an imperative to achieve fiscal consolidation and a higher tax – GDP ratio. This will enable the government to undertake planned investments in infrastructure and other areas that are important for growth and development of the country. With a view to lowering the burden on existing taxpayers, the government needs to find avenues to bring in more individuals and there unreported income under the ambit of taxation. As a first step, FICCI suggests that the government could consider mandatory reporting of income above a threshold by all persons irrespective of the source of income.