No Further Scope For I-T Cuts: Chidambaram Chidambaram

Income tax rates have hit the bottom and will not go down any further, says finance minister P Chidambaram.

There is no scope for a further cut. This part of the finance ministers job is complete. No future finance minister can reduce the income tax rates further, Chidambaram said at a seminar on the Voluntary Disclosure of Income Scheme (VDIS), 1997, here yesterday.

Chidambaram said he had secured broad Parliamentary support for the new rates (30 per cent for individuals and 40 per cent for corporate bodies). The seminar was organised by the Federation of Indian Chambers of Commerce & Industry (Ficci).

 

Proclaiming himself as a change agent in the process of transforming India from a tax-evading nation to a tax-paying nation, the finance minister said that the lowering of the rates was the starting point of the exercise.

Chidambaram now sees reform of the income tax law as his next goal. The new Income Tax Bill will be introduced in Parliament in the winter session and we should have a new income tax law next year, he said.

In the interim, the draft Income Tax Bill, prepared by a working group in close association with the Central Board of Direct Taxes (CBDT), will be debated upon, so that the bill moved in Parliament is better than the draft, as in the case of the Companies Bill, 1997.

The minister warned that life will not be very pleasant for tax evaders once the VDIS closes on December 31, as this could be the last opportunity for them to come clean. From January 1, the tax payable would be 60 per cent. Combined with interest and penalty, it would add up to 300 per cent of the actual tax evaded, he said. I have a software that can take raw data from different sources for building up a family tree and help us trace people evading tax, the minister said, adding that the software had been tested in Hyderabad. Pointing out that about 2,00,000 of the 5,00,000 corporate bodies in the country do not file tax returns, Chidambaram said: It will not go unnoticed.

Moving from a culture of non-compliance of tax laws to a culture of compliance is the larger objective of VDIS, says the minister. Collecting a few hundred crore rupees is merely the immediate objective. He also made a case for rationalisation of stamp duty by the states. I am aware that in every property transaction, there is a disclosed price and an undisclosed price in order to evade stamp duty. He intends to appeal to the states to bring the stamp duty down to 5-8 per cent.

On the other topic close to his heart seven per cent economic growth the finance minister said that if this rate could be sustained, India will have wiped out the scourge of poverty and emerged as the fourth largest economy in the world by 2020.

Revenue secretary N K Singh sought to ward off apprehensions regarding the Foreign Exchange Management Act (Fema). He said the Fema Bill and the Money Laundering Bill will be moved in the winter session of Parliament.