The ASSOCHAM has approached the Finance Ministry for a clear road-map for reduction of corporate tax to 25 percent, which is effectively over 34 percent at present.
Making out a strong case for removal of cess and surcharges of various types, the ASSOCHAM in a post-Budget memorandum to the Finance Ministry, said the surcharge and education cess was originally introduced for a short period of time but the same is being continued from year to year. This has pushed up the overall tax rate sharply for the corporate sector to 34.608 percent.
“It is also recommended that the Government gives a time schedule for withdrawal of the surcharge and education cess. The Government had announced in the Budget for 2015-16 that tax benefits / exemptions would be withdrawn and simultaneously, the basic corporate tax rate would be reduced from 30 per cent to 25 per cent over a period of four years,” the memorandum stated.
“In this year’s Budget a road map has been given for withdrawal of the various tax benefits / exemptions but the time plan for reduction of Corporate Tax Rates has not been given,” theASSOCHAM memorandum added.
The chamber Secretary General D S Rawat stated that a clear road map would enable businesses to evaluate availability of funds for capital investments. “It would also help in giving more funds to the corporate sector for investment and growth and also generate confidence and certainty. This in turn will result in overall buoyancy in the national economy,” he said.
This year’s budget has introduced a new section 115BBDA, which provides that any income by way of dividend in excess of Rs. 10 lakh shall be chargeable to tax in the case of an individual, Hindu undivided family (HUF) or a firm who is resident in India, at the rate of 10 percent.
The proposal has effectively lead to a situation of triple taxation namely-corporate tax, DDT and now additional 10 per cent tax. As a result the effective tax rate goes up drastically.
Alternatively, if these provisions are not removed, it should be expressly clarified that only dividend income in excess of Rs. 10 lakhs will be taxable at 10 percent and senior citizens should be exempted from such a levy. (ANI)