Government dropped the tax for provident and pension fund withdrawals

In a sigh of relief to the salaried class, the government today dropped the contentious proposal to tax provident and pension fund withdrawals and decided to continue with the major tax incentive on housing loans.
In the revised Draft Taxes Code (DTC), which will replace the 50-year-old Income Tax Act, the finance ministry decided to drop its earlier proposal to tax the Government Provident Fund or the Public Provident Fund withdrawals.
"In the absence of adequate social security benefits, taxation of withdrawls from retirement benefits would be harsh," says the revised DTC.
It also said that the proposal to bring in perquisities like government accomodation to be part of salary has also been dropped.
Though the revised DTC is silent on the personal income tax rates and slabs, it said that home buyers would continue to get tax benefits on payment of interest on housing loans up to Rs 1.5 lakh annually.
Revenue Secretary Sunil Mitra said the taxation rates in the first draft, which suggested 10 per cent tax on income from Rs 1.60-10 lakhs and 20 per cent on income between Rs 10-25 lakhs and 30 per cent beyond that, were illustrative.
He said the tax rates would be made known only in the proposed Act, a bill for which will be introduced in Parliament in the coming monsoon session.
The proposals, which did not find favour with stakeholders like salaried class and the industry, were part of the first draft released in August last year.
The government received 1,600 representations on the first draft. The government has asked the stakeholders to give their views on the revised draft by end of this month.
The revised draft also dropped the proposal to impose Minimum Alaternate Tax (MAT) on gross assets, a move which too was fiercely opposed by the industry.

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