As anticipated, the revised draft of the Bill has brought in some key changes that the corporate taxpayers have been lobbying for. The concept of Minimum Alternate Tax has been reinstated in its current form as Tax on Book Profit, instead of the Gross Asset Value Tax, although the tax is hiked to 20% of book profits from the effective rate of approx. 17%. However, credit for such taxes will now be available for 15 years as against the current 10 years.
On the non-resident front, although provisions of the DTC or tax treaty which is more beneficial shall apply, the GAAR, Branch Profit Tax and CFC provisions under the DTC will override the tax treaty. Although GAAR guidelines have not been defined, detailed CFC provisions have been introduced under a specific schedule in the revised draft. The CFC provision proposes to tax the income from outbound investments in low tax jurisdictions in India. Moreover, the value of such overseas investments will now form part of net wealth for computing wealth tax liability.
Further, the much awaited clarity on availability of deductions to units in SEZ has been brought in by grandfathering the same to units commencing operations on / before March 31, 2014. While this has brought some cheer for these units, applicability of MAT provisions under the DTC is a dampener.
The postponement of DTC has automatically resulted in grandfathering of profit-linked incentives available to infrastructure sector as on 31 March 2012. This would benefit infrastructure projects in set-up phase which are likely to attain completion during the next financial year.
For individual taxpayers, the code has not brought many changes vis--vis the current slab rate under the Income Tax Act, which is evident from the reinstatement of tax slabs, deduction for interest on housing loan and exemption on withdrawal of specified savings at almost the same level as is prevailing, thus largely maintaining status quo for the individuals.
The investors in equity-oriented mutual funds and life insurance policies which were earlier exempt from tax on income distributed by fund houses and insurers are likely to bear the burden of taxes in terms of lower returns due to introduction of a 0.5 per cent tax on profits distributed by these fund houses and insurers.
To sum up, the DTC in its revised form has attempted to simplify and address the concerns of taxpayers and industry at large.
* The writer is head of tax, KPMG