Direct Taxes Code Bill is in right direction: PHD Chamber
MAT on book profits a welcome move: Ashok Kajaria

PHD Chamber welcomes the proposed Minimum Alternate Tax (MAT) on book profits as compared to the value of gross assets earlier provided by the Direct Taxes Code (DTC) released in August 2009.

 However, the increase in MAT on book profits from current rate of 18 per cent  to 20 per cent will be retrograde for companies who had been earlier demanding for a complete abolition of MAT,  a press release issued by the Chamber said here on Monday.

 Historically, MAT was introduced to levy tax on depreciation charged in the books of accounts vis-à-vis for computing income under Income Tax Law. Then its scope was enlarged to take care of incentives and deductions. Some of the companies will now be required to follow International Financial Reporting Standards (IFRS) with effect from April 1, 2011. Under IFRS, the profits will be computed in a laid down manner. It will therefore be desirable that the computation of profits for the purposes of calculating MAT should be in sync with IFRS, said Mr Ashok Kajaria, President,  PHD Chamber.

 Making the tax rates a part of the code itself will be an appreciable move as it would provide stability to changing tax rates year after year. Currently, tax rates undergo a change year after year which results in a lot of instability in the tax planning for the corporates, Mr Kajaria added.

 However, the corporate tax rate of 30 per cent as proposed by the code will be of marginal relief for the corporates. The Chamber felt that the corporate tax rate should be brought down to a level of 25 per cent. 

 “ Since, the current aggregate tax burden is significantly higher than other developing / developed countries in the Asia Pacific region, rationalizing the tax rates and the total tax burden would encourage higher voluntary compliance and result in higher revenues," the  Chamber release said.

 On the individual taxation front, the tax slabs have been widened. The Chamber welcomes the increase in the exemption limit for individuals to Rs 2 lakh from the existing Rs 1.6 lakh and for senior citizens to Rs 2.5 lakh from the present Rs 1.9 lakh and Rs 2.4 lakh, respectively. This will result in more disposable income in the hands of individuals, who are at present teeming under inflation. It will also inculcate more voluntary compliance amongst the tax payers which would ultimately lead to higher revenues for the government, the Chamber press release said.

Media Division

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