While reducing the tax exemption age for senior citizens to 60 years, the finance ministry rejected Parliamentary Committee’s proposal to raise income tax exemption limit to Rs3 lakh
The Finance Ministry has rejected a Parliamentary Standing Committee’s recommendation to raise the income-tax (I-T) exemption limit to Rs3 lakh and to adjust other slabs. It has however decided to reduce the age for tax exemption for senior citizens to 60 years from 65 years.
As per the current structure, there is no tax on income of up to Rs2 lakh per annum; 10% on Rs2-5 lakh; 20% on Rs5-10 lakh and 30% on income beyond Rs10 lakh.
The Ministry on Tuesday released a revised and comprehensive draft direct taxes code (DTC) 2013 for comments. “The recommendation (to increase the exemption limit) is not acceptable as it will result in huge revenue loss. The total revenue loss on account of recommended changes in personal I-T slabs and removal of cess works out to about Rs60,000 crore,” the proposed DTC 2013 said.
The revised version of the DTC is aimed at widening tax net, removing ambiguities and plugging loopholes in the current tax laws to check tax evasion.
In the draft, 153 out of 190 recommendations made by the Standing Committee of Finance are accepted. This includes, relaxing the age for senior citizens to 60 years from 65 years and setting up tax rate of 35% for individual, Hindu undivided family (HUF) with an income over Rs10 crore.
“With a view to maintaining overall progressivity in levy of income tax, the revised Code provides for a fourth slab for individuals, HUFs and artificial judicial persons. In their case if the total income exceeds Rs10 crore, it is proposed to be taxed at the rate of 35%,” the ministry added.
The draft DTC also proposes to levy an additional 10% tax on dividend income exceeding Rs1 crore.
The earlier version of the DTC had said a company was liable to be taxed in India only if 50% of its assets were located in the country. However, according to the new draft, a company would be liable to be taxed in India if it has 20% of its total assets located in the country.
The Reserve Bank of India has said that banks should consider the possibility of allowing them to pre-pay floating rate term loans without any penalty
The Reserve Bank of India, in its first bi-monthly policy had said that banks should allow customers to prepay floating rate term loans without any penalty. Similarly, the central bank has asked bank not to levy penalty charges on non-maintenance of minimum balance in savings account.
"In the interest of their consumers, banks should consider allowing their borrowers the possibility of prepaying floating rate term loans without any penalty. Banks should also not take undue advantage of customer difficulty or inattention," RBI said in the policy statement.
According Dr Raghuram Rajan, governor of RBI, the central bank is envisaging a number of measures to protect consumers. “For example, banks should not levy penal charges for non-maintenance of minimum balance in ordinary savings bank account and inoperative accounts, but instead curtail the services accorded those accounts until the balance is restored," he said.
Instead of levying penal charges for non-maintenance of minimum balance in ordinary savings bank accounts, banks should limit the services available on such accounts to those available to basic savings bank deposit accounts and restore the services when the balances improve to the minimum required level, RBI said.
Further, banks should limit the liability of customers in electronic banking transactions in case where they are not able to prove customer negligence.
Foreign assets in India increased by $39.9 billion due to higher deposits, direct investments, equity and other investments
During the December quarter, foreign owned assets in India increased by $39.9 billion to $776.1 billion over the previous quarter while Indian residents’ financial assets abroad, increased by $22.2billion at $458.9 over the previous quarter, reveals the Reserve Bank of India (RBI) in its report on International Investment Position (IIP).
Net claims of non-residents on India
During the December 2013 quarter, net claims of non-residents on India (net IIP) increased by $17.7 billion to $317.2 billion compared with previous quarter. This change in the net position reflected an increase of $39.9 billion in the value of foreign-owned assets in India vis-à-vis an increase of $22.2 billion in the value of Indian Residents’ financial assets abroad.
Indian residents’ financial assets abroad
Indian residents’ financial assets abroad increased by $22.2 billion to $458.9 billion mainly due to a $16.7 billion increase in reserve assets and $5.8 billion rise in other investment abroad; trade credit and currency and deposits. Direct investment abroad observed marginal decline of $0.3 billion, the RBI said.
Foreign-owned assets in India
Foreign-owned assets in India increased by $39.9 billion to $776.1 billion, compared with previous quarter, due to a $23.6 billion increased in currency and deposits component of ‘other investment’.
Direct investment in India increased by $8.6 billion and portfolio investment in India increased by $5.6 billion during the December quarter. While equity investment increased by $8.0 billion, debt investment decreased by $2.4 billion. Among other investment liabilities, trade credits declined by $1.2 billion and loans increased by $3.2 billion.
Effects of Rupee Appreciation
Variation in exchange rate of rupee vis-à-vis other currencies affected change in liabilities. Equity liabilities increased by $16.3 billion, due to the stock valuation effect resulting from rupee appreciation, while net inflow was $11.5 billion during the period.
Composition of External Financial Assets and Liabilities
Reserve assets continued to have the dominant share (64.0%) in India’s international financial assets in December 2013, followed by direct investment abroad (26.1%). Direct Investment (29.2%), portfolio investment (22.8%), loans mainly ECBs (22.1%), trade credit (11.4%) and currency and deposits (12.7%) were the major constituents of the country’s financial liabilities, the RBI said.
External Debt Liabilities vis-à-vis External Non-Debt Liabilities
The share of non-debt liabilities decreased marginally to 44.8% as at end-December 2013 from 45.1 percent at end- September 2013. (Refer: Table 3)
RBI issues IIP every quarter, which helps in understanding sustainability and vulnerability of the economy’s external sector. IIP shows the value and the composition of financial assets and liabilities of residents of an economy to non-residents.