Draft tax code spares provident funds, eases MAT norms

The revised Ddirect Taxes Code (DTC) draft, released by the Central Board of Direct Taxes (CBDT) on Tuesday, proposes tax exemption on retirement benefits, the Public Provident Fund (PPF), the Government Provident Fund (GPF), the recognised provident funds and the employees provident fund, and addresses other pending issues such as the Minimum Alternate Tax (MAT).

It also looks into taxation of long-term savings, capital gains and housing loans.

Releasing the revised DTC draft in New Delhi, revenue secretary Sunil Mitra said provident funds would not be taxed on withdrawal.

Also, a proposal to levy MAT on corporate houses based on their assets had been dropped. However, the DTC did not give any details on the income-tax structure such as the slabs or rates, which were provided in the first draft released in August 2009.

''As of now, it is proposed to provide the EEE [exempt-exempt-exempt] method of taxation for GPF, PPF, the employees provident fund and recognised provident funds,'' it said.

The revenue secretary said taxation rates in the first draft - which suggested 10 per cent tax on income from Rs1.60 lakh to Rs10 lakh, 20 per cent on income between Rs.0 lakh and Rs.25 lakh, and 30 per cent for the income beyond that - were illustrative. The actual rates would be made known only in the proposed act.