New Delhi, March 30 (IANS) The government must introduce the ‘equalisation levy’ as part of the Income Tax Act itself and not as a separate chapter in the Finance Act, industry body Assocham said on Wednesday.
“Introducing equalisation levy separately under the Finance Act and not incorporating it as a part of the existing Income Tax Act would only increase cost of doing business for Indian companies,” the industry chamber said.
Assocham reasoned it out, saying foreign companies would insist that equalisation levy being a domestic levy should not affect payments made to them, as such domestic companies would be required to gross up equalisation levy while making payments, thereby adding to the cost.
If the levy is introduced as part of the Income Tax Act, it would not add to the cost of business to Indian companies as it would be in the nature of regular withholding, it said.
Introducing ‘equalisation levy’ in the Finance Act could also undermine the existing treaty obligations, and it should therefore be brought within the ambit of income tax law, Assocham said.
On the issue of retiral funds, it recommended that all stipulations relating to taxability of accumulated balance or annuity for recognised provident fund and superannuation fund as well as the financial limit of Rs.1.50 lakh for employer’s contribution to superannuation fund be withdrawn.
According to a recent government clarification in respect of the accumulated balance in the recognised provident fund, the taxability of stipulated 60 percent balance will not apply in case the same is invested in an annuity.
“This is an extremely controversial suggestion since money (lump sum) is generally utilised from the provident fund for various important purposes like construction of house, wedding and others and the salaried class cannot be forced to invest in any annuity scheme for tax saving purpose when lump sum money is required post-retirement,” Assocham said.
The government should not interfere in the utilisation of the lump sum amount post retirement, it added.