The Bharatiya Janata Party (BJP) recognises the need to redraft the 50-year-old Income Tax Act of 1961 and appreciates the initiative taken in this direction by the Finance Ministry but is opposed to the proposed Direct Tax Code in its present form.

A delegation of party leaders, including Sushma Swaraj and Arun Jaitley, met Finance Minister Pranab Mukherjee here on Tuesday to discuss the proposed changes in direct tax. They submitted a 12-page memorandum to him detailing their objections.

‘Insensitive’

Broadly the BJP saw the proposed code as insensitive to the need to encourage savings and bring about social justice. The party leaders claimed that under the proposed regime the small tax-payer would end up paying more taxes while it gave the impression that the tax burden on the middle class would be reduced.

The memorandum also criticised the code for being “guided by western/developed economies” while overlooking the fact that the needs in a developing economy such as India’s were different.

‘In drafting stage’

Apparently, Mr. Mukherjee told the delegation that the code was still in the drafting stage and nothing would be done to introduce it before 2011-12.

The BJP was against doing away with all exemptions and deductions (as proposed by the code); it wanted tax incentives for savings and for housing to continue; it strongly opposed the move from the EEE (Exempt Exempt Exempt) regime applied to savings such as provident fund and gratuity to EET (Exempt Exempt Tax); it favoured continuation of different tax rates on long-term and short-term capital gains; it was against withdrawal of area-based exemptions; it opposed tax holiday for industries till they recovered capital expenditure; and it opposed higher rate of taxation for non-resident Indians.

IT cess for seniors

The party demanded that tax-free income be allowed to certain vulnerable sections such as women, retired persons and senior citizens who should be allowed tax-free interest annual income up to Rs. 3,00,000.

The BJP welcomed the government initiative. It wanted proper consultations with experts before the code was introduced, and above all, preferred “simplicity” that would enable the tax-payer to fill up the returns without professional help.

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