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Amid a walkout staged by the major Opposition parties, the Lok Sabha today passed Budget 2013-14 with crucial amendments to clear the air on wealth tax on agricultural land and tax residency certificates (TRCs) for foreign institutional investors (FIIs).
The House passed amendments to the Finance Bill 2013 which clearly said there would not be wealth tax on agricultural land. The amendments on TRCs also made it clear that the tax authorities would not go beyond TRC if an investor came via Mauritius. For other countries with which India has double taxation avoidance agreements, other documents could also be asked for to prove ownership, depending on provisions in the respective treaties.
The amendment to incorporate that there will not be wealth tax on farm land came following widespread discontent. The Shiromani Akali Dal had been protesting against such an imposition. Finance Minister P Chidambaram clarified it was a canard being spread that agri land would attract wealth tax.
"Let me make it clear that the UPA government's policy is not to impose wealth tax on farm land. I am sorry that a canard was spread that a law was being amended... the law stands as it has been since 1993," the finance minister said.
Sale of urban land (non-agri) or property would, however, attract one per cent tax deducted at source, as provided in the Finance Bill, 2013. But need for a Tax Deduction and Collection Account Number (TAN) for this has been done away with.
The commodity transaction tax (CTT) on futures trading of non-farm commodities stays. Chidambaram said, this way, the trading would not be considered speculative.
The amendments also spared the Railways from service tax for a period from July 1 to October 1, 2012, as this was not collected by it.
Besides, withholding tax on rupee-denominated long-term infra bonds for FIIs and qualified foreign investors was lowered to five per cent from 20 per cent, bringing those on a par with foreign-currency denominated papers.
THE NEW FACE
Changes made to Finance Bill
- No wealth tax on farm land
- Markets' fears allayed; TRCs enough to prove residency
- Other documents may be sought to prove beneficial ownership, depending on treaties (but not with Mauritius)
- TDS on sale of urban land stays, but no TAN required
- CTT on non-agricultural futures stays
- Railways spared from service tax from July 1 to October 1, 2012
- Withholding tax for FIIs, QFIs cut to 5% on rupee-denominated infra bonds
