Having proposed tax exemptions on retirement and long-term savings schemes in the second draft of the Direct Taxes Code (DTC), the Finance Ministry today said the move will not entail any revenue loss.
"EEE (exempt-exempt-exempt) is only for the limited number of saving instruments. It (recommendation) is balanced," Revenue Secretary Sunil Mitra told PTI today when asked about the rationale for discarding the original proposal of taxing retirement schemes at the time of withdrawal.
The revised draft favors continuance of the EEE (exempt-exempt-exempt) mode for provident funds and pension schemes. Under the EEE mode, the tax exemption is enjoyed at all the three stages--investment, accumulation and withdrawal.
The original DTC draft proposed the EET mode for long-term savings scheme under which tax would be imposed at the time of withdrawal.
On the impact of the recommendations of the second draft on revenue, Mitra said: "Tax collections will increase or not will all depends on rates. The rates... We have not put just now. That will go in the legislation."
The revised DTC draft also puts pensions administered by the interim regulator PFRDA, including the pension of government employees who were recruited after January 2004, under the EEE treatment.
The government plans to introduce a draft legislation on the DTC in Parliament in the forthcoming monsoon session.
"If Parliament procedure is complete and it becomes a law, it will be implemented from April 1, 2011," Mitra had said yesterday. Once approved, DTC will replace the 50-year-old Income Tax Act.
