In a post-Budget memorandum to the Finance Ministry, the chamber said the surcharge and education cess was originally introduced for a short period of time but the same is being continued from year to year. This has pushed up the overall tax rate sharply for the corporate sector to 34.608 per cent.
It is also recommended that the Government gives a time schedule for withdrawal of the surcharge and education cess. The Government had announced in the Budget for 2015-16 that tax benefits / exemptions would be withdrawn and simultaneously, the basic corporate tax rate would be reduced from 30 per cent to 25 per cent over a period of four years. In this year's Budget a road map has been given for withdrawal of the various tax benefits / exemptions but the time plan for reduction of Corporate Tax Rates has not been given, the ASSOCHAM memorandum stated.
The chamber Secretary General Mr D S Rawat, such a clear road map would enable businesses to evaluate availability of funds for capital investments. It would also help in giving more funds to the corporate sector for investment and growth and also generate confidence and certainty. This in turn will result in overall buoyancy in the national economy, he said.
With a view to helping the ' Start-ups', the ASSOCHAM representation stated that the reduced tax rate of 25 per cent should also be made applicable for all companies and not only to manufacturing companies. This would provide a boost to the 'Start-up India' initiative and will bring newly set-up manufacturing as well as non-manufacturing companies on an equal footing as far as tax rates are concerned.
It said with introduction of a new provision for levy of tax on dividend in excess of Rs ten lakhs, a situation of triple taxation has arisen.
Under the existing provisions of clause (34) of section 10 of the Act, dividend which suffer dividend distribution tax (DDT) under section 115-O is exempt in the hands of the shareholder.
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This year's budget has introduced a new section 115BBDA which provides that any income by way of dividend in excess of Rs 10 lakh shall be chargeable to tax in the case of an individual, Hindu undivided family (HUF) or a firm who is resident in India, at the rate of ten percent
The proposal has effectively lead to a situation of triple taxation namely - corporate tax, DDT and now additional 10 per cent tax. As a result the effective tax rate goes up drastically.
Alternatively, if these provisions are not removed, it should be expressly clarified that only dividend income in excess of Rs. 10 lakhs will be taxable at 10 per cent and senior citizens should be exempted from such a levy.
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