New tax code targets super rich, owners of two homes
The Direct Taxes Code to be considered by the Cabinet on Thursday proposes to keep the minimum slab for income tax at Rs 2 lakh per annum but taxes on second homes could increase while a fourth slab will be added for those earning above Rs 10 crore.
It also plans to introduce a special court for black money related cases to deter tax evaders.
The tax rate for the fourth slab is proposed at 35 per cent. The move to introduce a fourth slab will undo a 1996-97 decision when the then government had settled for a three-slab income tax system.
In an effort to soak the super rich, the code, which is the largest revision of the Income Tax Act of 1961, also plans to levy a wealth tax for those with a net worth of above Rs 50 crore at the rate of 0.25 per cent of their wealth. Further, dividend earned above Rs 1 crore would be taxed at a rate of 10 per cent.
To ensure more houses are given on rent, the tax structure has introduced a disincentive to keep them vacant. Instead of allowing vacant houses to be assessed only on the rental value of comparable stock of houses, the code proposes to charge them at the higher of the rental value or 6 per cent per annum of ratable value fixed by the local authority.
The DTC has retained all elements of the progressive recommendations made by the Parthasarathi Shome committee on GAAR and on retrospective taxation. This would provide relief to cases such as Vodafone in the future.