Lok Sabha clears Finance Bills ; paves way for tax reforms

In a welcome sign on reforms front, the much awaited Finance Bill was passed in Lok Sabha on Thursday. The new Finance Bill aims at simplifying the tax laws and minimising the tax evasions. 

One of the key take away from the Finance Bill will be the formation of monetary policy committee comprising of members from the Reserve Bank of India and independent experts. The monetary committee will be expected to decide on the monetary policy rates from now on. As a current practice it is RBI Governor who decides on the policy changes. 

Amidst lot of opposition from various political parties  including Shiv Sena , a part of NDA government, government has retained the excise duty on Jewellery. In the current budget, Finance Minister Arun Jaitley had proposed an excise duty of 1 percent without input tax credit and 12.5 percent with input tax credit on Jewellery items. Input tax credit is total tax amount paid by a registered dealer on aggregate purchases made by him from other registered dealers within the state.  Finance Minister clarified that the tax levied will be only applicable to  those jewellers whose turnover has been in excess of Rs.12 crore in previous financial year.  

Additional 10 percent tax on dividends over and above 10 lacs was sought by the government. This move  seems to be less business friendly. The dividend tax of 10 percent will be applied on the whole amount in case the dividends earned by individual investors exceeds 10 lacs and not that the tax will be applicable only on the amount that exceeds 10 lacs for dividends earned by an individual.  The companies are already paying a 20 percent dividend distribution tax and now the individual investors will be taxed additionally at 10 percent for dividends earned. 

This may explain corporate India's preference for Share buy back to dividends distribution this fiscal year till date.