Daily News Magazine from India & around the world.

Responding to protests from India Inc. and individual taxpayers alike, finance minister Pranab Mukherjee has kept his promise and axed many proposals made earlier which would have pinched the common man in the pocket.

The revised proposals, which were released for comments on Tuesday, provide relief to the taxpayer, as well as corporates and non- profit charitable organisations.

The new code has dropped controversial clauses that proposed to tax provident fund savings of individuals, medical reimbursement and retirement benefits.

The earlier rule would have taxed long-term savings like provident fund (PF), as well as retirement benefits like gratuity.

The new proposals have also scrapped the move to introduce the controversial minimum alternative tax (MAT) for corporates based on gross assets and instead will continue with a tax based on book profit.

Also axed is the proposal to take away the tax breaks currently given for loans taken to acquire property. Housing loan borrowers will now continue to get tax exemption on the interest paid, as well as on the principal amount, as per the current provisions.

Employee contribution to an approved provident fund, superannuation fund and the new pension scheme within the limits prescribed will not be considered as salary in the hands of the employee.

Also, retirement benefits received by an employee will be exempt from tax subject to specified monetary limits.

Thus the amount of gratuity received and the amount received under the voluntary retirement scheme, commutation of pension and encashment of leave at the time of retirement are proposed to be exempt from tax, subject to specified limits, for all employees.

Perquisites in relation to medical facilities and reimbursements provided by the employer will be valued as per the existing law with appropriate enhancement of monetary limits.

Under the revised draft, the proposal to tax rent-free accommodation provided by employers at market value has also been dropped.

In the case of rented out property, gross rent will be the amount of rent actually received or receivable for the financial year. The earlier proposal was to compute rent at a presumptive rate of six per cent of the ratable value or cost of construction /acquisition, even on property which is actually not rented out.

The tax on capital gains has also been simplified. Income under the head “Capital Gains? will be considered as income from ordinary sources in case of all taxpayers including non-residents. It will be taxed at the rate applicable to that taxpayer.

This adjusted capital gain will be included in the total income of the taxpayer and will be taxed at the applicable rate.The loss arising on transfer of such asset held for more than one year will be scaled down in a similar manner.

The proposal bringing nonprofit organisations such as religious and charitable trusts under tax ambit has been axed.

Wealth tax on productive assets which had been proposed. The proposal to tax any wealth above Rs 50 crore in value at the rate of 1.25 per cent has been dropped.