GoI: No Tax on Long Term Savings
The Finance Ministry of the Government of India (GoI) has proposed exempting all long-term savings instruments like recognised provident funds, pension schemes administered by PFRDA, annuity schemes and pure life insurance from income tax at every stage of their life cycle.
And in a sign of pressure from India Inc having worked, the revised Direct Tax Code released today agreed to impose the minimum alternate tax (MAT) on book profits as opposed to gross assets originally mooted in the draft code that was made public in August 2009.
An exempt-exempt-exempt tax regime for savings instruments does bring cheer to the aam admi. But this goes against the general principle of doing away with all exemptions and contrary to the global practice of taxing all savings instruments during one of the three stages viz., investment, accumulation and withdrawal, of their life cycle.