No wealth tax on farm land: Finance Minister

Finance Minister P Chidambaram Tuesday ruled out levying wealth tax on agriculture land and roll back of the duty hike on SUVs but relaxed residency norms for investors from countries like Mauritius for the purpose of tax benefit.

New Delhi: Finance Minister P Chidambaram Tuesday ruled out levying wealth tax on agriculture land and roll back of the duty hike on SUVs but relaxed residency norms for investors from countries like Mauritius for the purpose of tax benefit.

In order to attract investment for long-term infrastructure bonds, he said the interest payments on investments in government bonds and corporate debts will attract 5 per cent tax as against 20 per cent.

In a short speech while moving the Finance Bill for passage in the Lok Sabha, Chidambaram ruled out withdrawal of the proposal to introduce Commodities Transaction Tax (CTT) saying that with the new levy commodities derivative trading would no longer be considered as a speculative transaction.

With the government and the opposition having reached a limited understanding, the House passed the Finance Bill, demands for grants of all the ministries after applying the guillotine and the Railway Budget without any discussion.

Before walking out as agreed earlier, the Leader of Opposition Sushma Swaraj and other leaders attacked the government on various scams calling it the "most corrupt" since independence.

With apprehensions raised by farmers, especially those in Punjab and Haryana, and capitalised by Congress' opponents, the Finance Minister took the first opportunity to clarify that there was no intention of levying Wealth Tax on agriculture land.

Chidambaram gave credit to Haryana Chief Minister Bhupinder Singh Hooda and some other Congress leaders for drawing the attention of the Central government to the issue with infuriated Akali Dal members from Punjab.

"There was apprehension that wealth tax was being imposed on agricultural land. Let me make it absolutely clear that the policy of the UPA government is not to impose wealth tax on agriculture land," he said.

The apprehensions arose on account of Punjab and Haryana High Court rulings, the Minister said, adding he had worked hard yesterday to prepare the amendment and obtain the approval of the President.

"The matter should come to an end", he said, adding urban land does not include agriculture land which is so declared in government records.

However, Akali Dal member Harsimrat Kaur challenged the Minister saying the Income Tax Department has sent out notices to Punjab farmers asking them to pay wealth tax on agriculture land falling 8 kms from municipality limits.

On the budget proposal putting stiff condition for Tax Residency Certificate (TRC) for foreign investment to avail benefits of tax avoidance treaties that triggered concerns among FIIs, the Minister said a TRC issued by a foreign government would be accepted as proof of residency for tax purposes.

"Additional information can also be asked by the government but the TRC issued by a foreign government will be accepted as a certificate of residence," he said.

The proposal in Finance Bill 2012 had created uncertainty among foreign investors, especially those routing investments through Mauritius.

Chidambaram clarified that PAN requirement and higher withholding tax of 20 per cent will not apply to interest paid to non-residents in respect of investments in long-term infrastructure bonds.

"These amendments will attract more investments in long-term infrastructure which is a very important need of the country," he hoped.

The Minister moved an official amendment which provides for a 5 per cent rate of tax on interest payment for three years beginning June this year to foreign investors in government securities and rupee-denominated corporate bonds.

On the proposal to impose Tax Deducted at Source (TDS) of one per cent on transfer of immovable property of over Rs 50 lakhs, Chidambaram said the person needing to deduct tax would not be required to obtain TAN (Tax Deduction and Collection Account Number).

"...In order to be helpful to the person who is required to deduct the tax, we are dispensing with the requirement of obtaining a TAN. He need not have a TAN but he must deduct the tax," he said.

Chidambaram said he had rectified the provisions relating to one per cent tax on cash sale of bullion or jewellery to prevent misuse of the provisions of the IT Act.

"There was an exclusion in parenthesis (relating to coin or article weighing less than 10 gms)...That exclusion was giving opportunity for misuse. That exclusion has now been withdrawn," he said.

Chidambaram also exempted Railways from payment of service tax for period between July, 1, 2012 to October 1, 2012 to avoid burden on the state-owned carrier.