In a sigh of relief to the salaried class, the government today dropped the contentious proposal to tax provident and pension funds withdrawls and decided to continue with the major tax incentive on housing loans.<br/><br/>In the revised Draft Taxes Code or DTC, which will replace the 50-year-old Income Tax Act, the finance ministry decided to drop its earlier proposal to tax the Government Provident Fund or the Public Provident Fund withdrawls. The draft says, in the absence of adequate social security benefits, taxation of withdrawls from retirement benefits would be harsh.<br/><br/>It also said that the proposal to bring in perquisities like government accomodation to be part of salary has also been dropped.<br/><br/>Though the revised DTC is silent on the personal income tax rates and slabs, it said that home buyers would continue to get tax benefits on payment of interest on housing loans up to 1.5 lakh rupees annually.<br/><br/>Revenue Secretary Sunil Mitra said the taxation rates in the first draft, which suggested 10 per cent tax on income from 1.60-10 lakhs rupees and 20 per cent on income between 10-25 lakhs rupees and 30 per cent beyond that, were illustrative.<br/><br/>He said the tax rates would be made known only in the proposed Act, a bill for which will be introduced in Parliament in the coming monsoon session.<br/><br/>The government has asked the stakeholders to give their views on the revised draft by end of this month.<br/><br/>The revised draft also dropped the proposal to impose Minimum Alaternate Tax or MAT on gross assets, a move which too was fiercely opposed by the industry.