Cabinet nod to direct tax code, more for you
The government plans to leave a little more money in the hands of the taxpayer, but not too much. On Thursday, the Union Cabinet cleared the new Direct Tax Code (DTC) Bill, which seeks to exempt income of up to `2 lakhs per year from income-tax against the current limit of `1.6 lakh annually. For senior citizens, the limit will now be `2.5 lakhs.
There has been one other change in the tax slabs — the peak rate of 30 per cent will now kick in from a level of `10 lakhs a year against the earlier `8 lakhs a year.
The bill will now be placed before Parliament on Monday. Once passed, the DTC will replace the current Income-Tax Act. If it is passed, the new code should come into effect from April 2011. “The whole objective is that a plethora of exemptions will be limited. (Income) tax slabs will be three. Rate of taxes will be taken in the schedule so that they need not be changed every year,” said finance minister Pranab Mukherjee after the Cabinet meeting. Corporate tax has been kept at 30 per cent, but there will be no surcharges or cess on it. The effective tax rate worked out to 33 per cent because of the surcharge and cess.
The changes proposed under the current bill are nowhere close to the proposals put forward in the original draft code. In the original draft DTC, the government had suggested a tax rate of 10 per cent for income of up to `10 lakhs. The top rate of 30 per cent would have kicked in only for incomes over `25 lakhs. Observers say the government is being guided by revenue considerations here.
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