Direct Tax Code to raise income tax exemption limit to R 3 lakh, introduces 'Super Rich' category
November, 14th 2013
In a time when high inflation is blowing holes in pockets of consumers, if a relaxation is granted on tax deduction, consumers will definitely get a reason to celebrate. Well, Ministry of Law and Justice has approved the proposal to raise annual income tax exemption limit from 2 lakh to 3 lakh, reports DB correspondent.
The Direct Tax Code (DTC) draft will now be sent to Cabinet for approval. Thereafter, the approved draft will be introduced in Parliament. According to an official of Ministry of Finance, Parliamentary Committee has nearly agreed to the tax exemption limit under the latest draft of future DTC bill.
The proposal was first drafted by the standing committee led by former Finance Minister Yashwant Sinha. The committee had raised the cap of annual tax exemption from Rs. 2 lakh to Rs. 3 lakh. Moreover, the committee has recommended maintaining the tax percentage at 10% for income group earning annual pay up to Rs. 10 lakh.
Current tax rates
Currently, income tax rate for income group of Rs. 2–5 lakh is 10%. Professionals earning annual income of Rs. 5–10 lakh are required to pay an income tax of 20%. Finally, the income group of Rs. 10 lakh above must 30% of their income as tax to the government.
'Super Rich' category
Yashwant Sinha has said that a new ‘Super Rich Category’ shall be introduced amongst the classes of taxable income groups. We are told that suggestions from various ministries have been incorporated in the draft that is due to be introduced in the Parliament. The Super Rich income group will have to pay more than 30% of their income as tax to the government.
Way through the Parliament
The DTC draft is expected to be introduced to the Winter Parliamentary Session commencing on 5 December. If the government is indeed keen to consider the DTC bill, it has to be introduced while the winter session. The bill shall not be delayed post the coming session, because in the following session Budget shall be presented to secure ‘vote on account’.
Three drafts of the DTC bill have already been prepared so far. The first draft was charted by P Chidambaram back in 2009, when he held the position of Finance Minister. The Ministry was however dissolved after that as the Ministry was taken over by Pranab Mukherjee. Mukherjee charted a fresh draft; however, neither of the two drafts could be taken forward.
Chidambaram is now a Finance Minister again and Pranab Mukherjee is now President of India. The Finance Minister has prepared a new draft on the proposal. It is now to be seen how far the proposal proceeds as there is little time left in general elections 2014.