Union Finance Minister Pranab Mukherjee on Monday tabled the Direct Taxes Code Bill 2010 in the Lok Sabha that seeks to replace the archaic tax regime, widen the tax net, provide incentives to investors and increase revenues to boost economic growth of the third fast growing economy in Asia.
The DTC Bill has been referred to the Select Committee of Parliament for scrutiny.
The Bill has proposed to raise the income tax exemption limit from the current Rs 1.6 lakh to Rs 2 lakh and widened tax slabs to levy 10 percent rate on income between Rs 2 lakh and Rs 5 lakh, 20 percent on Rs 5-10 lakh and 30 percent above Rs 10 lakh.
The proposed tax slabs are much lower than originally suggested in the draft DTC bill 10 percent for Rs 1.6 lakh to Rs 10 lakh, 20 percent from Rs 10-25 lakh and 30 percent for income above Rs 30 lakh.
The changes, when they take effect, will help save up to Rs 41,040 for people earning more than Rs 10 lakh a year vis-a-vis the current tax rates under the IT Act.
For senior citizens, tax exemption is sought to be raised to Rs 2.5 lakh from Rs 2.40 lakh.
However, the women tax players who enjoy higher exemption limit at Rs 1.9 lakh per annum as compared to Rs 1.6 lakh, will loose their special category. Instead their incomes will be taxed at the applicable rate for general tax players.
Significant tax incentives include upto Rs 1 lakh on long term savings like provident fund, superannuation fund, gratuity fund, pension fund, upto Rs 50,000 for expenditure on tuition fees of children, pure life premia, and health insurance payments, upto Rs 1,50,000 for interest paid on construction or acquisition of a self occupied house property.
Of the 3.25 crore tax payers about 96 percent of Indias taxpayers are in the earning bracket of Rs 1 lakh to Rs 5 lakh.
They pay around 30 percent of our total taxes. The slab of Rs 8 lakh and above accounts for 2.2 percent of our taxpayers, but they pay 60 percent of the taxes, that leaves 10 percent which is in the Rs 5 lakh to Rs 8 lakh, Union Revenue Secretary Sunil Mitra told reporter here.
The legislation also proposes to increase fix corporate tax at a flat rate of 30 percent, minimum alternate tax from 18 percent to 20 percent of the book profit of a company. It also seeks to levy dividend distribution tax at 15 percent.