Apart from slashing income tax rates, the direct tax report also suggested dropping surcharges and cess levied on income taxes

The task force on direct tax has reportedly recommended substantial cuts in income tax slabs for individual taxpayers in order to boost demand. Apart from slashing income tax rates, the report also suggested dropping surcharges and cess levied on income taxes, CNBC-TV18 reported.

The new direct tax report called for a 10 per cent income tax rate for individuals earning Rs 5-10 lakh per year, CNBC-TV18 quoted sources as saying. Presently, this tax bracket attracts 20 per cent income tax.

The direct tax report further suggested that individuals earning more than 20 lakh per year should be categorised under the 30 per cent income tax slab. Individual taxpayers earning more than 10 lakh per annum are currently placed in this particular tax slab.

Lastly, the direct tax report recommended a 35 per cent income tax slab for taxpayers earning over Rs 2 crore per year.

Last week, Finance Minister Nirmala Sitharaman had announced relaxation in corporate tax rates for domestic companies and new manufacturing domestic companies. As per the tax reforms, domestic companies will be taxed at 25.17 per cent, whereas new manufacturing firms will be taxed at 17 per cent. Both tax rates include all the surcharges and cess and will be applicable from the ongoing financial year.

The decision is meant to increase liquidity at the companies' disposal and encourage foreign investment, especially in the manufacturing segment.