The new direct tax code proposes to exempt the general tax payer from paying income tax if his income is Rs 1,60,000 in a year. He would pay just 10 per cent up to Rs 10 lakh, 20 per cent beyond that and Rs 25 lakh and 30 per cent beyond Rs 25 lakh. Though it looks green on the outlook, need to see and evaluate the details before concluding it to be a great one! The code also proposed to increase tax deduction on savings to Rs 3 lakh. However, one good thing is it will bring down the tax amount by a huge margin for all.
It further proposes that retirement benefits be exempted from tax, only if saved in Retirement Benefits Account. Here is a list of salient features in the new draft.
- Maintains tax exemption at Rs 1.60 lakh income a year
- 10% tax on income of Rs 1.6-10 lakh
- 20% on income over Rs 10 lakh up to Rs 25 lakh
- 30% on income beyond Rs 25 lakh
- all direct taxes including FBT and income tax would be brought under one code.
- Corporate Tax rate to be 25% against 30 per cent
- Wealth Tax to be levied on wealth over Rs 50 crore
- Abolition of Securities Transaction Tax
- Re-introduction of long-term capital gains tax
- Raising of tax deduction on savings to Rs 3 lakh
Probably the code will become law by 2011, which will be the golden jubilee of the Income Tax Act (1961). Former finance minister P Chidambaram had initiated the work on new code and he didn’t forget to mention in the press release that this was a brand new code written from scratch. Only thing I wish after this is implemented is to see no defaulters :) Punish them badly if anyone defaults even after such moderate taxes. I certainly feel it is a good one with little known details as of now. What is your take?
PS: You can share your thoughts on this proposal directly on Indian finance ministry site. Thanks to Sanjay for sharing the link.