Individuals and companies can expect some relief in the Direct Taxes Code (DTC), with the government planning to widen personal income-tax slabs, enhance the exemption limit and remove levies on corporate tax. This comes with the Cabinet clearing the Direct tax code which will be introduced in Rajya Sabha, and referred it to a select committee, during the monsoon session.
It has been referred to the Select Committee, and will be introduced in Rajya Sabha on Monday.
The proposed slabs are, however, a climb down from what was proposed in the first discussion paper on DTC, released last August. The government had then proposed to do away with most exemptions, including savings instruments, by taxing them at the time of withdrawal. But bowing to pressure, the government dropped the plan.
| PERSONAL INCOME TAX | |||
| (Amount in ‘ lakh) | 10% | 20% | 30% |
| Now | 1.6-5 | 5-8 | 8 & above |
| DTC I | 1.6-10 | 10-25 | 25 & above |
| Likely | 2-5 | 5-10 | 10 & above |
| # Exemption limit to be raised from ‘1.6 lakh to ‘2 lakh # Further relief for women, senior citizens expected # Corporation tax rate stays at 30%, but no cess or surcharge proposed # MAT rate to be raised from 18% to 20% of book profits |
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The limit for exemptions for salaried people is Rs. 2 lakh, while that for senior citizens is Rs. 2.5 lakh.
The earlier DTC draft had proposed to reduce the corporate tax to 25 per cent from the present 30 per cent but the revised direct tax code has been kept the same at 30%.
Also, unlike the original proposal that sought to impose minimum alternate tax (MAT) on gross assets, which drew strong criticism, the government has now decided to continue with the system of levying MAT on book profits. The MAT rate is, however, proposed to be increased from the present 18 per cent to 20 per cent.
The new Code comes into effect from April, 2011.
After the approval of the Cabinet, the decks are cleared for tabling the legislation in the Monsoon Session of Parliament so that the new Act ushering in reduced tax rates and exemptions may come into effect from next fiscal.
When enacted, the Code will replace the archaic Income Tax Act and simplify the whole direct tax regime in the country.
The Code aims at reducing tax rates, but expanding the tax base by minimising exemptions.
The Finance Ministry had earlier come out with a draft on the (Direct Tax Code) DTC bill, some of whose provisions drew strong criticism from industry as well as the public.
To address those issues, the ministry brought out the revised draft, dropping earlier proposals of taxing provident funds on withdrawal and levying Minimum Alternate Tax on corporates based on their assets.
“As of now, it is proposed to provide the EEE (Exempt-Exempt-Exempt) method of taxation for Government Provident Fund (GPF), Public Provident Fund (PPF) and Recognised Provident Funds (RPF) …”, the revised DTC released by the Finance Ministry said.
The revised draft also puts pensions administered by the interim regulator PFRDA, including pension of government employees who were recruited since January 2004, under EEE treatment.
The first DTC draft had proposed to tax all savings schemes including provident funds at the time of withdrawal bringing them under the EET (Exempt-Exempt-Tax) mode.
Under the EEE mode, the tax exemption is enjoyed at all the three stages – investment, accumulation and withdrawal.
The revised proposal has also made it clear that tax incentives on housing loans will continue. Payment on interest on housing loans up to Rs. 1.5 lakh will continue. The earlier draft was silent on housing loans.
Do we know if the tax benefit on home loan due to second property is still applicable or has been removed.
Till now, we could claim tax rebate on the interest paid on 2nd home loan without any limit of 1.5L. Does the latest DTC still provide this benefit?
nothing is clear about the present investments in ulips, section 80 c and standard deduction.
Details regarding Long Term Capital Gain Tax in respect of shares etc. still not cleared. Uncertainity in this regard is creating confusion.
Mr. SS Rana talking about the other government employees getting the slab. after getting all the perks after not doing the work, corrupting, expect more from teh government, finally its both teh MP’s and the government employees both suck out the remaining blood from the poor tax paying salaried people from teh private industry. Why are we forgetting that if we are not taxed, then how are these government employees going to get paid freely. nobody seeems to talke about the government controll on the rising educational prices, no centralized system, nothing. india is going to burst one day. even the so called god cant save its people. PITY…
There is still no relief from TDS. At a minimal level one pays 10% tax. up to 5 Lacs. (i.e.) If one’s income is 3 Lacs his tax liability is about 10000. But if all his income is from Bank deposits his TDS will be 30000. There seem to be no way to avoid this anamoly. It appears nobody cares. TDS regime requires a major revision, atleast for Bank Deposits, for senior citizens and house-wifes.
Indian politicians are really a great actors, really a huge clap to them bcoz they have given a huge slap to the government employees in the name of DTC. they can hike their pays as much they can, but when it comes to the govt. employees they start behaving in an immature way. when they are the decision making, responsible persons, then why they don’t pay the taxes? if they don’t then how can they expect other govt. employees to pay tax?
just a shear wastage of mind and time. hell with the DTC………………
The proposed Tax Rates i.e. exemption limit to Rs. 2L and 10% on 2 to 5 L and 20% on 5 to 10L and 30% on 10L above is not encouraging and benefiting the middle income group of whose taxable income is equal or less than Rs. 8 L.
In the above category max they can save Rs. 4 K which is nothing compared to the price incease on all essential products like fuel etc.,
Govt should consider in expanding the 10% tax base and it would be ideal to make it upto Rs. 10 L.
Regards
Idayachandiran
Hi,
Does the Investment limit under sec. 80 (Rs. 1.50 lacs) has a sub-limit of Rs. 50,000 for nsurance and Education Expenses, thus leaving the initial limit of Rs. 1.00 lac only for other instruments like P.F. PPF NSC etc.
Regards,
J. Alexander.
as on now we can invest up to 120,000/- and get tax exemption.
In the new DTC what is the maximum investment allowed
Dear Sir,
I have noticed that, there was a
error @
PERSONAL INCOME TAX
Likely 5-Feb 5-10 10 & above
Plz correct @ Likely 2-5 instead of 5-Feb
Rgds
D.G. Rajesh
under dtc the womwn of 20 years or so has been equlised to the slabb of Senior Citizens of 65 years and above. it is totally unjustified to Sr.citizen who has been paying tax throughout their life. instead of announcing tax free income and rewards to them the DTC want to penalise them have heart to your elders and raise tax free limit to Rs. 3.5 lacs. alternatively do not give any sr citizen so called concession, i suggest for tax rebate to the percentage of one’s age. i.e 70 year old should get rebate on total income tax of 70%. for consideration
This is a great disappointment to the salaried sector.
The MPs are cribbing after getting the hike of 300% that it is still less, whereas the genuine concern of the retired defence personnel and the common man (salaried class) is not even heard.
The lowest slab (10%) extending upto Rs 10 lakhs would have widened the base and much sought relief for the salaried class.
Hope, the slabs are revised to the original limit (as in the first DTC draft) for the welfare and good of the common man and the nation at large.
The slabs declared under the first DTC draft was a great whereas the approved draft by increasing the basic exemption limit to Rs 2 lakhs is an eyewash and was expected in the last budget but postponed by a year with a DTC. This is not a relief to the tax payer.
Hope and request the Govt to reconsider the slab to increase the lowest slab to Rs 10 lakhs with the exemption upto Rs 2 lakhs and allowing the EEE concept for the funds (like PF, Insurance etc) that has been approved yesterday.