Dr. Sanjiv Agarwal

Ahead of the Annual Union Budget later this Week, Select Committee of the Parliament, which has scrutinized the Direct Tax Code Bill (DTC), likely to replace Income Tax Law of 1961 has recommended some very significant tax reforms and tax payer’s friendly measures.

In personal taxation, it is proposed to raise the exemption limit from present Rs 1.80 lakh to Rs 3 lakh per annum and tax saving investment limit from Rs 1.20 lakh  to Rs 3.20 lakh. It also recommends to have three tax slabs, ie, 10 percent tax for Rs 3-10 lakh income slab, 20 percent tax for Rs 10 lakh- 20 lakh income slab and 30 percent tax for over Rs 20 lakh income.

DTC had proposed an additional deduction of Rs 50000 for life insurance and health insurance premiums and tuition fees. It has been recommended to raise this to Rs one lakh, besides an additional deduction of Rs one lakh for higher education loans.

It also recommends to tax wealth of Rs 5 crore (presently Rs 30 lakh) and above  besides rationalizing the tax rates and abolish securities transaction tax (STT) levied presently on sale or purchase of securities. That would mean that capital gains would be taxed  again.

So far as corporate income tax rates are concerned, the panel has suggested to retain the present rate of 30 percent, which is considered as reasonable.

One good thing about housing income is the recommendation of treating commercial rental income as income from house property and retain 20 percent deduction for repairs. For interest on loans, loans for repairs and renovation have been recommended to be included.

While it would be too ambitions to look at Finance Bill 2012 as a new DTC Bill, the Finance Minister is expected to atleast pick up some of the major recommendations in this budget itself and move two steps  forward in implementing the DTC, more so when indirect tax reforms are no where in sight in near future.

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