Cabinet’s nod for raise in IT Exemption Limit
The Cabinet on 26th Aug-2010, approved Direct Taxes Code (DTC) Bill, clearing decks 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.
The new DTC bill proposes to raise exemption limit for personal income tax from ` 1.6 lakh to ` 2 lakh. The bill also proposes income tax for ` 2- ` 5 lakh slab to be 10 per cent, and 20 per cent on income up to ` 5 – ` 10 lakh, and 30 per cent on income beyond that.
The code aims at reducing tax rates, but expanding the tax base by minimising exemptions. When enacted, DTC will replace the archaic Income Tax Act and simplify the whole direct tax regime in the country.
The Finance Ministry had earlier come out with a draft on the 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 draft also puts pensions administered by the interim regulator PFRDA, including pension of government employees who were recruited since January 2004, under EEE treatment.
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 ` 1.5 lakh will continue.
Once this bill cleared by Parliament Direct Tax Code will be a full-fledged Direct Tax law in India which will take effect from financial year 2011-12 (Assessment Year 2012-13)
Tax Structure proposed in the DTC Bill is as follows
- Salaried persons exempt up to ` 2 lakh
- Senior citizen upto ` 2.5 lakh exempt
- Tax for those earning ` 2 – 5 lakh at 10 per cent
- Tax for those earning ` 5-10 lakhs at 20 per cent
- Tax for those earning Over ` 10 lakhs at 30 per cent.
Source: NDTV Profit