Central Government is planing to riase the income tax exemption limit from existing Rs. 1.8 lakh to Rs 3 Lakh.
The Standing Committee on Finance on the Direct Taxes Code bill, headed by former finance minister Yashwant Sinha, has proposed that tax exemption limit should be riased to Rs.3 lakh a year and the investment limit for tax saving schemes to Rs.3.20 lakh per year. A flat 10 percent tax would be levied on income between Rs.3-10 lakh, 20 percent between Rs.10-20 lakh and 30 percent on income over Rs.20 lakh.
The DTC had earlier proposed income tax exemption limit at Rs.2 lakh, 10 percent tax on income between Rs.2-5 lakh, 20 percent for Rs.5-10 lakh and 30 percent on income above Rs.10 lakh.
The committee has also suggested that the Securities Transaction Tax (STT) be abolished and the wealth tax limit be pegged at Rs.5 crore.
As regards the rate, it said the wealth tax should be charged at 0.5 percent on assets between Rs.5-20 crore, 0.7 percent on assets between Rs.20-50 crore and 1 percent above Rs.50 crore. The wealth tax rate now is 1 percent.
The STT is a levy on transactions in the stock market i.e. on purchase or sale of shares, derivatives and equity-oriented mutual funds.
However, the committee has suggested that corporate tax rate be retained at 30 percent.
“The committee has rightly struck the need to have balance in tax reforms by putting the onus and making the tax authorities accountable as well. Clearly, a lot of work will need to go in – as per suggestions and recommendations of the Committee – for the tax authorities to put back the draft into shape to be finally made into law,” said Neeru Ahuja, partner at consulting major Deloitte Haskins & Sells.
The committee submitted its recommendations to Lok Sabha Speaker Meira Kumar Friday.
The DTC Bill seeks to replace the Income Tax Act, 1961.
Even before the DTC bill is passed by Parliament, the government may look at introducing some tax measures in the forthcoming Budget itself to be presented by Finance Minister Pranab Mukherjee in the Lok Sabha March 16.