DIRECT TAXES CODE BILL:-
The Cabinet on 26th August 2010 approved Direct Taxes Code 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 Rs. 1.6 lakh to Rs. 2 lakh. The Bill also proposes income tax for Rs. 2 - Rs. 5 lakh slab to be 10 per cent and 20 per cent on income up to Rs. 5 - Rs. 10 lakh and 30 per cent on income beyond that.
The Bill has exempted senior citizens earning up to Rs. 2.5 lakh. Further, the draft code has proposed corporate tax at 30 per cent with no cess and surcharge.
The code aims at reducing tax rates but expanding the tax base by minimizing exemptions. When enacted, DTC will replace the archaic Income Tax Act and simplify the whole direct tax regime in the country.
As of now, it is proposed to provide the EEE (Exempt – Exempt-Exempt) method of taxation for Government provident fund, Public Provident Fund and Recognized Provident Funds.
The revised draft also puts pensions administered by the interim regular 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. As regards MAT, it has been clarified that tax would be levied on the book profit, as is the current practice, and not on gross assests as proposed in the draft.
The revised proposal has also made it clear that tax incentives on housing loans will continue. Payment of interest on housing loans up to Rs. 1.5 lakh will continue. The earlier draft was silent on housing loans.
HIGHLIGHTS:-
1. Salaried persons exempt up to Rs. 2 lakhs.
2. Senior citizens up to Rs. 2.5 lakh exempt.
3. Tax for those earnings Rs. 2-5 lakh at 10 percent.
4. Corporate tax to be 30 per cent.
5. Tax for those earning Rs. 5-10 lakhs at 20 percent.
6. Tax for those earning over Rs. 10 lakhs at 30 percent.
Note: Government of India has now decided to give effect to this legislation only form April 2012.
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