DTC may bring relief on Income Tax Rates

Chidambaram assures that on tabling the Bill Parlianment will abide by all recommendations of the standing committee

After the Direct Taxes Code (DTC) Bill is approved by
Parliament, it may bring with it major relief for personal income tax payers.
At a press conference on Monday, Finance Minister P Chidambaram said when the
final version of the Bill was tabled in Parliament, the government would abide
by the recommendations of the parliamentary standing committee on DTC.

The parliamentary panel, chaired by former finance minister
Yashwant Sinha, had recommended the DTC increase income tax exemption limit to
Rs 3 lakh a year, against the Rs 2 lakh proposed in the Bill. Currently, the
exemption stands at Rs 2 lakh.

The panel also suggested a 10 per cent income tax rate be
applicable for annual income of Rs 3 lakh to Rs 10 lakh. The DTC Bill had
proposed this rate on income of Rs 2-5 lakh. Currently, too, 10 per cent income
tax is imposed on the Rs 2-5 lakh slab.

The panel also suggested 20 per cent income tax be paid by
those earning Rs 10-20 lakh a year. The Bill had proposed this rate for the Rs
5-10 lakh segment (the current segment).

It also wanted the government to impose a peak rate of 30
per cent on annual income of more than Rs 20 lakh, against the Bill’s provision
of more than Rs 10 lakh (the current scenario).

Substantial changes in tax exemptions on long-term savings,
medical insurance and social security contributions were also suggested by the
committee. It wanted the government to increase the long-term savings limit for
exemption from income-tax from Rs one lakh to Rs 1.5 lakh.

It recommended contribution to social security such as
pension be exempted up to Rs 1.5 lakh a year; medical insurance up to Rs one
lakh; medical insurance for dependent parents up to Rs 50,000 and professional
studies and education Rs 50,000.

The panel did not suggest any change in the corporate tax
rates imposed. The finance minister did not specify a date for the
implementation of the DTC, which would replace the archaic Income Tax Act of
1961.

Initially, DTC was scheduled to be introduced from April 1.
However, the standing committee had submitted its report to Parliament only in
March. The government would now table the revised DTC Bill in Parliament.

Source: Business Standard