As a major development in the Indian taxing regime, our government is proposing a new tax regime/tax code/direct tax code which is supposed to be replacing India Income Tax act 1961.
According to new tax code / new direct tax code a new initial tax slab will be 10% tax up to Rs. 10 Lakh Income.
The government proposed major tax reforms through a draft code that aims at moderating income tax rates, Securities Transaction Tax (STT) and increasing deduction for savings up to Rs 3 lakh.
“We expect to have better compliance and better collection of taxes,” Mukherjee said.
These new changes are currently under discussion and for collecting public opinion.
Direct tax code to be implemented only by the end of 2011 or early 2012 after completed the process of debate and suggestion from public.
Summary of the new proposed changes
According to the new recommendations of the Code :
- 10 per cent tax rate should apply to an annual income of Rs 1.6-10 lakh per annum (Now 10 per cent is levied on incomes of Rs 1.6-3 lakh, 20 per cent on Rs 3-5 lakh and 30 per cent above Rs 5 lakh).
- 20 per cent rate rate should apply to an annual income to Rs 10-25 lakh per annum.
- The maximum rate of 30 per cent should apply to income above Rs 25 lakh per annum.
- Perquisites given to employees should be included in salary income (likely to inflate the taxable income of certain categories of salaried persons).
- Tax rates for companies should be reduced to 25 per cent for both domestic and overseas companies. Currently, domestic companies are taxed at 30 per cent with surcharge and cess coming later.
- Foreign companies should pay an additional tax of 15 per cent as branch profit tax.
- Abolition of the controversial STT (but the Code also suggests reintroduction of tax on long term capital gains on securities trading).
