New Delhi : A parliamentary panel reviewing the Direct Taxes Code (DTC) bill has recommended raising the income tax exemption limit to Rs.3 lakh a year and the investment limit for tax saving schemes to Rs.3.20 lakh.
The current tax exemption limit stands at Rs.1.80 lakh.
The Standing Committee on Finance on the DTC bill, headed by former finance minister Yashwant Sinha, has proposed that a 10 percent tax 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.
IANS
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As per the Budget proposals for 2012-13 presented in the Lok Sabha by Union Finance Minister Pranab Mukherjee, today proposed raising the income tax exemption limit for individuals to Rs 2 lakh per annum from Rs 1.80 lakh and the exemption limit for the senior citizens between 60 and 80 years of age will be Rs 2.50 lakh and 10 per cent will be levied on income between Rs 2.5-5 lakh. In my view it is these two ranges many may be falling and all salaried class expected at least income tax exemption up to Rs.3 Lakhs. This could have given a lot of relief. As such the cost of living has gone up and with the budget proposals costs of many items or services will go up and inflation would spiral with the result dearness allowance for salaried class also would increase. This in turn will cross the exemption limit for the persons earning Rs.2 lakhs and they have to pay income tax which in my view is quite burdensome and hope the limit may be raised to Rs.3 Lakhs. If Government can recover black money abundantly available with highly placed Government officials, politicians and businessmen in the country and can unearth slush money stacked in foreign banks, perhaps there may not be a need to tax persons earning upto Rs.10 – Rs.15 lakhs per year. What is happening in our country is that those who have earned a lot of black money and others continuing to do so go scot free and only poor category of people come in the net whose income tax is cut at the source itself. We all know persons doing very small businesses like selling chole-bature, pav-bhaji, vegetables or pan vendors, to name a few, make a lot of money but do not pay any income tax and so also the case with many small and medium business persons intelligently avoid paying income tax. If all the categories pay income tax, then i think, lower end people especially large number of persons earning income of Rs 2lakhs to Rs.3 Lakhs can get relief from paying income tax.