Finance Minister Pranab Mukherjee is likely to introduce the Direct Taxes Code (DTC) Bill in Parliament on Monday.
The Cabinet had approved the DTC Bill that proposes a restructuring of income tax slabs — a move that would leave more money in the hands of people.
DTC Bill, once legislated, will replace the archaic Income Tax (I-T) Act by rationalising tax slabs for both corporations and individual I-T payers.
The Bill, has proposed to raise the basic exemption limit to R2 lakh per annum from R1.6 lakh per annum.
The Bill has proposed to fix corporate income tax rate at 30 per cent inclusive of surcharges and cesses — down from the current 33 per cent. It has also proposed a Minimum Alternate Tax (MAT) of 20 per cent, instead of the present 18 per cent, on book profits of companies.
After its introduction in Parliament, the Bill will be examined by a Standing Committee and based on its recommendations the government would consider further amendments.
The first draft of the Bill, unveiled in August last year, had suggested a 10 per cent tax on income between R1.6 lakh and R10 lakh, 20 per cent on income between R10 and R25 lakh and 30 per cent beyond that. Finance ministry officials said these were only illustrative slabs.
“The Bill will go a long way in simplifying tax laws and making them comparatively free of litigation,” said Dinesh Kanabar, deputy CEO, KPMG.
The Bill is also likely to propose to continue with exempt-exempt-exempt (EEE) method of taxation on investments up to R3 lakh. At present, all three stages of savings — income, deposit and withdrawal — are exempt from tax (EEE).
The cap of R1.5 lakh per annum on deduction on payment of interest on the home loan is likely to continue.