The Cabinet on Thursday approved the much-awaited Direct Taxes Code (DTC) Bill that proposes restructuring income tax slabs, to leave you with some more money in your pocket.
The Bill, which raises the income tax exemption limit from `1.6 lakh to `2 lakh a year, and rejigs existing slabs, will replace the archaic Income Tax Act.
"The objective is to limit the plethora of exemptions. (Income) tax slabs will be three. Rate of taxes will be taken in the schedule so that they need not be changed every year,” Finance Minister Pranab Mukherjee said after the cabinet meeting.
The Bill has also proposed fixing corporate income tax rate at 30 per cent inclusive of surcharges and cess — down from 33 per cent at present. It has also proposed minimum alternate tax (MAT) of 20 per cent, instead of the present 18 per cent, on book profits of companies.
While Mukherjee did not disclose the proposed new income tax slabs, sources said income between Rs 2-5 lakh would attract an rate of 10 per cent, 20 per cent for income between Rs 5 -10 lakh bracket and 30 per cent above Rs 10 lakh.
After introduction in Parliament, the Bill will be examined by a Standing Committee and based on its recommendations the government would consider further amendments in the Bill.
The first draft of the Bill, unveiled in Augsut last year, had suggested 10 per cent tax on income between Rs 1.60 lakh and Rs 10 lakh, 20 per cent on income between Rs 10 and Rs 25 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 and Chairman Tax of consulting firm KPMG.
Finance Minister Pranab Mukherjee had previously hoped that the bill could be passed during the current session. He had also said that deciding the slabs under the new code was the prerogative of parliament.