No big relief in tax slabs
This is likely to happen since the revised draft on Direct Taxes Code (DTC) dropped the contentious issues of imposing tax on provident and pension funds at the time of withdrawal and levying minimum alternate tax (MAT) on the basis of gross assets. “The proposals in the revised discussion paper would lead to reduction in the tax base proposed in DTC (last year),” sources in the Finance Ministry told PTI.
The first discussion paper had suggested imposing 10 per cent tax on income of Rs 1.6 lakh-Rs 10 lakh, 20 per cent on income of Rs 10 lakh-25 lakh and 30 per cent beyond Rs 25 lakh in a year. The budget had imposed 10 per cent tax on income of Rs 1.6 lakh-5 lakh, 20 per cent on Rs 5 lakh-8 lakh and 30 per cent over Rs 8 lakh in a year. Before this, the slabs were from Rs 1.6 lakh-3 lakh, Rs 3 lakh-5 lakh and over Rs 5 lakh in a year. Women and senior citizens enjoy greater relief.
The revised paper also retained the present provisions of giving income tax exemption on interest paid on housing loans up to Rs 1.5 lakh in a year. As such, tax slabs proposed in the first discussion paper will be calibrated accordingly, the sources said. They added that tax slabs given in the first discussion paper were anyway illustrative in nature.
Meanwhile, a day after his ministry dropped contentious proposals in the discussion paper on the Direct Taxes Code, Finance Minister Pranab Mukherjee, on Wednesday, said in Ahmedabad, that the proposed law will ensure a simpler and more rational direct tax regime. He asked senior income tax officials here to organise training for staff at all levels to meet the challenges of switching over to the proposed new taxation regime, which will replace the decades-old Income Tax Act.
Moderate tax rates
“A major tax reform initiative has already been announced in the proposed ‘Direct Taxes Code 2009’ to simplify, rationalise and consolidate the laws and procedure, relating to direct taxes,” Mukherjee said after laying the foundation stone of the new office building of the Income Tax Department here.
He said in order to improve compliance further, tax laws have to be simple, stable and robust, tax rates should remain moderate and multiplicity of tax exemptions and deductions should be gradually phased out, in order to widen and deepen the tax base.
He said that tax administration needs to be further toned up by appropriate use of technology on the one hand and improving professional competence and responsiveness of the employees on the other.