Income up to 
10 lakh to attract 10 percent tax
Bangalore: The government initiated radical tax reforms through a draft code that aims at moderating income tax rates, abolishing securities transaction tax and increasing deduction for savings up to 
3 lakh. The new Direct Taxes Code has suggested a significant expansion of personal income-tax slabs, with levels of relief going up with incomes.
Releasing the Direct Taxes Code, Finance Minister Pranab Mukherjee said, "If reasonable level of discussion happens on the code, a bill can be placed in the winter session of Parliament." The Code said that the 10 percent tax rate should apply to an annual income of 1.6-10 lakh per annum and the 20 percent rate to 10-25 lakh. The maximum rate of 30 percent should be applicable for income above 25 lakh per annum.
Currently, 10 percent is levied on incomes of 1.6-3 lakh, 20 percent on 3-5 lakh and 30 percent above 5 lakh. The Code also suggested that perks given to employees should be included in salary income, a recommendation that may inflate the taxable income of certain categories of salaried persons. Besides, the new code also suggested that tax rates for companies should be reduced to 25 percent for both domestic and overseas companies. Currently, domestic companies are taxed at 30 percent with surcharge and cess coming later. After the implementation of new tax code, foreign companies are likely to pay an additional tax of 15 percent as branch profit tax.
Mukherjee said, "The language is very, very simple. By putting simple language and simple forms, we will eliminate litigations as far as possible. It would be possible for most taxpayers to file their returns easily, adding that there were several easy to comprehend illustrations to guide them through the entire process, which today is often seen as complex and confusing. I expect people will read it and there would be an informed debate. Of course, we will hold detailed discussions with large numbers of stakeholders."
Home Minister P Chidambaram, who during his tenure in the finance ministry had initiated work on the code, said that this was a brand new code written from scratch. "In these 48 years, not only India has changed, the world has changed. Therefore, it is widely accepted that the present code is outdated," added Chidambaram.
The finance minister also placed on the ministry's website a discussion paper on the subject to invite opinion from the public before going to parliament with a proper bill for the legislative changes.
3 lakh. The new Direct Taxes Code has suggested a significant expansion of personal income-tax slabs, with levels of relief going up with incomes.
Releasing the Direct Taxes Code, Finance Minister Pranab Mukherjee said, "If reasonable level of discussion happens on the code, a bill can be placed in the winter session of Parliament." The Code said that the 10 percent tax rate should apply to an annual income of 1.6-10 lakh per annum and the 20 percent rate to 10-25 lakh. The maximum rate of 30 percent should be applicable for income above 25 lakh per annum.
Currently, 10 percent is levied on incomes of 1.6-3 lakh, 20 percent on 3-5 lakh and 30 percent above 5 lakh. The Code also suggested that perks given to employees should be included in salary income, a recommendation that may inflate the taxable income of certain categories of salaried persons. Besides, the new code also suggested that tax rates for companies should be reduced to 25 percent for both domestic and overseas companies. Currently, domestic companies are taxed at 30 percent with surcharge and cess coming later. After the implementation of new tax code, foreign companies are likely to pay an additional tax of 15 percent as branch profit tax.
Mukherjee said, "The language is very, very simple. By putting simple language and simple forms, we will eliminate litigations as far as possible. It would be possible for most taxpayers to file their returns easily, adding that there were several easy to comprehend illustrations to guide them through the entire process, which today is often seen as complex and confusing. I expect people will read it and there would be an informed debate. Of course, we will hold detailed discussions with large numbers of stakeholders."
Home Minister P Chidambaram, who during his tenure in the finance ministry had initiated work on the code, said that this was a brand new code written from scratch. "In these 48 years, not only India has changed, the world has changed. Therefore, it is widely accepted that the present code is outdated," added Chidambaram.
The finance minister also placed on the ministry's website a discussion paper on the subject to invite opinion from the public before going to parliament with a proper bill for the legislative changes.