Recommendations for Income Tax Relief for Up to 3 Lakh

Bangalore: Parliament’s standing committee on Finance has recommended hike in Personal Income Tax relief for the amount up to 3 lakh, which was 1.8 lakh till now for the annual income of 5 lakh.

This UPA-2’s ambitious Direct Tax Code’s (DTC) draft report is likely to suggest several revisions and improvements including linking tax slabs to consumer price indexes to allow an automatic adjustment of rates. According to sources the committee wants the government to raise the limit of income tax exemption from the perspective of a nearly double digit inflation of rupee.

The committee proposal of tax rates are expected to 10 percent for the slab of 3 lakh to 10 lakh, 20 percent for up to 20 lakh and 30 percent beyond that, as reported by Economic Times. Presently the income tax rate for 1.80-5 lakh is 10 percent, 20 percent for 5-8 lakh and 30 percent for above 8 lakh. This proposal also recommends a reduction of tax eligible time period of residency of 60 days allowed to NRIs, which is presently 182 days.

It also recommends lowering of wealth tax threshold and anti-abuse provisions to ensure that taxman don’t get illegal power to annoy taxpayers. There are also considerations to change the tax benefits for life insurance products. The bill states that all insurance policy dividends should be exempted from dividend distribution tax and there should not be any tax deduction on source (TDS) on stock market brokerage fees, which are paid during such transactions.

This DTC bill seeks to replace 60 year old income tax law. “Officials will have to work on amendments to the code and with the ongoing work on budget it may not be possible to bring the amendments in the budget session,” says an income tax official, as quoted by Times of India.