New Delhi: The Government will table the much-awaited Direct Taxes Code (DTC) bill in the Lok Sabha tomorrow, that is expected to provide relief to income tax payers, both personal and corporate, though not as much as was proposed earlier in the draft.
The government is quite confident of replacing archaic Income Tax Act with DTC from 1 April 2011.
Finance minister Pranab Mukherjee has said he would announce the slabs for personal income tax while tabling the bill and has refused to share the details before that.
He has only said so far that the exemption limit will be raised from the current Rs1.6 lakh in a year to Rs2 lakh.
However, sources said that as per the bill, approved by the Cabinet on Thursday, income between Rs2-5 lakh is likely to attract 10% tax; for Rs5-10 lakh it will be 20% and above Rs10 lakh, 30%.
Currently income between Rs1.6-5 lakh attracts 10% tax; between 5-8 lakh, 20 % and beyond 8 lakh, 30%.
The proposed tax slabs are much lower than originally proposed in the draft DTC bill -- 10% for Rs1.6 lakh to Rs10 lakh, 20% between Rs10-25 lakh and 30% for income above Rs30 lakh.
Compared to the current tax slabs, the proposed rates will make tax payers earning Rs15 lakh a year richer by Rs41,040.
Similarly, tax burden would reduce by Rs21,540 for those earning between Rs 5lakh and Rs10 lakh annually, while those earning between Rs2-5 lakh could be richer by Rs7,660, Deloitte Haskins & Sells Partner Neeru Ahuja said.
The tax slabs are proposed to be reduced from the draft stage, because the government is expected to retain income tax exemption on interest on housing loans up to Rs1.5 lakh a year, under pressure from certain quarters.
Also, earlier proposals of taxing long term savings like provident funds at the time of withdrawal have been dropped.
DTC aims at reducing tax rates, and cutting exemptions.
With the government getting adverse feedback on the proposals to withdraw some exemptions, it will have to calibrate tax rates to save the government kitty.
The DTC bill also proposes to retain corporate tax at 30%, but without surcharge and cess. With them, the current tax liability on corporates comes to over 33%.
Tax experts said this proposal will provide much needed relief to the industry and bring the levy on par with global standards, though the industry wanted it to be reduced to 25%.