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Tax code proposes 10% tax on Rs 10 lakh income
NDTV Correspondent, Wednesday August 12, 2009, New Delhi

The government, on Wednesday, introduced a new direct tax code that seeks to simplify the tax regime in India. This was a much-awaited proposal as the government currently computes taxes based on the Income Tax Act 1961.

This code (Read: Direct Taxes Code full text)  is expected to replace the existing income tax laws.

The main proposals of the new code are as follows:

  • Slash income tax rates
  • Most exemptions to go
  • Interest on savings to be taxed
  • Up to Rs 1.6 lakh: No tax
  • 10 per cent tax for Rs 10 lakh income (Rs 1.2 lakh in hand)
  • 20 per cent tax for Rs 25 lakh income (Rs 2.60 lakh more in hand)
  • 30 per cent tax for income over Rs 25 lakh
  • To raise deduction limits for savings upto Rs 3,00,000
  • Corporate Tax: Down from 30 per cent to 25 per cent
  • Wealth tax to be levied for wealth above Rs 50 crore

However, there is a catch. According to the new proposals, all interest on savings will be taxed from 2011 onwards.

Former finance minister and now home minister, P Chidambaram, who had initiated work on the proposed code during his tenure, said the direct tax code was outdated and it needed a revamp.

The direct tax code would replace the Income Tax Act 1961, Chidambaram said. Adding that the new direct tax code would become a law only by 2011, Chidambaram said the new tax code would be a vast improvement over I-T Act 1961.

Finance Minister Pranab Mukherjee said tax reform was a process, not an event. To moderate tax rate and simplify tax laws, all direct taxes including FBT and income tax would be brought under one code, he said.

The new code was aimed at eliminating the scope of litigation as far as possible, Mukherjee said, adding that the government would have informed discussions with stakeholders on the tax code.
 
 
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Tags: code, India, Pranab Mukherjee, tax
Comments
Posted by ANUNTH SHREEVAS on Sep 06, 2009
1)In the Draft proposals, Exemption Limit needs to be substantially increased, as lower tax percentage is proposed for bigger limits of Income. It has been admitted by Mr Chidambaram that people with Annual Income of Rs 4.20 lac are poor, entitled to subsidy on interest on Education Loans for their wards. As such, the Exemption Limit should be increased from Rs 1.60 lacs to Rs 4.20 lac. 2) This Exemption Limit should be linked to Consumer Price Index (Base 2000)and be allowed to fluctuate with Average CPI of the previous year, for the next Financial Year. This will obviate the need to fix the Exemption Limit every year by Finance Ministry Officials arbitrarily. 3) Also, upto the exempted limit of income, no TDS is to be deducted by persons paying labour charges or commission or contract charges. Often, persons with relatively small incomes are forced to frequest Income tax Offices for refund of TDS amounts. This avoidance of deduction will help them most and also cut bribery levels at ITOs.
Posted by Bobby on Aug 19, 2009
Income Taxes of 20 per cent and 30 per cent are not advisable, as higher income groups may consider it painful to pay high taxes and there are chances that they may opt to evade taxes in one way or the other. Well, Income Tax may be considered to be charged at a single flat rate of 10 per cent on total Gross Income as TDS just like a Service Tax only, the minimum. However, for middle class/poor people, this 10 per cent Income Tax on total gross income may be borne by Employer and Employee in the following ratio: Gross Income Employer : Employee Up to 50,000 Borne by Employer-Full 50,000 to 1 lac 3 : 1 lac to 1.5 lacs 2 : 2 1.5 lacs to 2 lacs 1 : 3 More than 2 lacs Borne by Employee-Full There may be lot of retaliation/dissentment from the lower income groups for paying single 10% Income Tax on Gross Total Income. For them, Government may consider reduced/lower single slab Income Tax with 2 per cent, 4 per cent, 6 per cent and 8 per cent on Total Gross Income up to Rs.50,000, Rs.1,00,000, Rs.1,50,000, Rs.2,00,000 respectively, in the form of TDS. Incomes from 1. Interest 2. Dividends 3. Short / Long Capital Gain 4. House Property may be considered to be charged at a single flat rate of 10 per cent as TDS just like a Service Tax. However, people below the poverty line may be given exemption of this 10 per cent Tax. Initial, Income Tax of single flat rate of 10 per cent on total Gross Income as TDS may be considered to be applicable for employees of Government, Public Sector Undertakings and Public Limited Companies. Its scope may be further extended to Private Limited Companies, then firms, then wholesalers, then retailers and so on. Wealth Tax may be considered to be abolished. STT may be considered to be allowed to be continued and may not be considered to abolish the same. When all the incomes are charged at a single flat rate of 10 per cent, then ultimately, the revenue from Income Tax shall definitely be manifold. Then there are chances of less Tax evasion, less burden of filing returns. All investments and purchases should be free from any compulsion in liberalized economy and as such, all Tax Saving Investment Schemes may be considered to be abolished. People should decide its own priorities with 90 per cent amount available at its disposal - after paying 10 per cent Income Tax. Then People shall have the option either to invest the savings or purchase some more items/things out of the savings. In both the cases, the Government will earn revenue either in the form of Tax on interests/Dividends or Tax on Excise/Sales Tax. You are requested to consider on the above points for a single flat rate of 10 per cent Tax on Total Gross Income. with regards Bobby
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