However, on a disappointing note, the Direct Tax Code, which reduces tax burden on the individual, will not be applicable from next financial year as hoped by many, but will come into effect only from Apr 1, 2012.
The Union Cabinet on Thursday, Aug 26 cleared the Bill that provides reduced tax rates and exemptions. The DTC bill also aims at simplifying and mordernising the country's archaic direct tax laws.
The bill raises the income tax exemption limit from the present Rs 1.6 lakh to Rs 2 lakh.
The new provisions under the Direct Tax Code are:
- Tax for income between Rs 2 to 5 lakh - 10 per cent
- Tax for income between Rs 5 to 10 lakh - 20 per cent
- Tax for income over Rs 10 lakh - 30 per cent
- Corporate tax has been kept at 30 per cent
While the limit for exemptions for salaried people is Rs 2 lakh, the exemption for senior citizens is Rs 2.5 lakh.
Experts believe that government will not lose much revenue from the sops proposed in the bill as it proposes lower tax incidence for individuals but the higher minimum alternate tax rates for corporate, which will balance the government revenue.