Cabinet approves Direct Taxes Code Bill

The Union Cabinet approved the Direct Taxes Code (DTC) Bill, paving the way for lower tax rates and reduced exemptions for both individuals as well as corporates. The Bill is likely to be tabled in the current Monsoon Session of Parliament, and could lead to the introduction of the new tax regime from April next year. "The basic income-tax exemption limit is proposed to be raised to Rs2 lakh from the current Rs1.6 lakh and corporate tax rate for both domestic and foreign companies is proposed at 30%," Finance Minister Pranab Mukherjee said after a Cabinet meeting.



Senior citizens and women will enjoy a higher I-T exemption of up to Rs2.5 lakh. At present, women have to pay tax on incomes of Rs1.9 lakh per annum or more and senior citizens on incomes of Rs2.4 lakh or more. "The whole objective is that a plethora of exemptions will be limited. Income tax slabs will be three. Rate of taxes will be taken in the schedule so that they need not be changed every year," Mukherjee said.

The new Direct Tax Code proposes to tax incomes between Rs2 lakh and Rs5 lakh at 10%, between Rs5 lakh and Rs10 lakh at 20% and beyond Rs10 lakh at 30%. There will be no surcharge or cess on companies, and the corporate tax rate is proposed to be capped at 30% as against 33% at present. The rate of tax on corporate incomes was proposed to be capped at 25% earlier. Also, the Government proposes to raise the minimum alternate tax (MAT) on book profits to 20% from current 18%The Government has scrapped the original proposal of MAT on gross assets after drawing criticism from the industry.

It had also proposed to tax long-term savings like provident fund at the time of withdrawal. The revised draft that was made public some time ago exempted them. "Concerns were expressed for shifting from EEE (exempt, exempt, exempt) to EET (exempt, exempt, tax)," Mukherjee said. The Securities Transaction Tax will remain unchanged. The dividend distribution tax rate of 15% also stays as it is. Also, deductions from taxable income will be available for interest on housing loans up to Rs1.5 lakh per annum and on payments into PF and similar superannuation schemes up to Rs1 lakh. A deduction of up to Rs50,000 will also be available on the payment of life insurance and health insurance premiums or tuition fees.