Direct Tax Code bill offers big savings to taxpayers
Implementation of the proposals deferred by a year
The government, on Monday, tabled the Direct Tax Code (DTC) bill which when implemented from April 2012, will bring substantial savings to millions of taxpayers in the country.
According to quick calculations under the new tax structure as proposed in the DTC bill those earning between Rs 2 lakh and Rs 5 lakh per annum will get tax benefit of Rs 7,660, tax burden will be reduced by Rs 21,540 for those earning between Rs 5 lakh and Rs 10 lakh. Those earning more than Rs 10 lakh a year are likely to get a huge tax benefit of Rs 41,040 under the new tax system. However, the benefits would have been much more had the government retained the tax slabs proposed in the original DTC initiated in August 2009. The DTC bill, proposes to raise the exemption limit on Income Tax from the current Rs 1.6 lakh to Rs 2 lakh and seeks to widen tax slabs to levy 10 per cent rate on income between Rs 2 lakh and 5 lakh, 20 per cent on Rs 5-10 lakh and 30 per cent above Rs 10 lakh.
For senior citizens the tax exemption limit will be raised to Rs 2.5 lakh from Rs 2.40 lakh. For women Income Tax payee the DTC has not brought any cheer as it proposes to treat the fairer sex with their male counterpart on equal footing as far as exemption limit is concerned. The proposed tax slabs under the bill are much lower than originally suggested in the first draft of DTC — 10 per cent for Rs 1.6 lakh to Rs 10 lakh, 20 per cent from Rs 10-25 lakh and 30 per cent for income above Rs 30 lakh. However, what surprised everyone is the postponement of the DTC Bill implementation by an year from April 1, 2012. “The DTC will become effective after approval by Parliament from April 1, 2012.
The first return of income under its provisions will be filed after March 31, 2012,” Revenue Secretary Sunil Mitra clarified. He was of the view that people need time to understand the nuances of the new Bill, hence the postponement. It has proposed to enhance the tax incentives for individuals from the existing Rs 1 lakh to Rs 1.5 lakh. The deduction for individuals on account of tax incentives will be up to Rs 1 lakh for approved long term savings like PF, Superannuation Fund, Gratuity Fund and Pension Fund. Apart from this there will be tax incentives up to Rs 50,000 for expenditure on tuition fees of children, pure life insurance premia and health insurance payment.
Besides, there will be separate deduction from taxable income for interest paid on education loan and for payment of expenses of disabled person or disabled dependent. Significantly, the bill has dropped the earlier proposals of taxing long term savings like GPF, Public Provident Fund and EPF at the time of withdrawal under the EET (Exempt-Exempt-Tax) mode.
