Yes, you read it right! If the new Direct Tax Code Bill 2009 is passed by the Parliament in the winter session, paying 10% tax on income upto Rs.10 lacs, could be a reality very soon.
While presenting the Union Budget 2009-10, Finance Minister Mr. Pranab Mukherjee had promised to table a new Income Tax Code within 45 days. On Wednesday, August 12, 2009, the Finance Ministeralong with the Home Minister (and former Finance Minister) Mr. P. Chidambaram released a draft code.
The new code aims at simplifying income tax laws, moderating income tax rates, abolishing Securities Transaction Tax and increasing deduction for savings up to Rs.3 lacs.
The new Direct Taxes Code Bill 2009 proposes to bring all direct taxes such as Income Tax, Wealth Tax and Fringe Benefit Tax under one roof. Written in easy-to-understand language to improve voluntary compliance by all tax payers by unambiguous interpretation of the tax laws.
The most important and probably the most beneficial provision proposed in the new code for Individual Tax payers is the proposed new Income Tax Slab.
The draft Direct Tax Code Bill 2009 is not an amendment to the existing Income Tax Act 1961, but a complete replacement of the existing act. As rightly pointed out by Mr. P. Chidambaram in a press conference that comparing the new Direct Tax Code 2009 with the existing Income Tax Act 1961 will be a dis-service to the new code. Some of the provisions are so drastically different from the existing Income Tax Act 1961.
Currently, the Individual Male Asseess (less than 65 years of age) does not pay income tax till Rs1.60 of income. However, he pays 10% tax on income between Rs1.60 Lacs and Rs3.00, 20% between Rs3 lacs and Rs5 lacs and 30% beyond Rs5 lacs.
Direct Tax Code Bill 2009 – The proposed rates of income tax
For Individual Male Assessees (less than 65 years of age) and Hindu undivided family |
|
| Income Slabs | Rate of Tax |
| where the total income does not exceed Rs.1,60,000 | Nil; |
| where the total income exceeds Rs.1,60,000 but does not exceed Rs.10,00,000 | 10 per cent of the amount by which the total income exceeds Rs.1,60,000; |
| where the total income exceeds Rs.10,00,000 but does not exceed Rs.25,00,000 | Rs.84,000 plus 20 per cent of the amount by which the total income exceeds Rs. 10,00,000; |
| where the total income exceeds Rs.25,00,000 | Rs.3,84,000 plus 30 per cent of the amount by which the total income exceeds Rs.25,00,000; |
For Women Assessees |
|
| Income Slabs | Rate of Tax |
| where the total income does not exceed Rs.1,90,000 | Nil; |
| where the total income exceeds Rs.1,90,000 but does not exceed Rs.10,00,000 | 10 per cent of the amount by which the total income exceeds Rs.1,90,000; |
| where the total income exceeds Rs.10,00,000 but does not exceed Rs.25,00,000 | Rs.81,000 plus 20 per cent of the amount by which the total income exceeds Rs. 10,00,000; |
| where the total income exceeds Rs.25,00,000 | Rs.3,81,000 plus 30 per cent of the amount by which the total income exceeds Rs.25,00,000; |
For Senior Citizens (Assessees more than 65 years of age) |
|
| Income Slabs | Rate of Tax |
| where the total income does not exceed Rs.2,40,000 | Nil; |
| where the total income exceeds Rs.2,40,000 but does not exceed Rs.10,00,000 | 10 per cent of the amount by which the total income exceeds Rs.2,40,000; |
| where the total income exceeds Rs.10,00,000 but does not exceed Rs.25,00,000 | Rs.76,000 plus 20 per cent of the amount by which the total income exceeds Rs. 10,00,000; |
| where the total income exceeds Rs.25,00,000 | Rs.3,76,000 plus 30 per cent of the amount by which the total income exceeds Rs.25,00,000; |
Personal Money will analyze the Draft Direct Taxes Code Bill 2009 and share with you finer details of how the new code may impact your Income Taxes, Tax Deductions available to you under various Investment avenues and how you can benefit if and when this draft bill is passed by the Parliament. So stay tuned to Personal Money. Meanwhile, if you wish to have a look at the full text of the Draft bill, please download it from the link provided below.
A very long time hope of Indian Citizens are going to be fulfilled. Every year people asked to finance minister to increase limit will not be there for next some year i hope.
khalid
Dear Khalid, True! these hopes of Indian Citizens might take 2 to 3 years to materialize, but at least now we have a clearer indication of things to come, which is great!
Yes I think. But This step should be taken fast. They say they will implement fro April 2009 but should start from next year itself.
We agree, but it may take a little longer for this draft code to be implemented. Implementing it with effect from April 2009 is not feasible. As it is still a draft bill, which needs to be presented in the parliament, based on consensus it needs to be passed in both houses of the parliament, then it needs to be sent for President's ascent, only when the President of India signs it, this bill will become an act of parliament and replace Income Tax Act 1961.
Going by Indian standards, it would be too ambitious to expect it to be passed w.e.f April 2009, even April-2010 looks difficult. At the earliest, we can expect it to be in force w.e.f from April-2011.
Sir, great website. I would like to point out a small error in this article. In the last table For Senior Citizens, the Rate of Tax column should say "10 per cent of the amount by which the total income exceeds Rs.2,40,000" instead of 1,90,000.
Thanks for pointing out the error. We have corrected our oversight. Your suggestions for improvement are always welcome.