Cabinet nod to Direct tax code bill - Incometax exemption limit upped to Rs 2 lakh

The Cabinet approved the much-awaited Direct Taxes Code (DTC) Bill on Thursday, which is likely to be tabled in Parliament on Monday and thereafter it may be referred to standing committee.

When asked what will be the limit of exemptions for income tax, Finance Minister told reporters after the Cabinet meeting that it is proposed to be raised to Rs 2 lakh from the current Rs 1.6 lakh.

"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," Minister said.When enacted, the DTC will replace the archaic Income Tax Act and simplify the direct tax regime in the country.

Under the moderate tax slab suggested in the DTC Bill ,the government proposes tax rate of
10 per cent for income between Rs 2 lakh and Rs 5 lakh,
20 per cent for income between Rs 5 lakh -
Rs 10 lakh and 30 per cent for income over Rs 10 lakh.
Currently the Income Tax rate is 10 per cent on income above Rs 1.6 lakh and upto Rs 5 lakh, 20 per cent on income above Rs 5 lakh and upto Rs 8 lakh and 30 per cent on income above Rs 8 lakh.

Finance Ministry officials exuded confidence that the Bill will come into force by the deadline of 1^st April 2011.The code aims at reducing tax rates, but expanding the tax base by minimising exemptions.(Source DD)