Alert - Cabinet Approves Watered Down DTC
It is the turn of Aam Admi after the Babus, or so it seems.
In what could be termed as a relief, the cabinet on Thursday approved the Direct Tax Code (DTC), which will leave more money in the hands of the common man.
The Finance Minister has expressed hope that the new tax regime will 'provide predictability' to which the tax experts added that the new tax structure will bring significant benefits to taxpayers across the slabs.
What you get now While retaining the current tax rates, the government has decided to widen the three-tier slab structure, with the lowest rate of 10% for Rs 2-5 lakhs taxable income, 20% for Rs 5-10 lakhs and 30% for Rs 10 lakhs and above.
The current tax slabs look like this - Rs 1.
6-5 lakhs, Rs 5-8 lakhs and Rs 8 lakhs and above.
For women and senior citizens the tax exemption limit has been upped to Rs 2.
5 lakh.
In the current regime there were no taxes for women who earned Rs 1.
90 lakh or les per annum and senior citizens who earned Rs 2.
4 lakh or less.
On a positive note, it was decided to do away with EET regime - the most contentious of all the clauses, and adopt EEE.
What that means is, withdrawal from provident funds will not be taxed, as the original DTC in last August had proposed to do.
Other freebies in the new DTC ratified by the cabinet include - a) Deductions from taxable income will be available for interest on housing loans up to Rs 1.
5 lakh p.
a.
(same as earlier) and b) On payments into provident funds and similar superannuation schemes up to Rs 1 lakh (same as earlier).
c) As well as a deduction of up to Rs 50,000 for life insurance and health insurance premiums or tuition fees (earlier limit was Rs 20,000).
What was promised earlier...
The provisions that have been granted thumbs up are a step in the right direction, which will result in higher disposable incomes for individual taxpayers.
However, if one is to compare the DTC provisions now versus the DTC tabled in August 2009, there are stark differences, resulting in obvious disappointments.
Take for example tax slabs, in the first DTC draft, the government had proposed a substantial widening of the tax base.
It had suggested imposing 10% tax on income of Rs 1.
6 lakh-Rs 10 lakh, 20% on income of Rs 10 lakh-25 lakh and 30% beyond Rs 25 lakh in a year, which on a sad note, as mentioned above has now been significantly toned down.
Conclusion Maximum that anyone can gain from this proposal in terms of savings on the tax burden compared with the present levels is Rs 26,000 p.
a.
(assuming a woman taxpayer earning above Rs 10 lakhs) which is way below from the Rs 2.
2 lakh that the same person could have saved if the original DTC proposal were implemented.
The idea is to invest this Rs 26,000 or whatever amount that ends up with individual taxpayers' judiciously, especially, considering the fact that inflation continues to erode the purchasing power of a common man.
The DTC Bill will now be introduced in Parliament and will be forwarded to a standing committee, which will give its suggestion on various aspects before it is introduced in next year's budget.
In what could be termed as a relief, the cabinet on Thursday approved the Direct Tax Code (DTC), which will leave more money in the hands of the common man.
The Finance Minister has expressed hope that the new tax regime will 'provide predictability' to which the tax experts added that the new tax structure will bring significant benefits to taxpayers across the slabs.
What you get now While retaining the current tax rates, the government has decided to widen the three-tier slab structure, with the lowest rate of 10% for Rs 2-5 lakhs taxable income, 20% for Rs 5-10 lakhs and 30% for Rs 10 lakhs and above.
The current tax slabs look like this - Rs 1.
6-5 lakhs, Rs 5-8 lakhs and Rs 8 lakhs and above.
For women and senior citizens the tax exemption limit has been upped to Rs 2.
5 lakh.
In the current regime there were no taxes for women who earned Rs 1.
90 lakh or les per annum and senior citizens who earned Rs 2.
4 lakh or less.
On a positive note, it was decided to do away with EET regime - the most contentious of all the clauses, and adopt EEE.
What that means is, withdrawal from provident funds will not be taxed, as the original DTC in last August had proposed to do.
Other freebies in the new DTC ratified by the cabinet include - a) Deductions from taxable income will be available for interest on housing loans up to Rs 1.
5 lakh p.
a.
(same as earlier) and b) On payments into provident funds and similar superannuation schemes up to Rs 1 lakh (same as earlier).
c) As well as a deduction of up to Rs 50,000 for life insurance and health insurance premiums or tuition fees (earlier limit was Rs 20,000).
What was promised earlier...
The provisions that have been granted thumbs up are a step in the right direction, which will result in higher disposable incomes for individual taxpayers.
However, if one is to compare the DTC provisions now versus the DTC tabled in August 2009, there are stark differences, resulting in obvious disappointments.
Take for example tax slabs, in the first DTC draft, the government had proposed a substantial widening of the tax base.
It had suggested imposing 10% tax on income of Rs 1.
6 lakh-Rs 10 lakh, 20% on income of Rs 10 lakh-25 lakh and 30% beyond Rs 25 lakh in a year, which on a sad note, as mentioned above has now been significantly toned down.
Conclusion Maximum that anyone can gain from this proposal in terms of savings on the tax burden compared with the present levels is Rs 26,000 p.
a.
(assuming a woman taxpayer earning above Rs 10 lakhs) which is way below from the Rs 2.
2 lakh that the same person could have saved if the original DTC proposal were implemented.
The idea is to invest this Rs 26,000 or whatever amount that ends up with individual taxpayers' judiciously, especially, considering the fact that inflation continues to erode the purchasing power of a common man.
The DTC Bill will now be introduced in Parliament and will be forwarded to a standing committee, which will give its suggestion on various aspects before it is introduced in next year's budget.
Source...