New Delhi, August 12: The government today initiated radical tax reforms through a draft code that aims at moderating income tax rates, abolishing Securities Transaction Tax and increasing deduction for savings up to Rs three lakh.
Releasing the Direct Taxes Code that will ultimately replace the over four-decades old Income Tax Act and bring all other direct taxes like wealth tax under its purview, Finance Minister Pranab Mukherjee today said if reasonable level of discussion happens on the code, a bill could be placed in the winter session of Parliament.
The code proposes to exempt the general tax payer from paying income tax if his income is Rs 1,60,000 in a year. He would pay just 10 per cent up to Rs 10 lakh, 20 per cent beyond that and Rs 25 lakh and 30 per cent beyond Rs 25 lakh.
Currently, the general income tax payer does not pay tax till Rs 1,60,000 of income in a year. However, he pays 10 per cent tax on income between Rs 1,60,000 and Rs three lakh, 20 per cent between Rs three lakh and Rs five lakh and 30 per cent beyond Rs five lakh.
“We expect to have better compliance and better collection of taxes,” Mukherjee said.
While the code proposes abolition of the controversial STT, it also suggests reintroduction of tax on long term capital gains on securities trading.
Home Minister P Chidambaram, who during his tenure in the Finance Ministry had initiated work on the Code, said that this was a brand new Code written from scratch.
—Agencies