Direct tax code has more money for you

The government plans to leave a little more money in the hands of the taxpayer, but not too much. On Thursday, the Union Cabinet cleared the new Direct Tax Code (DTC) Bill, which seeks to exempt income of up to Rs 2 lakh per year from income-tax against the current limit of Rs 1.6 lakh annually. For senior citizens, the limit will now be Rs 2.5 lakh.

There has been one other change in the tax slabs — the peak rate of 30 per cent will now kick in from a level of Rs 10 lakh a year against the earlier Rs 8 lakh a year. The Bill will be placed before Parliament on Monday after being cleared by a parliamentary standing committee.

Once passed, the DTC will replace the current Income-Tax Act. If it is passed, the new code should come into effect from April 2011. “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,” said the finance minister, Mr Pranab Mukherjee, after the Cabinet meeting. Corporate tax has been kept at 30 per cent, but there will be no surcharges or cess on it.