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| DTC to raise income tax base: Revenue Secy |
| Press Trust of India / New Delhi Aug 31, 2010, 19:54 IST |
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The government is confident the proposed Direct Taxes Code (DTC) will increase the income tax base, which currently stands at around 3.25 crore, as well as boost economic growth and equity.
"We do hope that tax base will widen... Minimum exemptions will lead to higher tax-GDP ratio," Revenue Secretary Sunil Mitra said here.
However, he said widening of the tax base is not specific to the DTC, the Bill on which was tabled in the Lok Sabha yesterday.
"Widening of tax base has been a tax policy," he said, adding that the DTC proposals will lead to greater equity as well as higher economic growth because of the improved tax-GDP ratio.
The direct tax-GDP ratio increased from 2.97 per cent at the start of this decade to 6.45 per cent in 2009-10.
The government plans to roll out the new direct tax regime from April 1, 2012.
The proposed increase in exemption limits in the DTC Bill will benefit an overwhelming 96 per cent of taxpayers, who earn less than Rs 5 lakh a year.
The DTC Bill, which proposes to exempt income up to Rs 2 lakh from payment of income tax, compared to the existing limit of Rs 1.6 lakh, was introduced by Finance Minister Pranab Mukherjee in the Lok Sabha on Monday.
Mitra had earlier said that 95.75 per cent of India's 3.25 crore taxpayers are in the income slab of Rs 1 lakh to Rs 5 lakh. They pay around 30 per cent of our total taxes.
"The slab of Rs 8 lakh and above accounts for 2.2 per cent of our taxpayers, but they pay 60 per cent of the taxes. That leaves 10 per cent which is in the Rs 5 lakh to Rs 8 lakh (bracket)," he had said.
According to the Bill, annual income from Rs 2-5 lakh is likely to attract tax at the rate of 10 per cent, while the Rs 5-10 lakh bracket will be taxed at 20 per cent and income above Rs 10 lakh at 30 per cent.
At present, income between Rs 1.60 lakh and Rs 5 lakh attracts 10 per cent tax, while the rate is 20 per cent for the Rs 5-8 lakh bracket and 30 per cent for above Rs 8 lakh.
People earning more than Rs 10 lakh a year may save up to Rs 41,040 in income tax, if the slabs proposed by the DTC Bill come into effect, according to experts.
Similarly, the tax burden would reduce by Rs 21,540 for those earning an annual income between Rs 5 lakh and Rs 10 lakh, while those making Rs 2 lakh to Rs 5 lakh could be richer by Rs 7,660.
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