Under the current I-T slabs, income up to Rs 2.5 lakh is exempt from tax, those earning up to Rs 5 lakh pay 5 per cent, and those earning up to Rs 10 lakh have to pay 20 per cent tax. Those with income above Rs 10 lakh have to pay 30 per cent tax.
From April 1, those with income up to Rs 5 lakh will not have to pay tax, as they have been given tax credits in the interim Budget passed by Parliament. If various investment schemes are also factored in, those with income up to Rs 10 lakh might also escape the tax net in the next financial year.
Sources said with elections round the corner, the government does not want to bring in the long-pending report. The draft report requires a lot of brain-storming to incorporate various economic and political factors.
The finance ministry had appointed the second task force on the DTC after there were disagreements among members in an earlier panel. It was expected to submit its report to the finance ministry on Thursday.
Sources said the panel sought global trends and best practices adopted by developed nations to have a certain and effective legislation.
The DTC structure will focus on robust and calibrated plan for the long term so that people will have more clarity and it also helps to increase the tax base.
The previous United Progressive Alliance (UPA) had made an attempt to reform the age-old taxation system, by introducing DTC. The DTC was aimed at consolidating and integrating all direct tax laws by replacing the Income-Tax Act, 1961, and the Wealth Tax Act, 1957 and rationalising the exemptions.
The old DTC Bill had proposed an annual income tax exemption limit at Rs 2 lakh, and levying 10 per cent tax on income between Rs 2 lakh and Rs 5 lakh, 20 per cent on Rs 5-10 lakh, and 30 per cent for incomes above Rs 10 lakh. The Bill was introduced in 2010. It was then referred to Parliament’s standing committee on finance. After the parliamentary panel’s recommendation, the UPA government, at the fag-end of its tenure, had put the revised draft on the public domain in March, 2014.
The BJP government, too, believes that the I-T Act, which was drafted almost 60 years ago, needs an overhaul, but at the same time it should be in sync with the economic circumstances of the country.
In November 2017, the government had constituted a task force, which was to submit its report within six months.