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 earnings up to Rs 10 lakh have to pay 20 per cent. Those with income above Rs 10 lakh have to pay 30 per cent tax.
From April 1, those with income of up to Rs 5 lakh will not have to pay tax, as they have been given tax credits in the interim Budget on February 1. If various investment schemes are also factored in, those with income up to Rs 10 lakh may also escape the tax net in the next financial year.
Earlier, the United Progressive Alliance (UPA) had made an attempt to reform the age-old taxation system by introducing the direct tax code. The code aimed at consolidating and integrating all direct tax laws by replacing the I-T Act, 1961, and the Wealth Tax Act, 1957 while rationalising exemptions.
The old direct tax code Bill had proposed an annual I-T exemption limit of 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 for the proposed tax code 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 public domain in March 2014.
The BJP government, too, believes that the current 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 2014, the Modi government had presented the Budget on July 10. But this year, it is to be seen whether the full Budget is presented before the task force submits its report.
Overhauling the decade-old I-T Act
Finance minister Arun Jaitley took the decision on Friday
The task force earlier got a three-month extension till May 31
The new code will replace the decade-old I-T Act
The BJP govt thinks the new code should be in sync with the economic circumstances of the country