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The Union Cabinet on Thursday approved the DTC Bill to simplify the country's archaic direct tax laws. The government will now seek approval on Monday from parliament where the bill is expected to go through as the measure enjoys broad political support.
The Union Cabinet on Thursday approved the Direct Taxes Code (DTC) Bill to simplify the country's archaic direct tax laws. The government will now seek approval on Monday from parliament where the bill is expected to go through as the measure enjoys broad political support. The speaker will here decide to which committee the Bill will go to. It is likely that it will be referred to the standing committee on finance since all matters related to finance go to this committee.
Tax rates, which was learnt to be silent in the draft DTC Bill, have been included in the bill during the cabinet meeting, learns CNBC-TV18.
The proposed tax reform will cut tax rates to bring in more people and companies under the net, phase out profit-linked exemptions for firms and replace them with investment-linked incentives. The corporate tax rate, which currently stands at 33% has been reduced to 30%, including cess and surcharge. The original draft had proposed 25%, but it has been revised upwards.
The basic tax exemption has been set at Rs 2 lakh. The first draft code had proposed Rs 1.6 lakh for all individuals and Rs 20,000 special rebate for women.
Incomes between Rs 2 lakh and Rs 5 lakh will be taxed at 10%, income between Rs 5 lakh and Rs 10 lakh will be taxed at 20% and for income above Rs 10 lakh a tax of 30%. Tax exemption for senior citizens will be Rs 2.5 lakh.
Dividend distribution tax and capital gains tax will remain unchanged. Wealth tax has been set at 1% above Rs 1 crore, while Minimum Alternate Tax or MAT has been proposed at 20% on book profits.
Speaking to reporters after the cabinet meeting, Finance Minister Pranab Mukherjee said he would now introduce the Bill in the Lok Sabha. "After being introduced in the Lok Sabha it will go to the appropriate committee and after getting their recommendations it will be finally placed before the House for its approval."
Mukherjee said, "The DTC will provide predictibility. We have addressed all the concerns of stakeholders. The rates will be part of the schedule." He added that the direct tax rates will not be part of the Finance Act for now.
Revenue Secretary Sunil Mitra is hopeful that the direct tax code will be implemented from April 2011. "We hope to table the Bll in parliament on Monday," Mitra added.
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