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Direct Tax Code: Panel suggests peak income tax rate of 20%, says report

The DTC panel has suggested three tax brackets at 5 percent, 10 percent and 20 percent, the last one being the highest.

August 27, 2019 / 06:49 PM IST

The panel on Direct Tax Code (DTC) has suggested a cut in personal income tax rates with revised of 5 percent, 10 percent and 20 percent, ET Now reported August 26.

Currently, personal income is taxed at 5 percent for income between Rs 2.5 to Rs 5 lakh, at 20 percent for income between Rs 5 lakh and Rs 10 lakh, and 30 percent for an income of over Rs 10 lakh.

Lowering the personal income tax slabs could hit the fiscal by up to 30 basis points, with a loss in revenue for the next two to three years. However, a higher tax buoyancy due to greater compliance could be seen in about three years, the panel added.

The government-constituted DTC task force submitted its report to Finance Minister Nirmala Sitharaman on August 19. The new tax code is aimed at simplifying the rather complex tax laws with fewer slabs and exemptions.

Other recommendations of the DTC panel include the abolition of the dividend distribution tax (DDT), which it suggests must be treated as normal income. The panel said companies should be taxed on dividend income not shared with shareholders, adding that DDT leads to double taxation.


Dividend distribution tax is the tax levied on a company paying a dividend to its shareholders. Ideally, this income should be subject to income tax, but I-T laws in India provide for an exemption from taxation of the dividend income received from Indian companies.

The panel also recommends keeping the long-term capital gains (LTCG) tax, as per the ET Now report. All capital gains, it recommends, must be classified into three categories: financial equity, financial others and non-financial.
Moneycontrol News
first published: Aug 27, 2019 06:49 pm

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