INCOME TAX LIMIT TO BE HIKED TO RS. 2 LAKH

Tax ceiling for women, senior citizens to be raised to Rs. 2.5 lakh
New Delhi, Aug. 28 (JP) - The 50-year-old Income Tax Act with its many layers of incomprehensible laws and clauses will be revamped with the new streamlined Direct Taxes Code (DTC) that will come into force in the next Finance year.

The new tax code is expected to widen the tax base, put an end to unnecessary exemptions, moderate tax rates and finally add to the government’s revenues.

The DTC Bill, which has been approved by the Union Cabinet, will be placed before the Parliament on Monday.

The new tax slabs proposed in the DTC will raise the exemption limit to Rs. 2 lakh per annum against the current Rs. 1.6 lakh. For women and senior citizens, the exemption limit would be Rs. 2.5 lakh per annum.

Under the present IT Act, women have to pay a tax on an income of Rs. 1.9 lakh per annum or more while senior citizens have to pay a tax on income of Rs. 2.4 lakh.

A person earning Rs.10 lakh per annum would save Rs. 21,540 additionally each year when compared to the existing tax regime.

Similarly, women too stand to gain on the same income of Rs. 10 lakh per annum, as they will be saving around Rs. 23,450 while senior citizens (over 65 years) will save an extra Rs. 18,300 more.

Will companies hit MAT?
The DTC Bill, which will be vetted by the Parliament on Monday also seeks to impose Minimum Alternate Tax (MAT) at 20 per cent of the book profit, compared to 18 per cent at present. The corporate tax rate has come down from 40 per cent in 2000 to 33.22 per cent currently while MAT has inched upwards from 8.5 per cent to 19.93 per cent .

Meanwhile, Finance Ministry officials exuded confidence that the Bill will come into force by the deadline of April 1, 2011.