Indian Finance Minister released the draft of Direct Tax Code 2009, which is expected to be effective from 1 April 2011, for public discussions on 20 August 2009. New Code shall replace India's antiquated Income Tax Act, 1961. It is a major step in the direction of much awaited tax reforms in India and aims to simplify the entire regime of taxation radically.
All the direct taxes such as income, wealth, and dividend distribution are covered under one uniform Direct Tax Code in line with other countries like USA, UK and Germany. Unlike the previous Income Tax Act, 1961, the language of the new code is very much simple, making it easier for ordinary persons to understand the provisions of Income Tax.
At present, the rates of direct taxes are declared every year while presenting the Annual Budget and Finance Act in the month of February. However, in the Direct Tax Code, the rates have already been prescribed in the various schedules and thus it has done away with the need for an annual Finance Bill. From 1 April 2011, when the new code will come into effect, the changes in the tax rates, if any, will have to be done through appropriate Amendment Bills.
Taxation Pundits are busy analysing the New Code and submitting their suggestions to the Finance Ministry. Keeping aside the expert views, let's see what are the proposed Income Tax rates for the Resident Individuals.
With the new income tax slabs, people in the higher income slab will be greatly benefited. Resident Indians who are paying tax @ 30% on gross income of more than 800,000 (as per budget 2010) will now pay tax @ 10% from 1 April 2011. Refer the rates given below to know the exact rates. Exemption limit for deductions from Income (tax incentives for savings) has been raised to 300,000 as against the present limit of Rs.100,000 under section 80C. With the widening of tax slabs, average Indians will have more disposable income and therefore it will drive the consumption and the overall economy. Please note that the new rates are likely to be implemented with effect from Financial Year 2011-2012 once the proposed Direct Tax Code 2009 is enacted in the Parliament.
Proposed Income Tax Slabs for Resident Individuals and HUF as per the Direct Tax Code 2009, likely to be effective from 1 April 2011
- Taxable income up to 160,000 for men, up to 190,000 for women and up to 240,000 for senior citizens (resident individuals of 65 years or above): Tax Rate NIL
- Taxable income 160,001 - 1,000,000: Tax Rate 10%
- Taxable income 1,000,001 - 2,500,000: Tax Rate 20%
- Taxable income 2,500,001 upwards: Tax Rate 30%
- Taxable income up to 160,000 for men, up to 190,000 for women and up to 240,000 for senior citizens (resident individuals of 65 years or above): Tax Rate NIL
- Taxable income 160,001 - 500,000: Tax Rate 10%
- Taxable income 500,001 - 800,000: Tax Rate 20%
- Taxable income 800,001 upwards: Tax Rate 30%
The Author is a Techno-Commercial Consultant and Freelance Content Writer. Get more info on Financial Awareness Portal Also visit Financial Training
Article Source: http://EzineArticles.com/?expert=Dhrupad_Buch
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