The new tax slabs proposed in the Direct Taxes Code (DTC) may allow you to save an additional Rs 7,660 extra a year compared to the current tax regime if you earn Rs 5 lakh per annum. The extra benefit of DTC for women with the same income would be a little bigger at Rs 9,570 while senior citizens will save an additional Rs 4,420.
The new slabs proposed in the DTC Bill cleared by the Cabinet on Thursday proposes to raise the basic exemption limit to Rs 2 lakh per annum against the current Rs 1.6 lakh. It proposes income between Rs 2 lakh and Rs 5 lakh to be taxed at 10%, between Rs 5 lakh and Rs 10 lakh at 20% and beyond Rs 10 lakh at 30%.
For women and senior citizens, the exemption limit would be Rs 2.5 lakh per annum. Currently, women have to pay tax on income of Rs 1.9 lakh per annum or more and senior citizens on income of Rs 2.4 lakh or more.
Similarly, a person earning Rs 10 lakh per annum would save Rs 21,540 additionally each year when compared to the current tax slabs. In this case too women would benefit the most saving an extra amount of Rs 23,450 while people above the age of 65 years would save Rs 18,300 more.
Of course, these calculations are on the taxable income without the savings, as it is yet to be known what amount of savings deduction would be allowed. Currently, savings up to Rs 1.2 lakh is exempt. The DTC draft had proposed Rs 1.5 lakh of savings as exempt.
Meanwhile, someone with an income of Rs 15 lakh each year will save the maximum of Rs 41,000 additionally, women Rs 42,950 and senior citizen only Rs 37,800 once the new tax code slabs kick in.
The DTC is aimed at lowering the tax burden on people while removing most exemptions. The revised discussion paper released in June this year proposed to restore some of the exemptions like the one available for interest on housing loans that the original draft sought to scrap.
Experts feel the the new proposed tax slabs have taken away the significant tax savings as compared to the slabs indicated in the original DTC.
?Price seems to be too big for the relief proposed in the revised discussion paper in the form of extending EEE status to retirement schemes, not taxing employer?s contribution to PF, superannuation funds etc. In the current inflationary environment, these new proposed tax slabs would hardly provide any relief to the existing taxpayers,? said Kuldip Kumar, executive director, PricewaterhouseCoopers.
?On a standalone basis, the raising of the threshold limit is a welcome measure, however, one still needs to see the other related provisions to properly assess the overall impact,? said Amitabh Singh, tax partner, Ernst & Young.