Small taxpayers, worried over the disproportionate burden on them, can cheer. The parliamentary standing committee on finance is likely to pitch for 50% increase in the exemption limit for savings to R1.5 lakh in the proposed Direct Taxes Code (DTC). It has also proposed a widening of the tax slabs, which will benefit taxpayers across income levels.
According to draft report, the committee found that the ministry’s proposals of R1 lakh exemption limit in DTC Bill (which is also the present level) is inadequate, considering the social security needs and the need to promote long-term savings.
Besides, the panel has also pitched for broadening the deduction proposed in DTC for expenses incurred on life insurance, health insurance and fee paid of children from R50,000 to R1 lakh so that ?expenses are covered in a reasonable manner.? This means that as opposed to a total exemption of R1.5 lakh proposed in the DTC Bill for various savings and R1.2 lakh exemption (including the R20,000 for infrastructure bonds) currently allowed under the Income-tax Act, the panel has favoured a total exemption of R2.5 lakh. ?This will benefit small taxpayers immensely,? said PwC tax partner Rahul Garg.
?The committee further believes that since higher education, particularly professional education has become extraordinarily expensive for ordinary citizens, similar additional deduction to the tune of R25,000 may be permitted specially for this purpose over and above the deduction,? a source said.
The panel headed by Yashwant Sinha, is also likely to recommend that income up to R3 lakh ought not to be taxed, as compared to R2 lakh proposed in the DTC Bill. As per the panel?s draft report, annual income up to R3 lakh would attract no tax, income between R3-10 lakh will be taxed at 10%, R10-20 lakh, at 20% above R20 lakh, 30%. Currently, income up to R1.8 lakh is exempt, tax is levied at 10% on income between R1.8 lakh and R5 lakh, 20% on R5-8 lakh and 30% above R8 lakh.
