Common man to have deep pocket with tax leeway
Posted online: 2010-08-28 00:15:36+05:30
New DelhiThe new tax slabs proposed in the Direct Taxes Code (DTC) may allow you to save an additional7,660 extra a year compared to the current tax regime if you earn5 lakh per annum. The extra benefit of DTC for women with the same income would be a little bigger at9,570 while senior citizens will save an additional4,420.
The new slabs proposed in the DTC Bill cleared by the Cabinet on Thursday proposes to raise the basic exemption limit to2 lakh per annum against the current1.6 lakh. It proposes income between2 lakh and5 lakh to be taxed at 10%, between5 lakh and10 lakh at 20% and beyond10 lakh at 30%.
For women and senior citizens, the exemption limit would be2.5 lakh per annum. Currently, women have to pay tax on income of1.9 lakh per annum or more and senior citizens on income of2.4 lakh or more.
Similarly, a person earning10 lakh per annum would save21,540 additionally each year when compared to the current tax slabs. In this case too women would benefit the most saving an extra amount of23,450 while people above the age of 65 years would save18,300 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 to1.2 lakh is exempt. The DTC draft had proposed1.5 lakh of savings as exempt.
Meanwhile, someone with an income of15 lakh each year will save the maximum of41,000 additionally, women42,950 and senior citizen only37,800 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.