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Tax code proposes 10% tax on Rs 10 lakh income.

The government introduced a new direct tax code that seeks to simplify the tax regime in India. This was a much-awaited proposal as the government currently computes taxes based on the Income Tax Act 1961.

The main proposals of the new code are as follows:

1 Slash income tax rates
2 Most exemptions to go
3 Interest on savings to be taxed
4 Up to Rs 1.6 lakh: No tax
5 10 per cent tax for Rs 10 lakh income (Rs 1.2 lakh in hand)
6 20 per cent tax for Rs 25 lakh income (Rs 2.60 lakh more in hand)
7 30 per cent tax for income over Rs 25 lakh
8 To raise deduction limits for savings upto Rs 3,00,000
9 Corporate Tax: Down from 30 per cent to 25 per cent
10 Wealth tax to be levied for wealth above Rs 50 crore

Releasing the code that proposes to consolidate and amend the law relating to all direct taxes, Mr. Mukherjee expressed the hope that it would eventually pave the way for a single unified taxpayer reporting system and meet the aspirations of the young and professionally mobile population.

Income between Rs 10 lakh and Rs 25 lakh would be taxed at the rate of 20 per cent and earnings thereafter would attract a rate of 30 per cent, as per the draft of the new Direct Taxes Code which is aimed at radical direct tax reforms. At present, 20 per cent rate is imposed on income between Rs 3 lakh and Rs 5 lakh. Income beyond Rs 5 lakh attracts 30 per cent tax.

The new code was aimed at eliminating the scope of litigation as far as possible, Mukherjee said, adding that the government would have informed discussions with stakeholders on the tax code.