Draft Direct Taxes Code proposes moderate rates


The government on August 12 proposed to tax income up to Rs. 10 lakh at 10 per cent, while under the existing regime this relief is limited to people with an income of Rs. 1.6 lakh to Rs. 3 lakh.

Income between Rs. 10 lakh and Rs. 25 lakh will be taxed at 20 per cent and earnings thereafter will attract a rate of 30 per cent, as per the draft of the new Direct Taxes Code that seeks to improve the efficiency and equity of the tax system by eliminating distortions in the structure, bringing about moderate levels of taxation and expanding the base.

Releasing the code that proposes to consolidate and amend the law relating to all direct taxes income tax, dividend distribution tax, fringe benefit tax and wealth tax and ultimately replace the Income Tax Act of 1961, Union Finance Minister Pranab Mukherjee said that if a reasonable discussion took place on the draft code, a Bill could be placed in the winter session of Parliament.

The draft code proposes a new, substantially liberalised tax rate for individual tax-payers. For example, in the case of every individual other than women and senior citizens, the code does not propose to levy any income tax on a total annual income of up to Rs.1.6 lakh.


The code proposes 10 per cent income tax if the total yearly income exceeds Rs. 1.6 lakh but does not exceed Rs.10 lakh. It proposes two other slabs: where the total income exceeds Rs.10 lakh but does not exceed Rs. 25 lakh and it proposes a tax of Rs. 84,000 plus 20 per cent of the amount by which the total income exceeds Rs.10 lakh; where the total income exceeds Rs. 25 lakh, it proposes Rs. 3.84 lakh plus tax at the rate of 30 per cent of the amount by which the total income exceeds Rs. 25 lakh.

Currently, the general income tax payer does not pay tax up to Rs. 1.6 lakh of income in a year. However, he pays 10 per cent tax on income between Rs. 1.6 lakh and Rs. 3 lakh, 20 per cent between Rs. 3 lakh and Rs. 5 lakh, and 30 per cent beyond Rs. 5 lakh.

We expect to have better compliance and better collection of taxes. The attempt is to simplify the language to enable better comprehension and remove ambiguity to foster voluntary compliance, Mr. Mukherjee said.

Why you should pay for quality journalism - Click to know more

Recommended for you
This article is closed for comments.
Please Email the Editor

Printable version | Jan 23, 2020 9:40:33 PM |

Next Story