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Direct Tax Code Draft

Direct Tax Code Draft

  • Important Note: This is only a draft.
  • The Government will consider inputs and suggestions received from the public before finalizing the Direct Taxes Code Bill for introduction in Parliament.
  • Government has initiated radical tax reforms through a draft code that aims at moderating Direct Tax and other changes.
  • Direct Taxes Code will ultimately replace over four-decades old Income Tax Act and bring all other direct taxes like wealth tax under its purview.

Highlights of proposed tax code:

  • Tax law in simple and easy to understand language.

• Personal Income tax rates to be slashed substantially.

Up to 10 lacs: 10%
Over 10 lacs: 20%
Over 25 lacs: 30%

• Agricultural income will continue to be included under taxable income only fro rate purposes.

• Wealth tax exemption limit to be raised to 50 crores. To include financial assets like shares.

• Saving limit to be increased from 1 lac to 3 lacs.

• Tax exempt Savings to be taxed at the time of maturity under the Exempt Exempt Tax(EET) system. Savings before 1-4-2011 not to be included under EET.

• Losses to be allowed to be carried forward indefinitely.

• TDS to be deposited in the year of deduction. For last quarter, TDS can be deposited till due date of filing ITR. If TDS not deposited within 2 years from end of year of deduction, expenditure shall be disallowed.

• TDS rates to be reduced in some cases like payment to contractors and rent of machinery to 1%.

• Due dates filing income tax returns:

  • Co’s and other audit cases : Aug.31
  • Others : June 30
  • Revised return or belated return can be filed within 21 months from the end of the financial year.
  • Valuation of perquisites like rent free accommodation to be same in case of all employees whether in government or private sector.
  • Gratuity to be exempt only if invested in a retirement fund.