New Tax Code to Propose Changes in Individual Income Tax Bands
Aug. 13 – The government has released a draft of copy of India’s new tax code for public discussion that proposes changes in income tax rates and maintains income tax exemptions.
The draft is a huge change from existing tax laws because it cuts individual income tax and raises income tax brackets. Income up of to Rs1 million will be taxed only 10 percent while income between Rs1 million and Rs2.5 million will taxed at 20 percent with earnings thereafter taxed at a rate of 30 percent reports The Economic Times.
Currently, income between Rs300,000 and Rs500,000 have a 20 percent tax rate and income beyond Rs 500,000 is taxed 30 percent. When the new tax code is approved it will replace the Income Tax Act of 1961.
Businesses will be happy to hear that the proposal includes a reduction of the corporate tax rate by 5 percent to 25 percent. Foreign companies will also be charged a 25 percent corporate tax rate with another 15 percent tax for branch profits.
“The aim of the direct tax code is better compliance and better realization with likely expansion in the tax base.” Finance minister Pranab Mukherjee told The Times of India. “All direct tax laws have been brought under one umbrella and laid down in a manner that it will eliminate the scope of litigation.”