New Tax Code to Propose Changes in Individual Income Tax Bands

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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.”

2 Responses

  • Manikandan Raghavan says:

    There is no clarity on the new code for Loss on house property. Most of the salaried citizens are purchased their dream house property by spending 20 Lacs to 30 Lacs during the last five years for tax exemption. In case, the new code is going to disallow the existing act for loss on house property for interest payment to the financial institution, there will be a huge impact in the real estate business in India. I hope this would be good for Indian market, But not faithful to the Employees who had purchased their property only for tax exemption, I believe this would be considered in the new income tax code.

  • balaji says:

    I agree with Manikandan. I have purchased a home loan for 20 Lacs , i am already losing 20 K each month on my take home pay. Now if the IT exemption is off , it makes me afraid of the days to come….. can someone explain what will be the impact on me…

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