Saturday, August 21, 2010

Indian tax payers eagerly waiting for Direct Tax Code

There have been lot of news and rumour around the direct tax code. The tax payers have been eagerly waiting for DTC and expecting substantial reduction in their tax liability when the direct taxes code, which will replace the 50 year old Income Tax Act, comes into effect from the next fiscal.

The first draft of the direct taxes code had proposed substantial widening of the income tax slabs, but they were only illustrative. The first draft had suggested a 10% tax on income of Rs 1.6 lakh-Rs 10 lakh, 20% on income of Rs 10 lakh-25 lakh and 30% beyond Rs 25 lakh in a year. After this code comes into effect, rates in India will be almost in line with international standards.

At present, annual income of Rs 1.6 lakh- Rs 5 lakh attracts 10 % income tax, Rs 5 lakh- Rs 8 lakh attracts 20% and over Rs 8 lakh faces 30% tax.

As of now, tax payers are keeping their fingers crossed that the lower tax rates will come into effect soon.

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