In order to provide the much needed relief to people, a Parliamentary panel scrutinising the Direct Taxes Code (DTC) Bill has suggested raising the income tax exemption limit to Rs 3 lakh and also hiking deduction on savings to Rs 2.5 lakh.
"The committee has adopted the report. It only needs to dot the i's and cross the t's. The report will be submitted within a week...possible ahead of the (Budget) Session", sources said after the meeting of the Parliamentary Standing Committee on Finance said.
The report, which will pave the way for debate and passage of the DTC Bill by Parliament, has also suggested retaining the corporate tax rate at 30 per cent.
It suggested there should be three tax slabs at 10 per cent, 20 per cent and 30 per cent for personal income tax .
The DTC, which will replace the Income Tax Act, 1961 and modernise the direct tax structure in the country, was referred to the Committee headed by senior BJP leader and former Finance Minister Yashwant Sinha for scrutiny in August 2010.
The government, pending approval of the DTC Bill by Parliament, is likely to introduce some measures concerning taxes in the forthcoming Budget itself to be presented by Finance Minister Pranab Mukherjee in the Lok Sabha on March 16.
The Budget Session of Parliament will begin on March 12 with President Pratibha Patil addressing the joint sitting of Members of the Lok Sabha and the Rajya Sabha.
As regards the income tax exemption limit, the Committee did not favour the suggestions of some members who wanted it to be raised to Rs 5 lakhs. It later reached a consensus on suggesting the limit of Rs 3 lakh, up from Rs 1.8 lakh currently.
The income tax exemption in the original DTC Bill has been proposed at Rs 2 lakh.
At present, income in the bracket of Rs 1.80 lakh -Rs 5 lakh attracts 10 per cent tax, those in Rs 5 lakh -Rs 8 lakh 20 per cent, and above Rs 8 lakh at 30 per cent.
The Committee, sources said, favours raising the limit for the total tax saving deductions, which include investment in provident fund, life insurance, children education and infrastructure bonds, to Rs 2.5 lakh from Rs 1.2 lakh.
At present, investments up to Rs 1 lakh in specified instruments are deducted while calculating the tax liability.
In addition, investments up to Rs 20,000 in infrastructure bonds are also exempted from tax.
Raising the tax exemption and savings deduction limits, sources said, was necessary to compensate people reeling under the impact of high rate of inflation.
Although the inflation has in recent months come down to 7-8 per cent, it had remained near the double-digit mark for most of 2011.
PTI New Delhi March 3, 2012