House panel for raising income tax exemption ceiling

Parliament's standing committee on finance has proposed several changes to the new direct taxes code (DTC) bill proposed by the government, including raising the income tax limit to Rs3 lakh from the Rs2 lakh proposed in the bill, and exempting assese0es with annual income of up to Rs5 lakh from having to file tax returns.
 
Another important recommendation of the committee, headed by former finance minister Yashwant Sinha of the Bharatiya Janata Party, is likely to be indexing income tax rates to inflation to allow for an automatic adjustment of rates. This could do away with the need to announce tax rates in the annual budget, apart from being a logical step.

The committee is to meet today to finalise its recommendations, but most of these have already been accessed by sections of the media through various sources.

The committee wants a 10-per cent rate to be standardised for annual income of Rs3-10 lakh, according to reports. The government's DTC bill proposes this rate for the lower Rs2-5 lakh slab.

Similarly, the draft report recommends a 20-per cent income tax rate be paid by those earning income of Rs10-20 lakh a year, rather than the Rs5-8 lakh in the bill.

Three crore assesses are estimated to be benefited from not having to file personal tax returns if the committee's view of a Rs5 lakh ceiling is accepted.

The DTC is one of the few reforms proposed by the United Progressive Alliance government that is generally expected to sail through Parliament in the upcoming budget session, particularly as it does not require an amendment of the Constitution.