The Narendra Modi government at the Centre can provide significant relaxation in income tax slabs. The Committee on Direct Tax Code has suggested decreasing the income tax load on the middle class, and the Modi government may acknowledge it at the most immediate. A record has been presented to the Finance Minister. If these recommendations apply, the tax burden on the middle class may be decreased to half. The Committee on Direct Taxes Code (DTC) has also suggested changes in personal income tax rates to reduce tax evasion. In the case of individual income tax rates, the committee has advised three slabs of 5, 10, and 20 percent, while income tax is currently charged at the rate of 5, 20, and 30 percent.
According to this proposal, there is no tax up to 2.5 lakh, while only 10% of income tax has been suggested up to 10 lakh. According to this, 20% income tax has been recommended from 10 to 20 lakh per annum, while 20 to 2 crore 30% income tax has been promoted. Income tax is suggested above 2 crore annual earnings. The task force's proposal on income tax has placed a particular focus on the middle class. It has raised the rebate limit in income tax to Rs 6.25 lakh. The rebate limit in income tax is now Rs 5 lakh. The income tax exemption limit can remain at Rs 2.5 lakh. The committee has also recommended complete removal of Divisional Distribution Tax (DDT) and Minimum Alternative Tax (MAT) for corporates. The Task Force believes that the current income tax exemption, its rates, and slabs are not commensurate with the prevailing economic conditions. Taxpayers with a yearly income of less than 55 lakh can be given a significant relief.
The committee said the change in the tax slab will affect the government's income for a few years. But in the long last time, it will see the benefit. The committee has also suggested to the government to abolish the distribution tax. The report submitted to Finance Minister Nirmala Sitharaman also suggested scrapping of the Dividend Distribution Tax (DDT) and maintaining the Long Term Capital Games Tax (LTCG) and Securities Transaction Tax (STT). Indian companies have to pay a distribution tax of 15 percent on the total deposit announced or settled in a financial year. It also charges a surcharge of 12 percent and an education cess of 3%.
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