The Ministry of Finance asks the panel of the direct tax code to review the existing I-T slabs
This suggestion was made when the working group to redraft direct tax legislation met with Finance Minister Arun Jaitley on Wednesday, one day before the scheduled presentation of the draft DTC report.
"The current tax rates are ambiguous in nature, especially the lower slabs. As suggested, we will work to harmonize tax rates, currently prone to interpretation. "We will look for more expert voices and we will weigh the circumstances to incorporate the changes according to the suggestions we have received," said the aforementioned official.
Under current I-T slabs, revenues up to Rs 2.5 lakh are exempt from taxes, those earning up to Rs 5 lakh pay 5 percent and those earning up to Rs 10 lakh have to pay 20 percent tax. Those with incomes above Rs 10 lakh have to pay 30 percent of taxes.
From April 1, those with incomes of up to Rs 5 lakh will not have to pay taxes, since they have been granted tax credits in the Interim Budget approved by the Parliament. If you also include several investment schemes, those with incomes of up to Rs 10 lakh could also escape to the tax network in the next financial year.
The sources said that with the elections just around the corner, the government does not want to present the long pending report. The draft report requires a lot of ideas to incorporate various economic and political factors.
The finance ministry had appointed the second working group on the DTC after there were disagreements among the members in a previous panel. He was expected to present his report to the Ministry of Finance on Thursday.
The sources said that the panel sought global trends and best practices adopted by developed countries to have a certain and effective legislation.
The structure of DTC will focus on a solid and calibrated long-term plan for people to have more clarity and also help increase the tax base.
The previous United Progressive Alliance (UPA) had tried to reform the old tax system by introducing DTC. The DTC aimed to consolidate and integrate all direct tax laws by replacing the Income Tax Act of 1961 and the Property Tax Act of 1957 and the rationalization of exemptions.
The old DTC bill had proposed an annual limit of income tax exemption in Rs 2 lakh, and a 10 percent tax on income between Rs 2 lakh and Rs 5 lakh, 20 percent in Rs 5- 10 lakh and 30 percent for income above Rs 10 lakh. The bill was presented in 2010. It was then forwarded to the permanent finance committee of Parliament. After the recommendation of the parliamentary panel, the UPA government, at the last moment of its mandate, had put the revised draft into the public domain in March 2014.
The BJP government also believes that the I-T Law, which was drafted almost 60 years ago, needs a revision, but at the same time it should be in tune with the economic circumstances of the country.
In November 2017, the government had set up a working group, which was to submit its report within six months.