Standing Committee yet to decide Direct Tax Code

A 31-member Standing Committee on Finance led by former Finance Minister Yashwant Sinha has reportedly deferred its final report on 'Direct Tax Code' (DTC) due to differences on some issues.

The final report of Standing Committee would suggest the Finance Ministry to design the new Budget for Financial Year 2012-13. However, it depends upon the ministry to accept or reject the proposals of the committee.

According to media reports, the final report was postponed and it would be prepared after making consent of all members over all issues. Three more meetings will reportedly be convened on February 17, 24 and March 2.

The speculations about Income Tax, which is the part of the DTC, state that the exemption limit will be proposed to increase from current Rs. 1.80 lakh to Rs 3 lakh while immunity in Income Tax File return would be given to those whose income from salary and other sources will be less than Rs.5 lakh.

Moreover, the estimated new tax slab would be: 10% for income between Rs. 3 lakh to 10 lakh; 20% for over Rs. 10 lakh to 20 lakh and 30% for above 30-lakh annual income.

It is also reported that the government is planning to replace the five-decade-old Income-Tax Act, 1961 with a brand new Code. However, this new code will be expectedly introduced from April 1, 2013.

A new formula is also to be introduced that says that income from salary and income from other sources are to be calculated differently.

The committee is also reportedly considering in changes in tax benefits for life insurance products. The DTC's proposals on limiting deductions to premiums that do not exceed a certain percentage of the sum assured may be reviewed as well.