The committee has suggested increasing the income tax exemption limit to Rs 3 lakh a year, against Rs 2 lakh proposed in the Bill. The threshold now is Rs 1.80 lakh a year.
The committee, chaired by Bharatiya Janata Party senior functionary and former finance minister Yashwant Sinha, wanted a 10 per cent rate to kick in for annual income of Rs 3-10 lakh, according to sources. The Bill proposes this rate to be imposed on a slab of Rs 2-5 lakh. The panel also recommended that 20 per cent income tax rate be paid by those earning Rs 10-20 lakh a year. This slab was proposed to be Rs 5-8 lakh in the Bill. The committee wanted the government to impose a peak rate of 30 per cent on annual income above Rs 20 lakh, as against above Rs 10 lakh sought in the Bill.
Key recommendations of the Parliament Standing Committee on Finance
- Raise annual income limit for I-T from Rs 1.8 lakh to Rs 3 lakh
- 10% I-T on annual income beyond Rs 3 lakh and up to Rs 10 lakh
- 20% on annual income beyond Rs 10 lakh and up to Rs 20 lakh
- 30% on annual income over Rs 20 lakh
- Exemption up to Rs 1.5 lakh for social security contributions
- Exempt expenses on professional studies or education up to Rs 50,000 a year
- Increase exemption limit on long-term savings from Rs 1 lakh a year to Rs 1.5 lakh
- Annual contribution up to Rs 1 lakh for medical insurance should also be exempted, besides Rs 50,000 for dependent parents
The committee also suggested substantial changes in tax exemptions given to long-term savings, medical insurance and social security contributions. It wanted the government to increase long-term savings limit for the purpose of exemption from income-tax to Rs 1.5 lakh from Rs one lakh. Besides, it recommended that contribution to social security such as pension be exempted up to Rs 1.5 lakh a year; medical insurance up to Rs one lakh; up to Rs 50,000 medical insurance for dependent parents; Rs 50,000 for professional studies and education be exempted from income tax, the panel has said.
The panel did not suggest any changes in the corporate tax rates.
The panel wanted the government to cautiously implement the General Anti-Avoidance Rules. These provisions, contained in the Bill, are aimed at authorising the tax department to demand tax in situations where the main motive of a transaction is to get a tax advantage.
Income Tax Ready Reckoner for Financial year 2011-12 is available here for download
Income Tax Ready Reckoner for Financial year 2011-12 is available here for download
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