The Finance Minister Pranab Mukherjee announced raising the tax exemption limit from the curent level of Rs 1.8 lakh to Rs 2 lakh. For income upto Rs 2 lakh, the tax deduction will now be nill. For those with an income between Rs 2-5 lakh the tax deduction would be 10%.
For income between Rs 5-10 lakh the tax bracket will be 20%. Income above Rs 10 lakh will now come under the 30% tax bracket.
The Finance Minister also announced the introduction of DTC tax rates. Corporate tax rates were left unchanged. Savings accounts will now get Rs 10,000 tax deduction for interest earned.
"I propose to enhance the exemption limit for individual from Rs.1.80 lakh to Rs.2 lakh. I also propose to raise the upper limit of the 20 percent tax slab from Rs.8 lakh to Rs.10 lakh," Mukherjee said.
"This measure will provide a tax relief of Rs.2,000 to every taxpayer of this category," Mukherjee said.
The new tax slab for the coming fiscal will be 10 percent tax for income above Rs.2 lakh and up to Rs.5 lakh, 20 percent for above Rs.5 lakh and up to Rs.10 lakh, and 30 percent for income above Rs.10 lakh.
The Parliamentary standing committee on finance had recommended an increase in basic tax exemption limit to Rs 3 lakh and another Rs 3.20 lakh rebate for eligible investments and spending in its report on the direct taxes code, or DTC. The Direct Taxes Code Bill had proposed the basic exemption limit of Rs 2 lakh.
The senior BJP leader Yashwant Sinha headed panel that looked into the bill had also asked the government to continue with higher exemption limit for women. The panel had suggested retaining the three-slab structure of 10%, 20% and 30% for personal income tax.