At last, the government has unveiled the draft of a brand new direct tax law, which could replace forty year old Income-Tax Act.
According to the finance minister Pranab Mukherjee, the motive behind the decision is to improve the efficiency and equity of Indian tax system by eliminating distortions in the tax structure, introducing moderate levels of taxation and expanding the tax base.
The new tax code makes radical changes in various areas of taxation, whether corporate and individual. Also, it will bring a uniform pattern for taxation on all long-term savings.
Proposed features
1. The code proposes to exempt income up to Rs 1, 60,000 a year from tax, which is already said in the budget. Also, it is said that income up to Rs 10 lakhs will be taxed at 10%, 10-25 lakhs at 20% and beyond Rs 25 lakhs at 30%. However, at present, there is a 10% tax on income between Rs 1, 60,000 and Rs 3 lakhs, 20% between Rs 3 lakhs and Rs 5 lakhs, and 30% beyond Rs 5 lakhs.
2. The code proposes that gross salary of an individual would also include perquisites such as value of rent-free accommodation, medical reimbursements and leave travel encashment.
3. In the new tax law, salaried persons could not be able to claim tax benefit on interest repayment on housing loans. But, if the house is rented, benefits can be availed.
4. The tax code talks about implementation of EET, which means investors could face tax at the time of withdrawal. Meanwhile, the tax exemption would be available to the PPF (Public Provident Fund) and other pension fund schemes on withdrawals of amounts accumulated up to March 31, 2011.
5. The Code further proposes abolition of STT. But, capital gains on shares and securities have been proposed to be taxed as income.
Economy on a comeback trail with 7.8% industrial growth in June
According to the latest report released by government showed that industrial production was on the revival track and surges to 7.8% growth rate in June, beating forecasts by a wide margin. This figure can be positive news to the market that concerns about the poor monsoon casting a shadow on economic revival.
Manufacturing activities, the worst-affected sector, grew by a whopping 7.3% in June over 6.1% a year ago. The sector comprises about 80% of the index of industrial production (IIP).
The data showed that mining grew by a substantial 15.4% and power was up 8% in June. Also, 12 out of 17 industrial segments during the month recorded positive growth as compared to the corresponding month of the previous year.
Since, the collapse of Lehman Brothers, industry started contracting. In the first quarter, Industrial growth stood at 3.7% against 5.3% a year ago.
Montek Singh Ahluwalia, deputy chairman of Planning Commission said that he always expect the positive trend in industrial growth to continue. However, weak monsoon could have some negative impact on the overall GDP.
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