The Finance Ministry has rejected a Parliamentary Standing Committee's recommendation to raise the Income Tax exemption limit to Rs 300,000 and to adjust other slabs saying that it will lead to an annual loss of Rs 60,000 crore (Rs 600 billion) to the exchequer.
It has, however, decided to reduce the age for tax exemption for senior citizens to 60 years from 65 years.
The Committee headed by senior BJP leader Yashwant Sinha had proposed no tax on income of up to Rs 300,000 per annum; 10 per cent for Rs 300,000-10 lakh (Rs 1 million); 20 per cent, for Rs 10-20 lakh (Rs 1-2 million) and 30 per cent on annual income beyond Rs 20 lakh (Rs 2 million).
"The recommendation is not acceptable as it will result in huge revenue loss.
“The total revenue loss on account of recommended changes in PIT slabs and removal of cess works out to Rs 60,000 crore (Rs 600 billion) approximately," said the proposed Direct Taxes Code - 2013,
The Finance Ministry said the recommendations of the Committee ‘were not in harmony’ with the broad taxation policy and have not been incorporated in the revised Code.
As per the current structure, there is no tax on income of up to Rs 200,000 per annum; 10 per cent on Rs 200,000-500,000; 20 per cent on Rs 500,000-10 lakh (Rs 1 million) and 30 per cent on income beyond Rs 10 lakh (Rs 1 million).
In his Budget speech, Finance Minister P Chidambaram had said that revised Direct Taxes Code was ready and will be placed in public domain for discussions.
It proposes 35 per cent tax rate for individual and Hindu Undivided Family having income exceeding Rs 10 crore (Rs 100 million).
"With a view to maintaining overall progessivity in levy of income tax, the revised Code provides for a fourth slab for individuals, HUFs and artificial judicial persons.
In their case if the total income exceeds Rs 10 crore (Rs 100 million), it is proposed to be taxed at the rate of 35 per cent," the ministry added.