Tax reforms initiated

[Thanks to Beyond Basics for the news]

Direct Taxes Code Discussion

New tax code: Pay 10% tax on Rs 10-lakh salary
will ultimately replace the over
four-decades old Income Tax Act and bring all other direct taxes like wealth
tax under its purview

Key proposals:
Tax deduction limit on savings to be hiked to Rs 3 lakh (Rs 300,000)
Income tax slabs proposed to be changed; highest tax rate of 30% for individuals to be applicable for income over Rs 25 lakh (Rs 2.5 million)
Security transaction tax to be abolished
Effective corporate tax rate at 25 %
To scrap long, short-term capital gains distinction
Business losses can be carried forward indefinitely
No tax deduction on interest payable on any govt security
Base year for calculation of cap gains tax moved to April 2000
Wealth tax liability to be discharged by payment of pre-paid taxes
Income from certain transfers not be treated as capital gains

Proposals for businesses:
Taxation of all non profit organisations rationalised
Profits of non-life insurance business to be disclosed annually
Govt may enter overseas agreements for double taxation avoidance
No tax deduction on interest payable to banking cos, insurers

While the code proposes abolition of the controversial STT, it also suggests reintroduction of tax on long term capital gains on securities trading

Other links:
1. FT_com - Asia-Pacific - India plans to overhaul tax system
2. India to Cut Corporate Tax Rates, Broaden Base to Raise Revenue - Bloomberg_com