Discussion Paper on Direct Tax Code
CHAPTER XVI
RATES OF INCOME TAX
16.1 Tax rates are determined by the size of the tax base; if the tax base is higher, the tax rates can be lower.For the purposes of this Discussion Paper, the tax rates provided are such rates which are expected to yield the existing level of revenues with the revised comprehensive tax base proposed in this Code.
16.2 The rates of taxes are provided in the First Schedule to provide stability to the income tax regime.
16.3 The new tax rate for individual taxpayers can be substantially liberalized to levels indicated below:-
(I) In the case of every individual, other than women and senior citizens, -
| (1) where the total income does not exceed Rs.1,60,000 | Nil; |
| (2) where the total income exceeds Rs.1,60,000 but does not exceed Rs.10,00,000 | 10 per cent of the amount by which the total income exceeds Rs.1,60,000; |
| (3) where the total income exceeds Rs.10,00,000 but does not exceed Rs.25,00,000 | Rs.84,000 plus 20 per cent of the amount by which the total income exceeds Rs. 10,00,000; |
| (4) where the total income exceeds Rs.25,00,000 | Rs.3,84,000 plus 30 per cent of the amount by which the total income exceeds Rs.25,00,000; |
(II) In the case of woman below the age of sixty-five years at any time during the financial year,-
| (1) where the total income does not exceed Rs.1,90,000 | Nil; |
| (2) where the total income exceeds Rs.1,90,000 but does not exceed Rs.10,00,000 | 10 per cent of the amount by which the total income exceeds Rs.1,90,000; |
| (3) where the total income exceeds Rs.10,00,000 but does not exceed Rs.25,00,000 | Rs.81,000 plus 20 per cent of the amount by which the total income exceeds Rs. 10,00,000; |
| (4) where the total income exceeds Rs.25,00,000 | Rs.3,81,000 plus 30 per cent of the amount by which the total income exceeds Rs.25,00,000; |
(III) In the case of senior citizens,-
| (1) where the total income does not exceed Rs.2,40,000 | Nil; |
| (2) where the total income exceeds Rs.2,40,000 but does not exceed Rs.10,00,000 | 10 per cent of the amount by which the total income exceeds Rs.2,40,000; |
| (3) where the total income exceeds Rs.10,00,000 but does not exceed Rs.25,00,000 | Rs.76,000 plus 20 per cent of the amount by which the total income exceeds Rs. 10,00,000; |
| (4) where the total income exceeds Rs.25,00,000 | Rs.3,76,000 plus 30 per cent of the amount by which the total income exceeds Rs.25,00,000; |
16.4 Similarly, the tax rate for companies (both domestic and foreign) can be substantially reduced to a uniform rate of 25 per cent. However, foreign companies would be required to supplement their corporate tax liability by a branch profits tax of 15 per cent. on branch profits (that is, total income, as reduced by the corporate tax).The rates of tax in all other cases can continue at the existing levels.
16.5 However, the Government may consider calibrating the rates of taxes in the light of the responses and comments received on the scope of the tax base discussed in this Paper.