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Indian Finance Minister released the draft of Direct Tax Code 2009, which is expected to
be effective from 1 April 2011, for public discussions on 20 August 2009. New Code shall
replace India's antiquated Income Tax Act, 1961. It is a major step in the direction of
much awaited tax reforms in India and aims to simplify the entire regime of taxation
radically.

All the direct taxes such as income, wealth, and dividend distribution are covered under
one uniform Direct Tax Code in line with other countries l ike USA, UK and Germany.
Unlike the previous Income Tax Act, 1961, the language of the new code is very much
simple, making it easier for ordinary persons to understand the provisions of Income
Tax.

At present, the rates of direct taxes are declared every year while presenting the Annual
Budget and Finance Act in the month of February. However, in the Direct Tax Code, the
rates have already been prescribed in the various schedules and thus it has done away
with the need for an annual Finance Bill. From 1 Ap ril 2011, when the new code will
come into effect, the changes in the tax rates, if any, will have to be done through
appropriate Amendment Bills.

Taxation Pundits are busy analysing the New Code and submitting their suggestions to
the Finance Ministry. Keeping aside the expert views, let's see what are the proposed
Income Tax rates for the Resident Individuals.

With the new income tax slabs, people in the higher income slab will be greatly
benefited. Resident Indians who are paying tax @ 30% on gross incom e of more than
800,000 (as per budget 2010) will now pay tax @ 10% from 1 April 2011. Refer the
rates given below to know the exact rates. Exemption limit for deductions from Income
(tax incentives for savings) has been raised to 300,000 as against the pre sent limit of
Rs.100,000 under section 80C. With the widening of tax slabs, average Indians will have
more disposable income and therefore it will drive the consumption and the overall
economy. Please note that the new rates are likely to be implemented with effect from
Financial Year 2011-2012 once the proposed Direct Tax Code 2009 is enacted in the
Parliament.

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ðc Taxable income up to 160,000 for men, up to 190,000 for women and up to

240,000 for senior citizens (resident individuals of 65 years or above): Tax Rate
NIL
ðc Taxable income 160,001 - 1,000,000: Tax Rate 10%
ðc Taxable income 1,000,001 - 2,500,000: Tax Rate 20%
ðc Taxable income 2,500,001 upwards: Tax Rate 30%

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ðc Taxable income up to 160,000 for men, up to 190,000 for women and up to

240,000 for senior citizens (resident individuals of 65 years or above): Tax Rate
NILc
ðc Taxable income 160,001 - 500,000: Tax Rate 10%
ðc Taxable income 500,001 - 800,000: Tax Rate 20%
ðc Taxable income 800,001 upwards: Tax Rate 30%