The government is reviewing the Income Tax task force report on direct taxes and is likely to implement some of the recommendations in the next budget. If implemented these rejigs in income tax slabs can boost overall capital gains tax and government's revenues to more than Rs. 55,000 crore.
Whereas the existing Income tax rates are 5% plus 4 % cess for individuals earning between Rs 2.5 lakh and Rs. 5 lakh, 20% + 4 % Cess for individuals earning between Rs. 5 lakhs and Rs 10 lakhs, and 30 % + 4 % Cess for individuals earning more than Rs. 10 lakhs.
The task force report further suggests removing re-assessment for those who pay/declare higher income tax for a span of up to six years with a 50 percent penalty along with interest. It has also recommended to wave off surcharge that presently ranges between 15 & 37 percent. The report also mentions limiting the deductions available to individuals for medical and education expenses, provident funds, housing loans, etc. At present, tax-payers can avail a number of deductions in lieu of interest on equity-linked savings schemes, savings in FDs, and insurance. It also recommends the removal of deduction available in lieu of rentals and interests.
The report, however, proposes to keep the Securities Transaction Tax (STT) on equities and also to continue with the existing LTCG tax of 10% on equities worth Rs. 1 lakh held for more than a year. The report also suggests maintaining 15% short term capital gains (STCG) tax on equity assets.