In a stunning reform of income tax laws, the Budget 2010 income tax proposals have increased the 10% tax bracket to Rs. 5 lacs.
In a precursor of things to come when the comprehensive Direct Tax Code goes into operation next year, the personal income tax brackets have been drastically liberalized - doubtless, to ensure more compliance. The new threshold are:
1. Upto Rs. 1.6 lacs per year - no tax
2. Rs. 1.6 - 5 lacs per year - 10%
3. Rs. 5 - 8 lacs per year - 20%
4. Higher - 30%
Other steps:
1. Only 2 pages in the IT filing form for individuals
2. More cases can now be appealed against
3. Rs. 20,000 tax exemption for investments in certain investment bonds. This is in addition to the Rs. 1,00,000 already allowed in certain savings instruments.
4. Exemption for contribution to the Central Government Health Scheme (CGHS)