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FM Rejigs Tax Brackets

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Disappointing a large section of income tax payers in the country, Pranab Mukherjee made a small raise in the exemption limit in his Budget speech.

The Finance Minister announced raising the tax exemption limit from the curent level of Rs 1.8 lakh to Rs 2 lakh in the Union Budget on Friday. For income up to Rs 2 lakh, the tax will now be nill. For those with an income between Rs 2 and 5 lakh, the tax rate would be 10 per cent. For income between Rs 5-10 lakh the tax bracket will be 20 per cent. Income above Rs 10 lakh will now come under the 30 per cent tax bracket.

The Finance Minister also announced the introduction of DTC tax rates while corporate tax rates were left unchanged. Savings accounts will now

get Rs 10,000 tax deduction for interest earned.The Parliamentary standing committee on finance had recommended an increase in basic tax exemption limit to Rs 3 lakh and another Rs 3.20 lakh rebate for eligible investments and spending in its report on the direct taxes code, or DTC. The Direct Taxes Code Bill had proposed the basic exemption limit of Rs 2 lakh.

The senior BJP leader Yashwant Sinha headed panel that looked into the bill had also asked the government to continue with higher exemption limit for women. The panel had suggested retaining the three-slab structure of 10 per cent, 20 per cent and 30 per cent for personal income tax.

The exemption limit for the senior citizens between 60 and 80 years of age will be Rs 2.50 lakh; 10 per cent will be levied on income between Rs 2.5-5 lakh, 20 per cent between Rs 5-10 lakh and 30 per cent above Rs 10 lakh.