The tax that is levelled directly on your income or in the profit in the case of corporate.

For example Income tax, property tax, capital gain tax.

Income-tax Act, 1961 came into existence w.e.f. 1-4-1962 during second 5 year plan It replaced the Income-tax Act of 1922 Direct Taxes Advisory Committee set up New system for evaluation of work done by Income-tax Officers introduced.

An individual Company Local authorities Hindu undivided families (HUFs), Association of persons Firms Body of individuals

Taxability of individuals is summarized in the table below:STATUS INDIAN INCOME FOREIGN INCOME

Resident and ordinarily resident Resident but not ordinary resident Non-Resident

Taxable Taxable Taxable

Taxable Not Taxable Not Taxable

    

Income from Salary Income from House Property Income from business &profession Capital Gains Income from other sources

    

Income from Salary Income from House Property Income from business &profession Capital Gains Income from other sources

It set to replace income tax act 1961. It is proposed to lower the tax incidence in corporate and individual income. Removal of most exemptions. Capital gains on shares and securities to be taxed as income. Effective corporate tax rate at 30% of book profit

Capital gains on shares and securities to be taxed as income. Effective corporate tax rate at 30% of book profit

Upto Rs 1.6 lakhs no tax 1.6 to 10 lakhs 10% 10 to 25 lakhs 25% 25 lakhs and above 30%

Latest tax slabs Upto 2 lakhs no tax 2 to 5 lakhs 10% 5 to 10 lakhs 20% Above Rs 10 lakhs 30%

Distinction between short term and long term capital gains diluted. Capital gain of the tax payer is added to their total income. Move hinder long term savings as assets held for more than one year are not taxable.

Earlier code proposed that the gross rent to be calculated at a presumptive rate of 6% with reference to the cost of construction or acqusition. New code recommends that the gross rent for taxation will be the actual rent received. Deduction on interest payment on a housing loan subject to a ceiling of Rs 1.5 lakhs.

Tax paid by companies that are enjoying various tax assumptions In the previous code MAT levelled at the rate 2% on the value of gross assets of the company New code proposes a MAT rate of 20% on book profits Big relief to the capital intensive sectors such as infrastructure as they have a large assets base

Earlier code finance minister had decided to tax retirement benefits under provident fund. Now that proposal has been abondoned - new proposal provides for an Exempt-ExemptExempt (E E E) method of taxation For all recognized provident fund Even pure life insurance products and annuity schemes come under exempted category. However withdrawals above 3 lakhs will be taxed

Income earned by FII classified as capital gain to be taxed with EET methods not physical income. This will increase their tax liability. Code says let the foreign firms having a part of business operations in indicator a certain periods could be treated as a resident company liable to tax here in india.

Will curtail tax evasion Bring down effective tax rates at the same time Bring more transparency in the tax structure Increase the government revenues