New Tax Code - Pay 10% income tax up to Rs. 10 Lakh - Dream Come True for the Indian middle Class!

I was pinching myself as I read the report in the "Economic Times" that the Govt. is rationalizing the income tax structure, and reducing the overall tax burden on individuals.

Please read the full article here.

In a nutshell, here's what is proposed for Individuals:

Other highlights:

1. Increase in the tax deduction on savings of Rs 3 lakh and all perks to be added to income for taxation purposes. Currently under section 80C, we get an exemption of Rs. 1Lakh only.
2. For corporates and multinationals there are some tax sops but I leave it out since it doesn't concern individuals as much.
3. The part I didn't like that much is this: With regard to PPF and other pension fund schemes, the code said the government should continue the tax exempt status to withdrawals of amounts accumulated up to March 31, 2011. After this time, it is proposed that the withdrawals from Personal Provident Fund (PPF) be taxed. This is not good news.
   

Folks, please re-read the table above, until it sinks in to you . This is GREAT NEWS for Tax Payers and specially the middle class ones. As smart individuals, we should maximize our contribution to PPF, Pension Plans (e.g. NPS), ULIPs and other tax saving instruments to the tune of Rs. 3 Lakhs!!.

If you plan your taxes wisely, this proposal can result in savings from ranging from a few thousand rupees to a few lakh rupees. That's a lot!!

Note that this is not law yet, and the bill is proposed to be passed during the winter session of the parliament. I hope no one in the parliament dares to challenge such a great Income Tax reform benefiting the Indian public, that is long over due (48 years to be precise).

At a strategic level, this is a huge win for the government, and I'm sure it will help broaden the tax net, reduce the black money circulation.

Kudos to Pranab Mukherjee and P Chidambaram!

Hip hip! Hurray !!