NEW DELHI: The Union government on Monday introduced Direct Taxes Code (DTC), offering much lower benefits than in the original proposal that seeks to increase tax exemption on income from ` 1.6 lakh to ` 2 lakh and fix the corporate tax at a flat 30 per cent.

As per the Bill, income from ` 2-5 lakh will be taxed at 10 per cent; ` 5-10 lakh at 20 per cent and 30 per cent thereafter.

The changes, when they take effect, will help save up to ` 41,040 for people earning more than ` 10 lakh a year.

The exemption on savings as also payment of interest up to ` 1.5 lakh on housing loans have been retained in the proposed DTC Bill.

The Union Finance Minister, Mr Pranab Mukherjee tabled the Bill in the Lok Sabha and it has been referred to select committee of Parliament for scrutiny.

Similarly, the exemption limit for senior citizens is sought to be raised marginally to ` 2.5 lakh from ` 2.40 lakh now. Currently, income from
` 1.6-5 lakh attracts 10 per cent tax; from ` 5-8 lakh 20 per cent and beyond ` 8 lakh 30 per cent. The proposed tax slabs are much lower than originally suggested in the draft DTC bill -- 10 per cent for ` 1.6 lakh to
` 10 lakh, 20 per cent from ` 10-25 lakh and 30 per cent for income above
` 30 lakh.

According to estimates, an individual tax payer earning more than Rs 10 lakh would save up to Rs 41,040 annually.

The legislation also proposes to increase MAT from 18 per cent to 20 per cent of book profit of a company. It seeks to levy dividend distribution tax at 15 per cent.

When enacted, DTC will replace archaic Income Tax Act.