New Delhi : The Government on Aug 30 tabled the much-awaited Direct Taxes Code bill (DTC) in the Lok Sabha which proposed to raise the exemption limit on income tax from the current Rs 1.6 lakh to Rs two lakh.

People earning more than Rs 10 lakh a year may save up to Rs 41,040 in income tax, if slabs proposed by the Direct Taxes Code (DTC) bill come into effect, experts said.

The bill, introduced by Finance Minister Pranab Mukherjee, seeks to widen tax slabs to levy 10 per cent rate on income between Rs 2 lakh and 5 lakh, 20 per cent on Rs 5-10 lakh and 30 per cent above Rs 10 lakh.

For senior citizens, tax exemption is sought to be raised to Rs 2.5 lakh from Rs 2.40 lakh. Currently, income from Rs 1.6-5 lakh attracts 10 per cent tax; from Rs 5-8 lakh, 20 per cent and beyond Rs 8 lakh, 30 per cent.

The proposed tax slabs are much lower than originally suggested in the draft DTC bill -- 10 per cent for Rs 1.6 lakh to Rs 10 lakh, 20 per cent from Rs 10-25 lakh and 30 per cent for income above Rs 30 lakh.

The bill seeks to fix corporate tax at the current 30 per cent but without surcharge and cess. With surcharge and cess, the current tax liability on corporates comes to over 33 per cent.

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.