Your income may rise, for tax purposes
Your income, at least for taxation purposes, is likely to rise in the eyes of the government. The finance ministry is planning to bring in a few more income streams, including earnings currently exempt from tax under double taxation avoidance agreements (DTAAs) with various countries.
Expatriates and locally placed employees of software companies may feel the pinch of a higher tax if the proposal goes through. These changes – in the definition and scope of income – will be reflected in the Direct Tax Code, likely to be tabled by the finance ministry in Parliament during the monsoon session.
A finance ministry official told FE, “We are reviewing the definition of income to bring it in step with international standards. Internationally, we see a harmonious flow of capital under the income head and we want to emulate this in India as well.”
At present, taxable heads under income include tax on salaries and wages, pensions, gratuities, bonus, fees and commissions, annuity, advance salaries and perquisites, allowances, deferred compensation, income from real estate property and capital gains.
The government is studying international models to decide what can be included under ‘personal income’. One option being considered is to bring dividend income in the ambit of ‘personal income’, a practice followed by the US. At present, dividend in India is taxed in the hands of companies. The US lumps some other earnings such as income from certain retirement accounts, alimony received, rental income, royalty income, farm income and unemployment compensation under ‘personal income’.
The official said the government was of the view that income streams that had escaped taxation under DTAAs might be added to ‘personal income’ in the future. All tax treaties are reviewed by the government periodically and changes made to them with mutual consent.
Alternatively, North Block may also consider emulating some bits of the income tax system in OECD countries. Most OECD countries now have a dual tax structure. This is used to tax capital income at low and proportional rates, while labour income is taxed at a higher and progressive rate. Others have a flat tax—a single-tax rate schedule—that allows no special tax relief.
News posted by
CCI News Desk
Finance news reporter covering taxation, GST, income tax, business compliance, and economy updates. I simplify complex financial topics into easy-to-understand articles for professionals, taxpayers, and business owners on leading finance and tax platforms.
Recent News :
- Jio Platforms Announces Rs 30,213 Crore IPO, Targets Rs 10.3 Lakh Crore Valuation
- RBI Hikes Repo Rate by 25 Basis Points to 5.50% in October 2026
- RBI Announces Regulatory Measures for the Foreign Exchange Market
- CBDT Revises Form 161 for Penalty Waiver Applications Under Income Tax Act 2025
- GST Council Recommends Major Compliance Reforms: IPR Taxation, Late Fee Relief and E-Invoicing Changes
- GST Council Recommends Major Reforms in ITC Refunds, Blocked Credits and Export Benefits
- GST Council Recommends Changes to E-Way Bill Rules to Ensure Smoother Movement of Goods
- GST Council Recommends Withdrawal of Arrest Powers, Raises Prosecution Threshold to Rs 5 Crore
- 57th GST Council Recommendations Relating to Services
- 57th GST Council Meet Recommends Changes and Clarifications in GST Rates on Goods and Services
Popular News
- Central Excise Duty Rates Revised: Rs 16 and Rs 10.5 Per Litre Effective 1st October 2026
- CBDT Extends Tax Audit Due Date for AY 2026-27 to 21st October 2026; ITR Deadline Moved to 21st November
- CBDT Revises Form 161 for Penalty Waiver Applications Under Income Tax Act 2025
- CBDT Revises Administrative Subordination of Income Tax (Appeals) Authorities under IT Act 2025
- GST Return Reforms: New ITC Reconciliation Mechanism Proposed from April 2027
Trending Online Classes
-
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English
CA Bhanwar Borana & CA Shubham Keswani
Subscribe to Pro
Join an elite circle of professionals
CAclubindia
