The govt of  India has  introduced a new direct tax code that seeks to simplify the tax regime in the country.

This was a much awaited proposal as the government currently calculates taxes based on the Income Tax Act 1961.

This code (Read: Direct Taxes Code full text) is expected to replace the existing income tax laws.

However, there is a catch. According to the new proposals, all interest on savings will be taxed from 2011 onwards.

The main proposals of the new code are as follows:

• Income tax rates slash
  
• Most exemptions to go
• Interest on savings to be taxed
• Up to Rs 1.6 lakh: No tax
• 10 per cent tax for income of  Rs 10 lakh  (Rs 1.2 lakh in hand)
• 20 per cent tax for Rs 25 lakh income (Rs 2.60 lakh more in hand)
• 30 per cent tax for income over Rs 25 lakh
• To raise deduction limits for savings upto Rs 3,00,000
• Corporate Tax: Down from 30 per cent to 25 per cent
• Wealth tax to be levied for wealth above Rs 50 crore

Former minister of finance and now home minister, P Chidambaram, who had initiated work on the proposed code during his tenure, said the direct tax code was outdated and it needed a revamp.