New Delhi: In another step in favour of the middle-class, the Modi government on Wednesday has constituted a proposal recommending a new tax regime. A high-level tax force was set up by the Centre that reduced the tax slab to 10 per cent for people earning between Rs 5 lakh and 10 lakh.

The government panel, led by Central Board of Direct Taxation (CBDT) member Akhilesh Ranjan, proposed a zero tax levy on Rs 0-2.5 lakh, 10 per cent on Rs 5-10 lakh, and 20 per cent on an income of Rs 10-20 lakh. The recommendation was then forwarded to Union Finance Minister Nirmala Sitharaman on August 19.

There is, however, no confirmation on the timeline on which the government may approve the recommendations.

Currently, personal income tax is levied at 5 per cent for income between Rs 2.5 lakh and Rs 5 lakh, at 20 per cent for Rs 5 lakh to Rs 10 lakh, and 30 per cent for an income of over Rs 10 lakh. According to sources, for those earning above Rs 20 lakh and till Rs 2 crore, the income tax slab continues to remain at the previous rate of 30 per cent.

It has also proposed introducing a new top tax bracket of 35 per cent for the ‘super-rich’, those earning above Rs 2 crore in a year, and doing away with the surcharge.

The rationalisation in tax slabs has been proposed to boost consumption and revive the economy, which has been witnessing a major slowdown, by putting more money in the pockets of the middle-income group.

Among other recommendations, the panel proposed the removal of dividend distribution tax and scrapping the minimum alternate tax. Further, it wants the government to avoid levying surcharges.

The tax force was formed to do away with the 58-year-old Income Tax Act, in order to simplify income tax provisions and improve tax certainty. Akhilesh Ranjan was appointed as the convenor after the retirement of Arbind Modi.

Other members of the task force include Chartered Accountant Girish Ahuja; Rajiv Memani, Chairman and Regional Managing Partner at EY; Tax Advocate Mukesh Patel; Mansi Kedia, Consultant at ICRIER; and G C Srivastava, retired IRS and Advocate.