Varanasi,Mar 11, 2012: The New Direct Tax Code (DTC) is said to
replace the existing Income Tax Act of 1961 in India. DTC bill was
The DTC will replace
the Income Tax Act, 1961
tabled
in parliament on 3oth August, 2010. There are big changes now in monsoon
session and There are now much less benefits as compared to what were in the
original proposal. During the budget 2010 presentation, the finance minister
Mr. Pranab Mukherjee reiterated his commitment to bringing into fore the new
direct tax code (DTC) into force from 1st of April, 2011, but same could not be
fulfilled and now it will be applicable from 1st April, 2012.The following
factors of DTC which will impact on salaried peolpe.
Removal of most of the
tax saving schemes:
DTC
removes most of the categories of exempted income. Unit Linked Insurance Plans
(ULIPs), Equity Mutual Funds (ELSS), Term deposits, NSC (National Savings
certificates), Long term infrastructures bonds, house loan principal repayment,
stamp duty and registration fees on purchase of house property will loose tax benefits.All
these schemes earlier came under savings u/s 80c exemption.
New tax saving
schemes:
Tax
saving based investment limit remains 100,000/- but another 50,000/- has been
added just for pure life insurance (Sum insured is atleast 20 times the premium
paid) , health insurance, mediclaims policies and tuition fees upto two
children. However,Parliamentary panel that scrutinized the Direct Taxes Code
(DTC) Bill has suggested that the investment limit for tax savings schemes be
hiked to Rs 3.20 lakh. But the one lakh investment u/s 80c can now only be done
in provident fund, superannuation fund, gratuity fund and new pension scheme
(NPS).
Tax slabs:
The
income tax rates and slabs have been modified. The Standing Committee also
suggested that 10 percent tax be levied on taxable income between Rs 3-10 lakh,
20 percent between 10-20 lakh and 30 percent over Rs 20 lakh.
At
present under proposed DTC Act, 10 percent tax levied on income between Rs
1.8-5 lakh, 20 percent on income between Rs 5-8 lakh and 30 percent above Rs 8
lakh.Men and women will be treated same.
Home loan interest:
Exemption
will remain same as 1.5 lakhs per year for interest on housing loan for
self-occupied property.
EEE and EET:
As
per changes on 15th June, 2010, Tax exemption at all three stages (EEE)
—savings, accretions and withdrawals—to be allowed for provident funds (GPF,
EPF and PPF), NPS (new pension scheme administered by PFRDA), Retirement
benefits (gratuity, leave encashment, etc), pure life insurance products &
annuity schemes. Earlier DTC wanted to tax withdrawals.
Education Cess:
Surcharge
and education cess are abolished.
Income arising from
House Property:
Deductions
for Rent and Maintenance would be reduced from 30% to 20% of the Gross Rent.
Also all interest paid on house loan for a rented house is deductible from
rent.
Before
DTC, if you own more than one property, there was provision for taxing notional
rent even if the second house was not put to rent. But, under the Direct Tax
Code 2010 , such a concept has been abolished.
LTC(Leave Travel
Concession):
Tax
exemption on LTA is abolished.
Education loan:
Tax
exemption on Education loan to continue.
Taxation
of Capital gains from property sale :
For
sale within one year, gain is to be added to taxable salary. For long term gain
(after one year of purchase), instead of flat rate of 20% of gain after
indexation benefit, new concept has been introduced. Now gain after indexation
will be added to taxable income and taxed at per the tax slab. Base date for
cost of acquisition has been changed to 1st April, 2000 instead of earlier 1st
April, 1981.
Medical reimbursement
:
Maximum
limit for medical reimbursements has been increased to 50,000 per year from
current 15,000 limit.
Tax on dividends:
Equity
mutual fund will attract 5% dividend distribution tax (DDT). DDT has been
removed from debt and non-equity based mutual funds but now dividends on
non-equity funds will be taxable in investor’s hand as per his slab rates.
There will also be a TDS 0f 10% (20% in case of NRI and companies) if dividend
is more than 10,000 Rs for non-equity funds.
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