Direct Tax Code

Rupa Singh (Roll No.12)

Dhiraj Kakati (Roll No. 5)
Introduction
 The new Direct taxes code has been published by
Finance ministry, which would replace current Income
Tax structure from 2011-12.


 Transitional changes will be expected from 2010-11.
Backdrop
§ Income Tax Act came into existence in 1961.
§
§ In the last 30 years, more than 5000 amendments have been made
which has made in even more complicated.
§
§ Chief Architect of this code is Mr.P.Chidambaran who has rewritten
this act from SCRATCH.
§
§ The underlying philosophy of the code is “The philosophy of the
Government, which is wedded to a well regulated free market
system.”
Philosophy
◦ Use of simple language to ensure clarity.
◦
◦ Reduction in scope for litigation by avoiding ambiguity in
provisions.
◦
◦ Use of flexible structure to accommodate changes in the
growing economy without resorting to frequent amendments.
◦
◦ Consolidate and rearrange various provisions to make them
consistent with the general scheme of the Act.
Strategy
◦ Expand tax base by adopting a comprehensive definition of
income by including all accruals and receipts of revenue and
capital nature unless otherwise specified.
◦
◦ Remove tax exemptions to promote equality and discourage
corruption.
◦
◦ Liberalize tax rates –in order to raise level of revenues with
the revised comprehensive tax base.
◦
◦ Provide limited exemptions.

Gross Total Income
PERSONAL TAX - Highlights
 Rationalisation of tax rates by removal of surcharge and shift of slabs
 Due Date of filing of tax returns
 30 June – Non business non corporate tax payers
 31 August – All other tax payers
 No distinction between Capital Gains basis long term and short
term
 Removal of many benefits currently exempt / taxed at lower rates -
House Rent Allowance, LTC, Retirement benefits etc.
 “Exempt Exempt Taxable (EET)” to guide the philosophy of
taxation of all savings
 Overall limit of savings based deductions/tax incentives increased
to Rs. 3 Lakhs.

Present Tax Rates
Income Slab (Rs.) Existing
Rates
Up to Rs.1,60,000* Nil

1,60,000 to 3,00,000 10%

3,00,000 to 5,00,000 20%

5,00,000 to 10,00,000 30%

10,00,000 to 25,00,000 30%

Above Rs. 25,00,000 30%

Proposed Tax rates
Slab Income Between Tax rate

1 0 - 1.60 Lakhs 0%

2 1.60 Lakhs to 10 10%

Lakhs
3 10 Lakhs to 25 Lakhs 20%

4 Above 25 Lakhs 30%

§For Female, second slab begins from 1.90 Lakhs and for Senior
citizen it begins from 2.40 Lakhs
§
§Companies tax rate changed from 30% to 25%
§
§Non-Profit organization tax rate- 100% application of income required
to remain out of the tax net.
§
§Income from special source is at 30% tax rate
New due dates for Tax Returns

Sl No Type Date First filing

1 Non-Business / Non- 30th (under DTC)
30/06/2012
Corporate June

2 Others 31st 31/08/2012

August
RATES OF TAX - Observations
 No change in lowest slab (Rs.160,000)


 Upward shift of slabs intended to neutralise impact of removal

of many of the current exemptions and benefits


 Individuals on “borderline”, currently not paying taxes,

may become tax payers due to removal of exemptions


 Possible negative impact on individuals with annual incomes

of Rs.3,00,000 and below

Taxation of resident companies

Existing% Proposed %

Corporate Tax 33.99 25

Dividend 16.995 15
Distribution Tax

MAT 16.995 2/0.25 on assets

Capital Gains Tax Varying 25

Additional elements taxable
 House Rent Allowance

 The value of leave travel concession

 Medical reimbursement - The amount of deduction shall not exceed
sixty thousand rupees, who is a senior citizen; and forty thousand
rupees, in any other case.

 The amount received on encashment of unavailed earned

 leave on retirement
Wealth Tax
 Individuals, HUFs(Hindu Undivided Families) and Private
Discretionary Trusts liable to wealth tax on the net wealth on the
valuation date in the financial year.

 Wealth tax abolished for companies

 Rate of wealth tax reduced from 1% to 0.25%

 Exemption limit enhanced from Rs. 30 Lakhs to Rs. 50 Crores
TAX INCENTIVES
Savings Based Deductions
 All savings instruments transitioned to EET basis

◦ Tax exemption on accumulations in “approved” PF as on 31st
March 2011 and (future) accretions thereon to be preserved

 Overall limit of Rs.300,000 per annum paid to any “permitted
savings intermediaries”

 Approved provident fund
Approved superannuation fund
Life insurance
New Pension System (NPS)


◦ Roll over or purchase of annuity plan will be tax free




TAX INCENTIVES- Other
Deductions
 Tuition fees for children

◦ For maximum of two children
◦ Educational institution should be situated within India
◦ Covered under the overall limit of Rs 300,000 per annum for
savings instruments


 Interest on education loan


 Health insurance premium, treatment of prescribed diseases,
maintenance of a disabled dependent

 Deduction in respect of donations subject to various limits

 Deduction for rent paid by a self employed person
Non- Resident Indians
 An individual shall be resident in India in any financial
year, if he is in India-for a period, or periods, amounting
in all to one hundred and eighty-two days


 A company is considered to be a resident in India if it is

an Indian Company or if its place of control and
management at any time during the year is situated
Wholly or partly in India.
International Tax
Category Existing rate As per DTC
Foreign Company 40 percent - 25percent
- For branches of
foreign companies in
India,an additional
branch profits tax
Of 15 percent(on
after tax total
income) is also
payable resulting in
EffectiveTaxRateof36.
25percent
Thank You