DIRECT TAX CODE(DTC)

AJANTA CHOUDHURY-02 NARENDRA GAVALE-08 ALEX KUREEKAT-10

WHAT IS DTC?

Replace the existing Indian Income Tax Act, 1961. Applicable for income earned during the financial year 2012-13.

Eliminate the scope of litigation.

PURPOSE OF DTC

Integrate all direct tax laws with a single legislation Provide stability in direct tax rates Strengthen taxation provisions for international deals Minimize exemptions to result in a higher tax-GDP ratio

NEW TAX SLABS PROPOSED

Present Tax Slab Rs. 0 to Rs. 1,60,000 : No tax Proposed Tax lab Rs. 0 to Rs. 2,00,000 : No tax

Rs. 1,60,000 to Rs 5,00,000 : 10%

Rs. 2,00,000 to Rs 5,00,000 : 10%

Rs. 5,00,000 to Rs. 8,00,000 : 20%

Rs. 5,00,000 to Rs. 10,00,000 : 20%

Rs. 8,00,000 and above : 30%

Rs. 10,00,000 and above : 30%

INCOME FROM HOUSE PROPERTY

No income from house property if property is not put to use. Assessed only under the Income from house property even if renting is your business. The amount of rent received in advance shall be included in the gross rent of the financial year to which the rent relates.

INCOME FROM HOUSE PROPERTY

Following deductions from gross rent is allowed as per section 26 20 % of the gross rent as standard deduction for repair & maintenance any interest taken for buying or construction or paying home loan. Interest prior to construction shall be allowed in five instalments.

INCOME FROM EMPLOYMENT

Income of a person from employment Dealt under Section 20 to Section 23 Gross Salary Aggregate Amount of Deductions Scope of Salary ( due, paid or allowed) Deductions dealt in Section 23

DEDUCTIONS DEALT IN SECTION 23

Sum paid as tax on employment (clause (2) of article 276 of the Constitution) Allowance granted by the employer for journey between residence and office Allowance granted for official purposes Contribution by the employer in approved pension fund Contribution by the employer in an approved provident fund Interest credited on the balance to the credit of an employee in an approved fund House rent allowance

Capital Gains tax is a tax charged on Capital Gains It is the profit charged on Non Inventory Asset That was purchased at a lower price

Short Term Securities:

Securities held for less than a year

Long Term Securities:

Securities held for more than a year

Tax Impact :
Capital Gains will be scaled down to 50% and taxed at the marginal tax rate.

Tax Rate Will be 15%

It will be taxed 5%, 10%,15%

Short term Capital Gain

Provision Impact

Effective Tax Rate Lower STCG for those in 5%,10%,15% depending lower brackets on the tax bracket

In case of STCL-only 50% of the STCL can be set of against the STCG

Earlier it could be completely set off

Long Term Capital Gains

Provision Change in definition of assets other than equity shares and equity mutual funds Change in the base year Impact Many capital gains which will short term will now become long term Earlier it was 1980 now it is 2000 Capital gains between 1980 to 2000 will not be taxed

LTCG can be set of against STCG

People Affected
Life Insurance Premium Tuition Fees High Premium towards Ulip Health Insurance

Housing Loan

Revised Rules For Other Sectors

Real Estate

Equity

Gold, Debt Funds

Real Estate
Interest on Principal Exempted Up to 1.5 lakhs Rented Flats : Actual Rent Received Will be taxed No rent, No tax on your house Advanced Tax will be taxed in the year it relates

Equity
Equity Mutual Funds And Equity shares will be taxed

Indexation Concept is removed Holding Period Tax Slabs Before Holding Period Short term capital gains, otherwise long term capital gains

Gold, Debt Funds

Long term Assets will be considered 1 year instead of 3 years Indexation will be applicable for long term assets, short term as per tax slabs

HOW INSURANCE GETS IMPACTED

Life cover of 20X annual premium = tax deduction No tax deduction + Income from policy taxed Possible only with term policy of 20-25 years Tax deduction Limit reduced by 50% Premature withdrawal from ULIP s Taxed Bigger the cover, better for the policy holder.

IMPACT ON EQUITIES INVESTMENT

Exemption on long term capital gains continues ELSS Mutual Fund scheme s will be Taxed

IMPACT ON PENSION FUNDS

Annuity income exempt from taxation Emerge as good tax saving instrument

Investment Instrument Public Provident Fund (PPF) Pension Plans

What s Changed Nothing at all. plans to tax withdrawals withdrawn

Your strategy Continue your investment in this tax- free financial instrument as part of your debt portfolio. National Pension Scheme (NPS) will get a look in. Invest in this low-cost product and secure your life after retirement. You need to save more to shelve out EMI s

Annuity income to be exempt from tax Deduction for interest to continue but not for principal. No more tax on notational rent. Nothing .Interest to be taxed at normal rates. No change for long term gains. Short term gains to be taxed at lower rate. Deduction lowered to 50,000 per year. Life cover of 20 times the annual premium must for tax deduction, exemption. Long term gains to be taxed as income

Real Estate Fixed Deposits , Bonds Equities and Equity Oriented Funds

Keep investing as part of debt portfolio. Continue investing as per your asset allocation. Use SIP for compounding. Exemption on ELSS will go.

Life Insurance

Buy term plans for life insurance.

Debt Funds and Other Non Equity Schemes

Go for funds that are treated as equity funds. Buy before financial year ends.

Pros Savings of up to '41,000 for those earning '10 lakh Foreign companies to pay tax at the same rate as local companies Corporate tax rate lowered from 33.2% to 30%

No tax on maturity amount of New Pension Scheme at the time of withdrawal

Cons Women will not get any additional tax benefits Fund houses face 5% tax on distribution income for Ulips, equity-linked MFs SEZ developers face tax burden starting April 2012 More non-profit firms will come under the tax net ( i.e. 15%) Some of the sectoral sops will be discontinued

Interest you pay for housing loans can be exempted and your tax burden decreases Recommends long term capital gains tax to be reintroduced Short Term Capital gain tax to be added in Income Suggested abolishing the Securities Transaction Tax Perks now will be included as a part of the income for purpose of tax calculation

CONCLUSION

Simple language Single Code for Direct Taxes Flexibility Comprehensive Elimination of the regulatory functions