Taxation Presentation on

:

Direct Tax Code
By: Vrinda Khanna - 7161 Saloni Chaudhary - 0073 Ayan Nagpal - 7164 Pooja Jha - 0044

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Introduction
S The New Direct Tax Code (DTC) is said to replace the existing

Income Tax Act of 1961 in India. DTC bill was 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.
S During the Budget 2012 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.
S Again, as per budget presented on 16th March, 2012,

Implementation of Direct tax code has again been deferred and won’t be applicable from 1st April, 2012.

. S It is expected to usher in a new tax regime of transparency and greater compliance.S The proposed Direct Tax Code is a combination of major tax relief and removal of most tax-exempted benefits.

S introduce moderate levels of taxation. S expand the tax base.Advantages The Direct Tax Code will : S eliminate distortions in the tax structure. . S improve tax compliance. S simplify the language and lower tax litigations.

Highlights of the Direct Tax Code S .

Equity Mutual Funds(ELSS). Term deposits. . stamp duty and registration fees on purchase of house property will loose tax benefits.Removal of most of the tax saving schemes S DTC removes most of the categories of exempted income. S Unit Linked Insurance Plans (ULIPs). NSC (National Savings certificates). house loan principal repayment. Long term infrastructures bonds.

000 has been added just for pure life insurance (Sum insured is atleast 20 times the premium paid) . health insurance. medi-claims policies and tuition fees of children.000 but another 50.New tax saving schemes S Tax saving based investment limit remains 100. gratuity fund and new pension scheme (NPS). S But the one lakh investment can now only be done in provident fund. superannuation fund. .

000 Above INR 1.000 Nil 10% 20% 30% .000.000.000 Between INR 500.Tax Slabs S The Income tax rates and slabs have been modified.000) Between INR 200.000.000 to 1. The proposed rates and slabs are as follows: Annual Income Tax Slab Up-to INR 200.000Above INR 1.000 (for senior citizens 250.000 to 500.

Home Loan Interest S Exemption will remain same as 1.5 lakhs per year for interest on housing loan for self-occupied property. .

on which STT has been paid) are still exempted from income tax. .g. e. if you gains 50.Short and long term gains S Only half of Short-term capital gains will be taxed. S Long Term Capital Gains (From equities and equity mutual funds.000. add 25.000 to your taxable income.

Tax exemption at all three stages (EEE) —savings. 2010. Retirement benefits (gratuity. leave encashment. accretions and withdrawals—to be allowed for provident funds (GPF. EPF and PPF). pure life insurance products & annuity schemes.EEE and EET S As per changes on 15th June. . NPS (new pension scheme administered by PFRDA). etc). S Earlier DTC also wanted to tax withdrawals.

. S Tax exemption on Education loan to continue.Education Cess and Education Loan S Surcharge and education cess are abolished.

such a concept has been abolished. there was provision for taxing notional rent even if the second house was not put to rent.Income arising from House Property S 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. under the Direct Tax Code 2010 . . S Before DTC. if you own more than one property. But.

.Corporate tax S Corporate tax reduced from 34% to 30% including education cess and surcharge.

Now gain after indexation will be added to taxable income and taxed at per the tax slab. 2000 instead of earlier 1st April. new concept has been introduced. S Base date for cost of acquisition has been changed to 1st April. gain is to be added to taxable salary.Taxation of Capital Gains from Property Sale S For sale within one year. instead of flat rate of 20% of gain after indexation benefit. S For long term gain (after one year of purchase). 1981 .

Medical reimbursement S Max limit for medical reimbursements has been increased to 50.000 limit. .000 per year from current 15.

S There will also be a TDS 0f 10% (20% in case of NRI and companies) if dividend is more than 10.000 Rs for nonequity funds. .Tax on dividends S 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.

S An NRI will be deemed as resident only if he has also resided in India for 365 days or more in the preceding four financial years. this duration has been changed to just 60 days. a NRI is liable to pay tax on global income if he is in India for a period more than 182 days in a financial year. . together with 60 days in any of these fiscal years.News for NRIs S As per the current laws. But in new bill.

To avoid any income tax. . Global income would become taxable only if the person also stayed in India for nine out of 10 precedent years.S Even if an NRI becomes a resident in any financial year. S This is very unfair to Seafarers. his global income does not immediately become liable to tax in India. an Indian sailor employed with a foreign ship will have to stay maximum for 60 days in India. or 730 days in the preceding seven years.

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. it proposes that every tax offense under the Code will be punishable by both imprisonment and fine. it will also make life miserable for those who evade tax through fraudulent means.Conclusion S If the Tax Code is generous in giving relief to tax payers. be sure. As the Tax Code prescribes stiff penalties and prosecution for noncompliance with the tax laws. S Apart from defaulters. the Tax Code proposes to punish tax consultants who help in tax evasion. It gives sweeping powers and blanket protection to Income Tax officials for initiating court proceedings on matters relating to tax offences.

Thank you S .

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