51 direct tax code ion

8/8/2019 51 Direct Tax Code ion

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DIRECT TAX CODE


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DIRECT TAX CODE (DTC)

COMPARSION OFRELEVANT PROVISIONSUNDER INCOME TAX

ACT AND DTC FIRSTDRAFT & DTC REVISEDAS APPLICABLE TOINDIVIDUALS

By CA PANKAJ K. JAIN


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INCOME TAX SLABS

Particulars Provisions underIncome Tax Act

DTC First Draft DTC revised Observation/Remarks

Tax Rates(Individual /HUF)

Upto 1.6 Lacs : Nil+1.6 5 Lacs : 10%+5 8 Lacs : 20%+8Lacs : 30%

eg.:Income : 25 Lcas

Tax : 6.04 Lacs

Upto 1.6 Lacs : Nil+1.6 10 Lacs : 10%+10 25 Lacs : 20%+25 Lacs : 30%

eg.:Income 25 Lcas

Tax Rs.3.84 Lacs

Rates to beprescribedafterconsideringthe overall

impact of thechangessuggested inrevised draft.

It is expected thatthe ratesprescribed underthe First DTC draftwould be

substantiallyreduced to bring itdown at currentlevels.


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TaxabilityonwithdrawalfromPF/PPF,ULIPS,Pension

Fund, etc.

E-E-E Regimei.e.Investment: ExemptIncome: ExemptWithdrawal:Exempt

E-E-T Regimei.e.Investment :ExemptIncome: ExemptWithdrawal: Taxable

E-E-E Regime**It will be a dilutedversion of the existingEEE regime as therevised draft has notcategoricallycommitted to complete

EEE regime.Certain investment e.g.New ULIP, NewEndowment Policymay not qualify undernew EEE regime.

This issupposed to beone of the mostpath breakingrelief. Howeverit is suggestedto register the

protest andpressurize theauthorities toreinstate theexisting EEEregime.

Taxability on withdrawalof Retirement Benefit


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Taxability of variouscomponents of Salaries

Particulars Provisionsunder IncomeTax Act


House RentAllowance

Exemption isavailable U/s

10(13A)

Noexemption/relief is

prescribed

No Change

Leave TravelAllowance

Exemption isavailable U/s

10(7)

Noexemption/relief is

prescribed

No Change

Allowance forpersonalexpenses eg:children

education, hostelallowance

Exemption ofRs.100/300 permonth wasavailable

No exemption isavailable in respectof any allowancefor personal

purposes

No Change It will not have anymajor impact onthe salarycomputation

It is suggested toregister the protest

and pressurize theauthorities toreinstate theexistingexemptions.


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Employer

contribution toSuperannuationFund

Exempt upto

Rs.1 Lacs perannum

Contribution

with in theprescribed limitwill be exempt

No Change It is possible that

exemption will belinked to thequantum of salary.

Medical

Reimbursement/facility

Exempt Under

Proviso tosection 17

It will be

available onsame lines withsome increasein currentmonetary limit ofRs.15k

No Change Will benefit all the

employees in theorganization.


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Taxability of variouscomponents Salaries


DTC FirstDraft

DTC revised Observation/Remarks

Retirement

benefit : VRS,Gratuity, LeaveEncashment, etc

Permanent

exemption isavailable undervarious sections.

Exemption

availableunder EETscheme.

i.e. temporaryexemption

Permanent

Exemption.However theamount is not yetprescribed.

It appears that the

amount of exemptionwill be more or less atexisting levels.

Perquisites As perPerquisitesvaluation Rules

As per Rules,not yetPrescribed

No Change Rules expected moreor less on the sameline as the existingRules.


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DTC FirstDraft

DTC Revised Observation/Remarks

Meal coupons,Reimbursement oftelephone/mobilebills

Meal coupons areexempt uptoRs.50 per meal &reimbursement ofTelephone/

Mobile bills arefully exempt

NoExemptionisprescribed

No change It is suggested to registerthe protest and pressurizethe authorities to reinstatethe existing exemptions.

Set off of BusinessLoss againstSalary Income

Not allowed Allowed Allowed It will benefit thoseemployees who are alsoengaged in Business

activity.


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Income from HouseProperty


DTC First Draft DTC Revised Observation/Remarks

Computation oftaxable rent in case

where property isgiven on Rent

Actual Rent or Fairmarket value of rent

whichever is higher

Actual Rent or 6%of cost of Property

whichever ishigher.

Actual Rent It is a verypragmatic step as

it will resolve theissue of taxabilityof notional rent

Taxable Rent ofthe property if held

for personal use.

Any one Property :Nil

All other property:Fair Market value ofrent

Any one Property:Nil

All Other Property:6% of cost ofProperty

Nil if propertyis not actually

given on rent

No change

It will curb themenace of

notional tax incase where, morethan one propertyis held forpersonal use.

StandardDeduction 30% of Rentincome is allowedas deduction.

It is reduced to20% It is calibrated inview of the aboverelief


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Deductions for Savings



LIcPremium, PF

Contributions, TuitionFees etc

Max. upto Rs.1Lac (80C)

Limit enhancedto Rs.3 Lacs,

provided theamounts areinvested in anypermittedsavingsintermediary.Tuition fees hasbeencategoricallyprescribed.

Limit likely to bereduced as EEE

regime isproposed now.However thedetails of savingsinstruments arenot yetprescribed.Tuition fees hasbeencategoricallyprescribed.

Though the savinginstruments are not

prescribed, LifeInsurance premium,contribution to PFand PPF wouldqualify. However it isdoubtful whetherrepayment ofhousing loan willqualify.

Donation toCharitableTrust

Deductionavailable undersection 80G

Deductionavailable.

No deduction willbe available.

This change shouldbe opposedvehemently.


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Capital Gains

Particulars IncomeTax Act


Sale of Listed shares/Equity oriented Mutual

Funds after they areheld for +12 months &STT is paid.

Fullyexempt

Fully taxable atnormal rates

however thebenefit ofIndexation isavailable.

Benefit of Indexationis not available

however, someconcession isprescribed.

Sale of Listed shares/

Equity oriented MutualFunds after they areheld for -12 months &STT is paid.

Taxable

@specialRate of15%

Taxable at

applicableNormal Rates

Taxable at Normal

Rates applicable toindividuals

Even if one intends tohold the shares, he

should sale it and buyback the same tobook the profit undercurrent regime toavail the benefit ofexemption /

concession in tax.Caution: The aboveadvice is a generalone and may not holdgood in all the cases.

Consultants adviceshould be sought.


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Capital Gains


DTC First Draft DTC revised Observation/ Remarks

Carry Forward ofCapital Loss

Maximum upto 8Years

No Time Limitfor carryforward of Loss

No Change. Very pragmatic andwelcome step.

Adjustment of ShortTerm Gains againstLong Term Loss.

Not allowed Allowed Allowed DTC has abolished theconcept of Long term &Short term gains. Thiswill help the long term

Investors.

Period of holding forclaiming the benefitsof Long TermHoldings.

+12 months /+36 Months asthe case may be

+12 monthsfrom the end ofthe FY in whichit is acquired in

all the cases(i.e.+12 mths 24 mths)

No Change. Will hurt the investors inshares and units ofMutual funds. Howeverit will benefit other

investors.


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Capital Gains

Particulars Provisions underIncomeTax Act

DTC FirstDraft

DTC revised Observation/Remarks

Base Year for

Indexation:For listedEquity sharesor Units ofEquity orientedMutual fund.

1.4.1981 1.4.2000 The benefit of

Indexation is notavailable

A deduction at a specified

% of capital gains will beallowed and such gainswill be taxed at aconcessional rate.

For OtherAssets

1.4.1981 1.4.2000 No change Any capital gains arisingtill 1.4.2000 will beexempted from capitalgains.

Levy of STT Yes No Yes, will becalibrated.

Revised DTC hasdeviated from the promisemade under original DTC.


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Contribution to DTC

The Finance Ministry has solicited the onlineresponse of all the stake holders upto 30th

June, 2010 Please visit :

http://finmin.nic.in/dtcode/comments.asp

to register your comments or write at:

[email protected]
http://finmin.nic.in/dtcode/comments.aspmailto:[email protected]:[email protected]://finmin.nic.in/dtcode/comments.asp


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For any clarification.

Write to us at:

[email protected]

[email protected]
mailto:[email protected]:[email protected]:[email protected]:[email protected]


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To conclude..

Tax his Coffin, Tax his grave,

Tax the sod in which he lays.

Put these words upon his tomb,Taxes drove me to my doom!

And when he is gone, we wont relaxWell still be after the inheritance tax!!


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Thank YouPresented by

CA PANKAJ K. JAIN

51 direct tax code ion

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