NEW DIRECT TAX CODE

“In 48 years, not only India has changed, the world has also changed”

P.Chidambaram“By putting simple language and simple forms we will eliminate litigations as far

as possible”Pranab Mukharjee

IMPLIMENTATION

Direct Tax Code will replace Four Decade old Income Tax Act-1961 and will be implemented from 2011

Ease for taxpayers

Instead of today’s confusing and complex processes their will be easy process

NEW INCOME TAX SLABS

10%

1.6 to 5.00 lacs 10%

1.6 to 10 lacs

20%

5.00 to 8.00 lacs 20%

10 to 25 lacs

30%

Above 8 lacs 30%

Above 25 lacs

Salary

Gross Salary will include perquisites, and contribution of employer to PF, Pension Fund, Leased house, LTC, Leave encashment, free concessional medical treatment etc

Deductions allowed will be-Compensation on VRS, Gratuity, Commutation of Pension(Upto amount deposited)

Tax Treatment of Saving

Contribution up to 3 lacs (80C type) for employer and employee(e.g.PF,Pension Fund, Life Insurance, Superannuation Fund)

EEE EET(Income deductions,accumulation and withdrawal)

EEE : e.g. GPF, PPF, RPF and pension schemes. Approved pure life insurance and annuity schemes.

(Existing instrument enjoying EEE will be eligible for EEE up to its maturity.)

EET : All existing (only new contributions as well as accretions will be subject to tax)

Permitted saving intermediaries

Permitted saving intermediaries be approved by Pension Fund and Regulatory Authority.Intermediary will invest in G-Sec,Term Deposit, ULIP, Annuity Plans, Bonds, Securities of Public Compnay,bank, fin.institution,bonds of other company,equity linked schemes of MF,debt oriented MFs,equity and debt instrument

(Roll over from one to another instrument will not be treated withdrawal.)

Capital Market Related Amendments

Securities Transaction Tax will be standardized according to new taxes.

No short term capital gain tax (current rate 15%)

Long term capital gain tax will be reintroduced, rate for NRI 30% for residents applicable marginal rate will be introduced.

Capital Gain Treatment

Capital gain is ordinary source of income so taxation as per applicable rate for tax payer

Capital assets gain-Specified deduction-loss on transfer

Capital gain on assets held for less than 1 year treated without specified deduction and will be taxed as per slab.

Example of adj.capital gain :Specially beneficial for low and middle income category of tax payers

Indexing

After one year cost of improvement will be indexed to reduce inflationary gain.

Base date will be shifted from 1.4.1981 to 1.4.2000

Appreciation from 1.4.1981 to 31.03.2000 will not be liable to tax.

To take cost of acquisition at price prevailing as on 1.4.2000.

Other issue of importance

Taxation of Income from House PropertyGross Rent – Specified DeductionsGross Rent is contractual rent or presumptive rent @6%p.a.ratable value fixed by local authority/Cost of constructionAdvance Rents – Taxed on which year relatesDeductions- 1) Amount of tax levied by local authority.2) 20% Gross rent towards repairs and maintenance.3) Any interest payble on capital borrowed (1.5 lac current limit to retain)

For knowledge

MAT On Value of fixed assets (Gross block of fixed assets).25% for banking 2% other companies.Investment linked incentives to spedicified sectors.FIIs income chargeable under capital gainFor Non profit organisation tax liability is 15% amount surplus or capital gainNPOs registration with Income Tax Deptt is mandatoryDonations to such trust will not eligible for deduction in hands of donor.Wealth tax payable by Individual, HUF, Private Discretionary trusts on net wealth on valuation date rate is for above 50 Cr..25%