The New Direct Taxes Code Bill introduced in Parliament on 30th August, 2010 is very different then what it was proposed in its initial as well as revised draft. It has many surprises and would disappoint Individual taxpayers who were expecting a lot from the Finmin. Although it is not a complete disappointment as we will be getting more than what we have at present. Please find the summary of Draft presented in the parliament
- It will become effective from April 1, 2012 instead of April 1 2011. The DTC operationalization has been put on hold for a year to give tax practitioners, taxpayers and tax administrators time to become familiar with the new provisions.
- Tax benefit on the principal component of housing loans to discontinue, however benefit continues for the Interest repayment.
- Increase in exemption threshold of individuals from the current Rs 1.6 lakh to Rs 2 lakh and reduce corporate taxes to a flat 30%. In the bill, income between Rs 2 and 5 lakh is proposed to be taxed at 10%, Rs 5-10 lakh at 20% and 30% thereafter.
- Tax slabs for women is now bought at par with Men Taxpayers with income up to Rs 2 lakh exempt. The earlier proposal was to place women taxpayers and senior citizens at an exemption level of Rs 2.5 lakh.
- No clarity of LTA or LTC in the exemptions and its quiet possible that the tax benefits on these components may be withdrawn.
- Housing loan comprises 50% of the total deduction of up to Rs 3 lakh on savings which meansif you have not taken housing loan, you can claim maximum of Rs 1.5 lacs and the 3 lac tax benefit will not apply to you.
- Other deductions allowed include Rs 1 lakh on pension, PF and gratuity funds.
- Up to Rs 50,000 for tuition fees of kids, pure life insurance premium and health cover.
- Capital gains on listed securities held for less than a year will be scaled down to 50% and then taxed at the person's marginal tax rate. There would be three different rates in the DTC regime—5%, 10% and 15% Capital gains on listed securities held for more than a year will not be subject to tax instead of flat rate of 15%. For securities held for less than a year, will be taxed at 5%, 10% or 15% depending on the marginal tax rate of the person.
- ULIP's and ELSS will loose its sheen as it will be taxed marginally at the time of withdrawal. ULIP's where Annual Premium is more than 5% of sum assured will be taxed at marginal rate of 5%.
- Much more clarifications are awaited and will be published here once that is released.
- The exemption limit for imposing wealth tax to Rs 1 crore from Rs 15 lakh (Rs 1.5 million) at present, a move that will help a lot of taxpayers avoid the levy.
