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.
During the budget 2010 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.
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. Also check out changes in taxation in 2012 budget.
Highlights of Direct Tax code
1. Removal of most of the tax saving schemes: DTC removes most of the categories of exempted income. Unit Linked Insurance Plans (ULIPs), Equity Mutual Funds (ELSS), Term deposits, NSC (National Savings certificates), Long term infrastructures bonds, house loan principal repayment, stamp duty and registration fees on purchase of house property will loose tax benefits.
2. New tax saving schemes: Tax saving based investment limit remains 100,000 but another 50,000 has been added just for pure life insurance (Sum insured is atleast 20 times the premium paid) , health insurance, mediclaims policies and tuition fees of children. But the one lakh investment can now only be done in provident fund, superannuation fund, gratuity fund and new pension scheme (NPS).
3. Tax slabs: The income tax rates and slabs have been modified. The proposed rates and slabs are as follows:
| Annual Income | Tax Slab |
| Up-to INR 200,000 (for senior citizens 250,000) | Nil |
| Between INR 200,000 to 500,000 | 10% |
| Between INR 500,000 to 1,000,000 | 20% |
| Above INR 1,000,000 | 30% |
Men and women are treated same now 
4. Home loan interest: Exemption will remain same as 1.5 lakhs per year for interest on housing loan for self-occupied property.
5. Short and long term gains: Only half of Short-term capital gains will be taxed. e.g. if you gains 50,000, add 25,000 to your taxable income.
Long term capital gains (From equities and equity mutual funds, on which STT has been paid) are still exempted from income tax.
6. EEE and EET: As per changes on 15th June, 2010, Tax exemption at all three stages (EEE) —savings, accretions and withdrawals—to be allowed for provident funds (GPF, EPF and PPF), NPS (new pension scheme administered by PFRDA), Retirement benefits (gratuity, leave encashment, etc), pure life insurance products & annuity schemes. Earlier DTC wanted to tax withdrawals.
7. Education Cess: Surcharge and education cess are abolished.
8. Income arising from House Property: 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.
Before DTC, if you own more than one property, there was provision for taxing notional rent even if the second house was not put to rent. But, under the Direct Tax Code 2010 , such a concept has been abolished.
9. LTA (Leave travel allowance): Tax exemption on LTA is abolished.
10. Education loan: Tax exemption on Education loan to continue.
11. Corporate tax: Corporate tax reduced from 34% to 30% including education cess and surcharge.
12. Taxation of Capital gains from property sale : For sale within one year, gain is to be added to taxable salary.
For long term gain (after one year of purchase), instead of flat rate of 20% of gain after indexation benefit, new concept has been introduced. Now gain after indexation will be added to taxable income and taxed at per the tax slab.
Base date for cost of acquisition has been changed to 1st April, 2000 instead of earlier 1st April, 1981.
14. Medical reimbursement : Max limit for medical reimbursements has been increased to 50,000 per year from current 15,000 limit.
15. Tax on dividends: 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. There will also be a TDS 0f 10% (20% in case of NRI and companies) if dividend is more than 10,000 Rs for non-equity funds.
15. News for NRIs : As per the current laws, 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. But in new bill, this duration has been changed to just 60 days.
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, together with 60 days in any of these fiscal years. Even if an NRI becomes a resident in any financial year, his global income does not immediately become liable to tax in India. Global income would become taxable only if the person also stayed in India for nine out of 10 precedent years, or 730 days in the preceding seven years.
This is very unfair to Seafarers. To avoid any income tax, an Indian sailor employed with a foreign ship will have to stay maximum for 60 days in India.
You can download the bill tabled in parliament from below link:
Direct Tax code bill (1.1 MiB, 17,967 hits)
Related posts:
IS THERE ANY CHANCES OR THERE IS SOME ALTERNATE PROCEDURE WHICH COULD HELP TO REDUCE THE TAXATION ON INDIAN SEAFARER ….WHEN THEY ARE STAYING FOR MORE THAN 60 DAY IN INDIA
As per the current laws, 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. But in new bill, this duration has been changed to just 60 days.
Hard earn money in foreign soil under on /off pattern,it us difficult to maintain just 60 days.Really nonsense idea to bring under tax.thereby reducing 181days stay
Hi,
Please help:- I wanted to know whether interest earned on rbi bonds/rbi relief bonds will be taxable?
Thanks
Ajay
@Ajay555
Interest from RBI relief bonds is taxable and TDS would also be deducted on same.
hi, i am ateacher.my anual income is rs. 505426 & my total diducation is rs.129645. I Have a madical slip of rs.20000.pls caculate my taxation & send me.thanks
income from LIC or TATA AIG PENSION FUND is taxable income?
@Dipa
Regarding pension fund, In case you had taken income tax benefit under section 80CCC, whole surrender value will be added to your taxable income and will be taxed as per your slab rates. But if you did not claim deduction, then only bonus/interest shall be added to your total income as income from other source and income tax will be applicable.
In case of other insurances (other than pension schemes), if amount is withdrawn after five years of policy and annual premium is less than 5% of sum assured, there won’t be any income tax on withdrawal.
i am living in my house which is purchased against loan.Getting HRA @ Rs 300PM.Is this HRA is taxable in my case.
@Rks
As you are living in owned house, HRA would be taxable.
Hi Pankaj,
You mentioned Medical Reimbursement is increased from 15k to 50K. In current taxation system, a medical reciept from a medical store or medical practisioner would be sufficient for claiming deduction. Under DTC, whether s reciept from medical store be still accepted ? ( Refer Section 76 for more details of the DTC ).
I am really worried on this component as there is almost a tax implication of 15 K per year.
Your revert on this is highly appreciated.
Thanks- Abhijeet
@Abhijeet
Direct code bill has still not passed and detailed explanation would only be out in budget to be presented in March 2012.
Hi Pankaj, Under DTC will if I have a second home loan will be interest paid be reduced from taxable amount.
@Deepak
Interest paid on house loan for a rented house is deductible only from house rent income from that house. If second house is given on rent, you can deduct whole interest paid on that house from rental income, there is no upper limit on this deduction.
But if house is not given on rent, max interest deduction limit would be 1.5 lakh for all house combined.
Hi Pankaj, If i contribute more than 12% and upto 100% in my epf account. Is there interest taxed when I get the amount back. My epf account has been running for more than 5 years.
@Deepak
Returns from EPF would still be non taxable after five years service, even if you contribute more than 12% of basic salary.
is new pension scheme saving amount and govt. contribution taxable or not
@Amber
New pension scheme contribution in Tier-1 is exempted from income tax u/s 80C. 80C has maximum exemption limit of Rs 1 lakh.
Govt contribution is not considered a part of income and hence there is no income tax applicable on that part.
a SEAFARER today has become the most miserable of all….. piracy attacks,loneliness,tremendous work pressure… high risk in the high oceans and moreover the hazardous cargoes without which half of the world will be boud to their houses…. but there was atleast something which reduced some pain and that was the money….. INDIAN GOVERNMENT if approves this new rule , they will loose the seafarers… we want atleast tax free income.. and that is a basic thing why people join merchant navy….. the craze is going to be lost…. and the money that the country is making out of seafarers is surely going to be affected… india today has emerged as a major manning country… this tag is going to be lost as the rules change ..the quality of officers and crew that india is supplying will be affected. We want ministry to think again at the point of seafarers before deciding something… if they want us to be lost in water for 10 months then its okay for us to live somewhr else………….. maybe that will be something to give the greedy ministers some relief……
Hi Abhishek
I too am in the same boat..Am in oilfield services and work for 6 months and get 6 months off..
I hear the DTC may not be introduced this year(the Govt is busy with Lokpal etc..etc..Pankaj can confirm if true!!)Looks like April 2013..
@Sundar
Yes, there are some news reports which says DTC may even miss this year deadline.
What will be the short term capital gain treatment on non-equity mutual fund in DTC
@Amit
Short term gains form non equity mutual funds would be added to taxable income and taxed as per slab rates.
Whether the new indexation norms also applicable on FMP’s for >1year which starts in FY 2011-12 and maturing in FY 2012-13..??
@Amit
Yes, new indexation rules would apply to more than a year FMPs too.
I had invested in 367 days FMP on 06/08/2011 whose maturity date is 07/08/2012. If I will not redeem it on 07/08/2012 but renew it for another 367 days and then redeem it on 09/08/2013 (for completion of one FY).
Then would I get the indexation benefit..? or the renewal be treated as fresh investment..?
@Amit
There is no concept of renewal in FMPs. FMP have fixed term after which units would be redeemed automatically.
So further investment would be considered fresh investment only.
Thanks Pankaj..!!
Will it be applicable from FY 2012-2013 or more likely in FY 2013-2014?
Thanks!
@Anirudh
As of now date is FY 2012-13, but lets see what Pranab babu has to say in budget.
Thanks!
Any thoughts/views on XBRL?
hi, I have purchased a flat in this financial year and incurred a cost of rs 2 lacs on registration & stamp duties as cost of registration of this property in my name..guide me that is this cost deductable in tax computation..?
@Shailendra
Tax deduction is available for amount paid for registration and stamp duty charges of house. This is u/s 80C and maximum limit is Rs 1 lakh.
Please note that this is not a extra deduction but under 80C. 1 lakh is total limit of 80C which may have life insurance, ELSS mutual funds, PPF, EPF etc also.
Dear Sir
I intend to sale a house and buy a new one. what treatment will be given to cap gain, repurchase time, rules related to houses owned by other family members
@Jatin
Long term capital gains (computed with indexation benefit) are taxable at 20% rate as of now.
To save this income tax fully, one can buy another residential house property for cost more than the long term gains amount. Possession for new property must be taken before end of two years of sale u/s 54.
It won’t matter in case of section 54, how many other properties you and your family members own.
TOTALY WORTHLESS IDEA OF MR PARNAB MUKHARGI…
STEP BACK FROM THIS IDEA
SO MANY RESOLUTION ARE REQUIRED FOR AWAITING RESULT BUT WHO CONVINCED GOVT TO ADOPT THAT KIND OF IDEA
Is the latest version of DTC is that of 2010, as available on your website or there are more changes with updated versions?
@Abhishek
This is the latest draft. More changes may come in budget session.
Thank you ver much Pankaj.