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.
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, 28,348 hits)
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View Comments
Hi Pankaj, what about ELSS? Is it allowed in 2012-13?
@Enki
Yes, ELSS would continue in FY 2012-13 as well, because Direct Tax code is not going to be implemented from 2012-13.
please advise if seafarer has to pay any income tax even after completeing 184 days on board foreign going ship.
@Manoj
Only income earned in India would be taxable in case one gains a non resident status.
HI SIR
I WANT TO KNOW .WHEN THE START THE DTC?
@Ankit
Most probably it would start from April, 2013 now.
hi pankaj sir.
i want to know .
Only income earned in India would be taxable in case one gains a non resident status.
or othars country income also texable
@Ankit
In case of non resident status, only income earned in India would be taxable in India.
Considering I am in India from April to July. If I go to abroad in the month of August, will my whole income from April to 31 March taxable or only income from April to July taxable?
@Suunil
If you are out of India for more than 181 days, then only income earned in India would be taxable in India.
Else whole income earned globally would be taxable here.
Thanks Pankaj.
Dear Sir,
Please send me link for induvisiol Income, Saving & invesment link
Thanks & best regards,
Shivram
Hi Pankaj,
I have taken a insurance policy in dec 2011 in which sum assured is less than 20 time of premium. Do i need to pay tax on premium after implementation of DTC.(most probabily after 2013)?
@Saurabh
Tax benefit for all policies taken prior to direct tax code implementation would continue as it is. New rules would apply to newly issued policies.
So is the DTC coming at all from April 1 ,2012 or likely to be postponed.Am more interested in the residence limit(60 days etc) for guys going out of India on work /NRI etc…
Who, if any is exempted from this condition
Que(1)I got a Capital Gain of Rs.23,00,000/- by selling a Flat.
Registration is done by the party who purchased a flat in the month of April 2012.
Will this be considered as the date of selling for me?
Que(2)If answer to Que(1) is YES, Can I invest this amount in FD for one year i.e. till May2013 without getting taxed for this LTCG?
Que(3)I'm not planning to purchase any property now as I want to utilise this amount for my Kid's future. In such case, how can I best utilise the LTCG. I mean is there any option that I can invest in any kinds of Infrastructure bonds and forever get rid of Tax on LTCG? If the answer is YES, I want to know what are those bonds, what is the locking period, within how much period of selling the flat these bonds need to be purchased and how much is the annual rate of interest? Once, the locking period is over, can I get rid of LTCG and make use of this amount in opening FDs, etc.
Que(4)Since, I got LTCG of Rs.23,00,000/- from selling of a Flat, can I make use of this amount in purchasing a land of around Rs.10,00,000 and remaining amount of Rs.13,00,000 being utilised for constructing the house on the same purchased land?
@SharadaG
1. The day you handover property to buyer (possession date) would be assumed as date of sale. Generally transfer sale deed date is also accepted for same.
2. You can invest this amount anywhere before 31th July 2013, without loosing tax benefit u/s 54.
3. If you don't want to purchase residential property and get tax benefit u/s 54, you need to invest capital gains into capital gains bonds u/s 54EC to ave tax. This must be done within six months of sale. Amount would be locked for three years. Rate of interest is 6% p.a. Interest would be taxable like normal income as per slab rates. After lock-in period, you can use amount wherever you want.
4. Long term gains can be used to buy land and constructing house on it and get tax benefit u/s 54. House construction should be completed by three years time from date of sale.
Thanks Pankaj.
Need one more clarification from you;
(1)I've registered a Flat in the year June 2008 for Rs 14,00,000 and sold the property to the purchaser for Rs 37,00,000.
If the purchaser registered the Flat on April 2012 for Rs 23,00,000. What will be the capital gain for me?
(2)I've paid Rs 50,000/- to the land owner for Generator connection and Rs 1,50,000/- to the Agent towards Commission from the amount I received from the purchaser. Can I deduct this amount from the capital gain?
@SharadaG
1. Capital gains would be computed on basis of registered sale deed value. If assumed as 23 lakh, your gains would be around 2.6 lakh. This is assuming CII for 2012-13 as 850, its not been declared yet.
2. Amount paid to property dealer can be deducted from sale consideration but generator connection amount won't be applicable.
Hi Pankaj,
Can you please clarify my below question:
I have booked a under construction flat this year and I would be paying Stamp Duty and Registration by this year end but I will be getting possession of the house by next financial only.
Can I claim charges incurred towards Stamp Duty and Registration for income tax deduction under Section 80C in this financial itself?
Thanks in advance!
@Parimal
As per rules, stamp duty and registration charges are deducted u/s 80C for residential house property purchase. Even if possession is received later, deduction can be claimed.
This is really informative information. Thank you.