The Direct Taxes Code (DTC) 2010, bill no. 110 of 2010, was introduced in parliament last month. It will replace the Income Tax Axt`1961. The major changes affecting personal financial planning and investment are required to be analyzed and assessed, so that you know which provisions are likely to affect your financial plan. Even though it is going to be implemented w.e.f. 01.04.2012, one must be rest assured before starting a fresh investment.
The basic exemption limit has been raised from 1.6 lakh to 2 lakh for individuals and from 2.4 lakh to 2.5 lakh for senior citizens. The female taxpayers are likely to lose the special privilege given to them. The income above this limit will be taxed at 10% up to 5 lakh, from 5 to 10 lakh at 20% and above 10 lakh at 30%.
Life insurance premium will qualify for deduction up to 50,000 only, compared to available deduction of 1 lakh at present. The overall limit of 50,000 as per new section 73, includes life insurance premium, health insurance premium and tuition fees paid for two children. Life insurance premium will qualify for deduction only if premium payable is not exceeding 5% of the sum assured. At present this limit is 20% of the sum assured. This will again change all the existing insurance plans next year. So be cautious, if you are buying a new insurance plan in this year.
New section 69 also provides for an additional deduction of 1 lakh to tax payer if the amount is deposited in approved fund such as provident fund, superannuation, graruity fund and also pension funds approved by the central government. It seems that government wants promote long term investment plans for the retirement benefit. The major problem in this type of plans is that they are not liquid and in case of emergency also you cannot withdraw these funds. Government should seriously think about this liquidity problem in these plans.
The following investments shall not be eligible for deduction after 01.04.2012
1) Payment of housing loan principle
2) ELSS schemes of mutual funds
3) Fixed deposits (FDs) with banks
4) National saving certificates (NSC)
5) Term deposits of post office
Housing loan interest is eligible for deduction up to same previous limit of 1.5 lakh under section 74, provided it is not let out during the year and also acquisition and construction is completed within 3 years from the end of the financial year in which loan is taken.
Section 110 provides for levy of 5% dividend distribution tax on dividend distributed or paid by mutual fund and life insurer. Life insurance cos. never pay dividend to their policyholders. Actually the fund grows in the fund opted in the insurance plan. This may be the case when the dividend is paid to the shareholders of the co. We have to wait for the further clarifications.
The basic exemption limit has been raised from 1.6 lakh to 2 lakh for individuals and from 2.4 lakh to 2.5 lakh for senior citizens. The female taxpayers are likely to lose the special privilege given to them. The income above this limit will be taxed at 10% up to 5 lakh, from 5 to 10 lakh at 20% and above 10 lakh at 30%.
Life insurance premium will qualify for deduction up to 50,000 only, compared to available deduction of 1 lakh at present. The overall limit of 50,000 as per new section 73, includes life insurance premium, health insurance premium and tuition fees paid for two children. Life insurance premium will qualify for deduction only if premium payable is not exceeding 5% of the sum assured. At present this limit is 20% of the sum assured. This will again change all the existing insurance plans next year. So be cautious, if you are buying a new insurance plan in this year.
New section 69 also provides for an additional deduction of 1 lakh to tax payer if the amount is deposited in approved fund such as provident fund, superannuation, graruity fund and also pension funds approved by the central government. It seems that government wants promote long term investment plans for the retirement benefit. The major problem in this type of plans is that they are not liquid and in case of emergency also you cannot withdraw these funds. Government should seriously think about this liquidity problem in these plans.
The following investments shall not be eligible for deduction after 01.04.2012
1) Payment of housing loan principle
2) ELSS schemes of mutual funds
3) Fixed deposits (FDs) with banks
4) National saving certificates (NSC)
5) Term deposits of post office
Housing loan interest is eligible for deduction up to same previous limit of 1.5 lakh under section 74, provided it is not let out during the year and also acquisition and construction is completed within 3 years from the end of the financial year in which loan is taken.
Section 110 provides for levy of 5% dividend distribution tax on dividend distributed or paid by mutual fund and life insurer. Life insurance cos. never pay dividend to their policyholders. Actually the fund grows in the fund opted in the insurance plan. This may be the case when the dividend is paid to the shareholders of the co. We have to wait for the further clarifications.
Capital gain in respect of equity share in a company or a unit of an equity oriented fund, where STT is paid & the asset is held for more than a year, no tax is payable. But if the asset is held for less than a year than 50% of the income is chargeable to tax. Thus you have to pay 5%, 10% or 15% of tax depending on your slab rate. At present short term capital gain is taxed at 15% flat. The individuals in lower tax slab will benefit from new provisions.
The base year for the fair market value of the investment asset shall be 01.04.2000, at the option of person for the assets acquired before such date. At present it is 01.04.1981.
The base year for the fair market value of the investment asset shall be 01.04.2000, at the option of person for the assets acquired before such date. At present it is 01.04.1981.
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