Direct Tax code 2009!!


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Direct Tax code 2009!!

  1. 1. DIRECT TAX CODE (DTC) <ul><li>The Direct Tax Code (‘DTC’) 2009 is to come into force on 1 April, 2011, if enacted. </li></ul><ul><li>Earlier Income Tax Act and Wealth tax Act (Covering Income Tax, TDS, DDT, FBT and Wealth taxes) are abolished and single code of Tax, DTC in place. </li></ul><ul><li>In Income-Tax we were using Assessment Year and Previous Year. Now the concept of Assessment Year and Previous Year is replaced with a new concept of “Financial Year” which means a period of 12 months commencing from 01 April and ending on 31 March. </li></ul>
  2. 2. RESIDENTIAL STATUS <ul><li>Resident status of an individual is to be determined on the basis of his status in India </li></ul><ul><li>Indian Company to be treated as resident in India </li></ul><ul><li>  </li></ul><ul><li>Foreign Company to be treated as resident in India if the control and management of its affairs is situated wholly or partly in India in the financial year. </li></ul>
  3. 3. <ul><li>Resident based taxation to be applied for residents and accordingly worldwide income to be taxed. </li></ul><ul><li>We have in India three categories of assesses viz. </li></ul><ul><li>  </li></ul><ul><li>Resident </li></ul><ul><li>Non-ordinarily resident (NOR) </li></ul><ul><li>Non-resident </li></ul><ul><li>  </li></ul><ul><li>Second category i.e. NOR to be abolished. </li></ul>
  4. 4. <ul><li>Income to be classified into two groups: </li></ul><ul><li>(i) Income from ordinary source </li></ul><ul><li>(ii) Income from special source </li></ul><ul><li>  </li></ul><ul><li>Income from Ordinary source will include: </li></ul><ul><li>(i) Income from employment (salary) and perquisites </li></ul><ul><li>(ii) Income from house property </li></ul><ul><li>(iii) Income from business </li></ul><ul><li>(iv) Income from capital gains </li></ul><ul><li>(v) Income from residually source (other source) </li></ul><ul><li>  </li></ul>
  5. 5. <ul><li>Income from Special Source to include specified income </li></ul><ul><li>(i) of non-residents viz. winning from lotteries, horse races, royalty and dividend on which DDT has been paid etc. </li></ul><ul><li>A separate schedule is given in DTC which provides working of taxable portion of income from special source. </li></ul><ul><li>Loss can be carried forward to indefinite period. If in any year return is not filed within due date, the whole of the loss i.e. current year as well as all previous year’s loss carried forward will get lapsed. </li></ul>
  6. 6. EET <ul><li>EET based taxation for all permitted savings like PF, Superannuation fund, LIC and New Pension System Trust, i.e. contribution is E xempt, accumulation/accretions is E xempt and all withdrawals at any time will be subject to T ax (taxed under Income from residuary source). However, rollover of balance from one account to other won’t be taxed. </li></ul><ul><li>The EET based taxation will not be applicable for balance Accumulated as on 31st March 2011. That is any contribution/accumulation/accretions to PPF from 1st April 2011 when withdrawn will only be taxed, withdrawal of contribution/accumulation made upto 31st March 2011 and accretions in case of PPF will be exempt. </li></ul>
  7. 7. <ul><li>An aggregate deduction of Rs 300,000 is proposed for savings maintained with permitted intermediaries (approved retirement benefits trusts & life insurers) and children education. Investment in equity linked savings schemes of MFs, saving FDs with banks, housing loan repayment, etc, would no longer be eligible for the deduction. </li></ul><ul><li>The existing deductions in respect of interest on educations loans and medical premium/expenses is sought to be continued </li></ul>
  8. 8. <ul><li>Corporate taxation The corporate tax regime in India, for years, is plagued on the one hand, with a higher base rate and on the other hand, with sector-specific tax incentives (exemptions/deductions). This complicated the effective tax computation as also resulted in protracted litigation. </li></ul><ul><li>The code seeks to rationalize corporate taxation in a big way. The corporate tax rate has been proposed at 25%. Consequently, the tax incentive provisions have been largely eliminated. </li></ul>
  9. 9. <ul><li>Business income : Under the new model, the income from business would be computed as gross earnings minus business expenditure. All receipts from business, including capital receipts, shall form part of gross earnings. Thus, for instance, profit from sale of business capital assets/slump sale of business undertakings, would now be taxable as business income (as against capital gains under the current Act). Also, remission of any loan, otherwise a capital receipt, would form part of gross earnings. Business expenditure is classified under three categories—Operating expenditure, permitted financial charges and capital allowance. </li></ul>
  10. 10. <ul><li>House property income: The code largely simplifies taxation of house property income. The taxable gross rent shall be the actual rent receivable upon letting out or a notional presumptive rent computed at 6% of the ratable value, whichever is higher. If no ratable value is fixed, the actual cost would be taken in lieu thereof. </li></ul><ul><li>While exemption for one self-occupied property (SOPs) continues for individuals, the deduction for repairs & maintenance is proposed to be reduced to 20% of the gross rent, from the current level of 30%. Besides, the current deduction for housing loan interest up to Rs 150,000 available for sops is sought to be done away with. </li></ul>
  11. 11. <ul><li>Capital gains tax: The code seeks to bifurcate capital assets as investment assets and business assets. Income arising upon transfer of an investment asset would only be taxable as capital gains. </li></ul><ul><li>Secondly, and more importantly, the code seeks to completely eliminate the distinction between short-term and long-term assets </li></ul><ul><li>Long-term assets, though, would continue to be eligible for indexation benefits. In another major change, the cost base for an asset acquired prior to April 1, 2000, can be taken, at the option of the taxpayer, as the fair market value as on that date. In cases where the cost is incapable of being determined, the cost shall be taken as nil. </li></ul>
  12. 12. <ul><li>The Securities Transaction Tax (STT)-based taxation of listed equity shares / equity linked MF units is proposed to be abolished. Consequently, capital gains on transfer of such assets would be taxable at the normal rate under the new regime, as against a full exemption for LTCG and a lower 15% rate for STCG, under the current regime. STT is sought to be abolished, in a move which should benefit day traders significantly. Further, the Code also proposes to do away with the special tax regime for FIIs / NRIs. </li></ul>
  13. 13. PROPOSED RATES FOR INDIVIDUAL: <ul><li>Slab of Income Rate of Tax </li></ul><ul><li>0 to 1,60,000/- NIL </li></ul><ul><li>1,60,001/- to 10,00,000/- 10% </li></ul><ul><li>10,00,001/- to 25,00,000/- 20% </li></ul><ul><li>25,00,001/- and above 30%. </li></ul><ul><li>NOTE: </li></ul><ul><li>Females below 65 years, the basic exemption limit Rs.1,90,000/- </li></ul><ul><li>Senior citizens, the basic exemption limit Rs.2,40,000/-. </li></ul><ul><li>For Domestic Company – 25% </li></ul><ul><li>Foreign Companies – 25% </li></ul><ul><li>Profit of Branch Office of Foreign Company – 15% . </li></ul>
  14. 14. 15% 15% Dividend Distribution Tax <ul><li>Tax on gross assets introduced as under: </li></ul><ul><li>0.25% of Gross Assets for Banking Companies. </li></ul><ul><li>2% of Gross Assets for other Companies. </li></ul>Levied at 15percent of the Adjusted book profits in the case of those companies where income-tax payable on the taxable income according to the normal provisions of the Act is lesser than the same. MAT 25 percent 30 percent Income-tax As per DTC Existing Rate Category
  15. 15. WEALTH TAX <ul><li>Wealth Tax will be abolished for Corporate </li></ul><ul><li>Wealth Tax is chargeable for individuals, HUF and private Trust. </li></ul><ul><li>Wealth Tax @ 0.25% of net wealth will be charged if the value of wealth exceeds Rs.50 crores. </li></ul>