THE DIRECT TAXES CODE, 2010 Bill No. 110 of 2010 PRESENTED BY :- SUPRIT SHARAN ARPITA SINGH
A charge imposed by Government onthe annual gains• of a person• corporation• or other taxable unitThe annual gain is derived from• work, business pursuits• investments, property dealings, and• other sources determined in accordance with the Internal Revenue Code or state law
THE DIRECT TAX CODE, 2010 When it is • in Lok Sabha on 30-08-2010introduced? • By Finance minister P. Mukherjee Enforced • Financial year 2012-2013 from • i.e. from 1st day of April, 2012 • to replace the existing Income Tax It’s aim Act of 1961 in India.
WHY DTC IS REQUIRED??? Tax deduction limit SecurityRates of tax to be on savings to be transaction tax to uniform hiked to Rs 3 lakh be abolished To scrap long, Business losses can short-term capital be carried forward gains distinction indefinitely
No tax deduction on Effective corporate taxinterest payable on any rate at 30 % Government security Highest tax rate of 30% for individual of income over Rs 25 lakh
BASIS OF CHARGE RESIDENTIAL STATUS TOTAL INCOME
An individual shall be resident in Indiain any financial year, if he is in India-for a period, or for a period, or ii) three periods, periods, hundred and amounting in amounting in sixty-five days all to one all to- or more within hundred and the four years eighty-two i)sixty days or immediatelydays or more in more in that preceding that that year; or year; and year.
The previous provisions shall not apply in respect of an individual who is :-a citizen of India and who leaves India in that year as amember of the crewof an Indian ship; or
the total income of any financial year of aperson, who is a resident, shall include allincome from whatever source derived which— • accrues, or is deemed to accrue to him in India In India • is received, or is deemed to be received, by him, or on his behalf in India during the year • accrues to him outside India Outside • is received by him, or on his behalf, outside India during the India year.
For Non- ResidentSubject to the provisions of this Code, the total income of anyfinancial year of a person, who is a non-resident, shall include allincome from whatever source derived which—accrues, or is deemed to accrue, to him inIndia during the year; oris received, or is deemed to be received, byhim, or on his behalf, in India during the year.
CLASSIFICATION OF SOURCES OF INCOME Income from Special sources TOTAL INCOME Income fromOrdinary sources
Income from Special sourcesIncome from Special Sourcesinclude interest, dividends onwhich distribution tax has notbeen paid, capital gains, anyother investment income,royalty, fees for technicalservices, amongst others.
Income from Ordinary sources Income fromIncome from Income from Houseemployment Business Property Income from Capital gains Residuary Sources
Income from employmentGross salary, including the value of perquisites andprofits in lieu of salary, to be taxed on due orreceipt basis, whichever is earlier and to be reducedby permissible deductionsPermissible deductions to include professional tax,transport allowance, prescribed special allowance,compensation under voluntary retirement scheme,gratuity, commutation of pension, amongst others
Income from House PropertyIncome from house property to be the gross rent less specifieddeductions. Gross rent to be higher of contractual rent or presumptive rentcalculated at 6% per annum of the rateable value fixed by thelocal authority / 6% of cost of construction or acquisition of theproperty (in the absence of rateable value).Advance rent to be taxed in the financial year to which it relatesto.
Income from BusinessAll assets to be classified into business andinvestment assets, wherein business assets to befurther classified into business trading assets andbusiness capital assets.Only income from transactions in business assets toform part of business incomeProfit on sale of business capital assets, profit on saleof an undertaking under a slump sale, transfer of anyself generated business asset, etc. to be treated asbusiness income
Capital gainsIncome from transactions in all investment assets to betaxed under the head “capital gains”.Gains and losses to be included in the total income of thefinancial year in which the investment asset is transferredirrespective of the year of receipt of consideration, exceptin the case of compulsory acquisition of an asset.
Income from Residuary SourcesResiduary income to comprise any income which does notform part of any other head of incomeThe scope of gross residuary income widened to includeincome having incidental nexus with some other head ofincomeAny amount exceeding Rs. 20,000, taken or accepted orrepaid as loan or deposit otherwise than by account payeecheque or draft to be taxed as income from residuarysources.
TAX INCENTIVESMajor Deductions applicable under the Tax Incentives for anindividual are: Investments through PFRDA approved agencies Payment of tuition fees Medical treatment Health insurance Donations Interest on loan taken for higher education Maintenance of a disabled dependant Interest income on Government Bonds
The EET Model for Investments Taxed when it is Exempted withdrawn till it is remained Exempted invested when invested
EARLIER EEE - MODEL INVESTEDINVESTED WITHDRAWN Exempted Exempted Exempted
HIGHLIGHTS OF DTCSingle Code for direct taxesUse of simple languageFlexibilityProviding stabilityReducing the scope for litigation
New Tax rates for individualsSlab Income Between, Tax rate1 0 - 1.60 Lakhs 0%2 1.60 Lakhs to 10 Lakhs 10%3 10 Lakhs to 25 Lakhs 20%4 Above 25 Lakhs 30%
In the case of woman below the age of sixty five years at any time during the financial year:Slab Income Between Tax rate1 0 - 1.90 Lakhs 0%2 1.90 Lakhs to 10 Lakhs 10%3 10 Lakhs to 25 Lakhs 20%4 Above 25 Lakhs 30%
In the case of senior citizensSlab Income Between Tax rate1 0 - 2.40 Lakhs 0%2 2.40 Lakhs to 10 Lakhs 10%3 10 Lakhs to 25 Lakhs 20%4 Above 25 Lakhs 30%
New due dates for Tax Returns:Sl. No Type Date First filing (under DTC)1 Non-Business / Non- 30th June 30/06/2013 Corporate2 Others 31st August 31/08/2013
Terminology of Assessed • terminology of assessed was meant for the person who is paying taxEarlier and/or • who is liable for proceeding under the Act • Two more definitions • a person, whom the amount isNow refundable, and/or, • who voluntarily files tax return irrespective of tax liability
Impact on Residential status Ordinary Resident Resident Not OrdinaryEarlier Resident Non- Non- Resident Resident
Recent Tax Code v/s DTCSl. No. Before DTC After DTC1 At present there are two legislation i.e. Income Single code for Income Tax Act and Wealth Tax Act. Tax Act, 1961 and Wealth Tax Act, 1957. The code consists of 285 sections.2 There are three kind of Residential status i.e Residential status of “Resident but not ordinarily ‘Resident’, ‘Non Resident’ and ‘Resident but resident” has been done away with. not Ordinarily Resident’.3 There are ‘previous year’ and ‘assessment To eliminate confusion only ‘Financial Year’ will year’. prevail.4 Date of filing of tax return 31st July for non- Date of filing of tax return preponed to 30th June business non-corporate assessee and 30th Sept for non-business non-corporate assessee and 31st for others. Aug for others5 The corporate tax rate of domestic company is The corporate tax rate of all companies reduced to 30% and for foreign company, it is 40%. 30%. Business losses can be carry forward for Business losses can be carry forward for 8 yrs. unlimited period. Dividend distribution tax Dividend distribution is at 15%. remains at 15%.6 Wealth tax rate is 1% above Rs.30 lacs. Wealth tax rate reduced to 0.25% above Rs.50 Definition of wealth includes some specific crore except for private discretionary trust, for assets excluding investments in shares. It was which no threshold limit will be available. applicable to all assessee. Definition of wealth has been expanded to include all assets, including investments.
7 Self-occupied house property whose gross rent Self-occupied house property whose gross is taken as NIL, used to get deduction of rent is taken as NIL, will not get deduction of interest on loan. Deduction for repair based on interest on loan. Deduction for repair on annual value in case of rented house property annual value in case of rented house property is 30%. is proposed to reduce to 20%.8 As per section 80C certain investment/savings Exempt-Exempt-Taxation (EET) method of upto Rs. 1 lac were deductible from taxable taxation of savings/investment, will be applied income. on new contribution after commencement of the code. Limit for investment raised to Rs.300000 p.a. However deduction on investment in tax-saving mutual funds and fixed deposits have been abolished.9 Income from Salary includes all perquisites All such exemption withdrawn. such as house rent, leave travel assistance, children education allowances, encashment of unavailed earned leave on retirement, medical reimbursement and free/concessional medical treatment paid/provided etc is exempt up to a certain limit.
Positives of DTCSavings of up to 41,000 for those earning 10 lakh Corporate tax rate lowered from 40% to 30%Foreign companies to pay tax at the same rate as local companies No tax on maturity amount of NewPension Scheme at the time of withdrawal
Negatives of DTC Women will not get any additional tax benefits SEZ developers face tax burden starting April 2012Fund houses face 5% tax on distribution income for Ulips, equity-linked MFs More non-profit firms will come under the tax net As per the current laws, a NRI is liable to pay tax onglobal income if he is in India for a period more than 60 days in a financial year
How insurance gets impacted:Under DTC, to be eligible for taxdeduction, a policy should give life coverof at least 20 times the annual premiumIf this condition is not met, you will not getany tax deduction on the premium andeven the income from the policy will betaxableRight now income received from insurancepolicies is free.
Impact on Pension Funds:Under the DTC, most of current tax saving investment willnot be eligible for deductionAn Annuity is an investment that gives out a regular incomeof the investor.DTC has proposed to make annuity income exempt fromtaxation which makes them good tax saving instrumentThe New Pension scheme is low cost pension fund which aninvestor can consider.
EFFECT ON TAX LIABILITY DUE TO DTC INCOME RS 8,30,000 INCOME RS 3,00,000 INCOME RS 15,00,000
EFFECT ON TAX LIABILITY DUE TO DTCSUPPOSE THE TAXABLE INCOME IS RS 3,00,000FROM CURRENT TAX SLABTAX FOR 1ST RS 1,60,000 = NILTAX FOR NEXT1,40,000= RS 14,000 @ 10 %TOTAL TAX LIABILITY (EXCLUDING EDUCATION CESS @ 3% ) = RS 14,000
NOW, AFTER DTCTAXABLE INCOME = RS 3,00,000TAX FOR 1ST RS1,60,000 = NILTAX FOR NEXT RS 1,40,000 = RS 14,000@ 10%TOTAL TAX LIABILITY (EXCLUDING EDUCATION CESS @ 3%) = RS 14,000TOTAL SAVING = RS ( 14,000 – 14,000) = RS 0
SUPPOSE THE TAXABLE INCOME IS RS 8,30,000FROM CURRENT TAX SLABTAX FOR 1ST RS 1,60,000 = NILTAX FOR NEXT3,40,000= RS 34,000 @ 10 %TAX FOR NEXT 3,00,000 = RS 60,000 @ 20%TAX FOR NEXT 30,000 = RS 9000@ 30%TOTAL TAX LIABILITY (EXCLUDING EDUCATION CESS @ 3% ) = RS(34000+ 60000+9000) = RS 1,03,000
NOW, AFTER DTCTAXABLE INCOME = RS 8,30,000TAX FOR 1ST RS1,60,000 = NILTAX FOR NEXT RS 6,70,000 = RS 67000@ 10%TOTAL TAX LIABILITY (EXCLUDING EDUCATION CESS @ 3%) = RS 67,000TOTAL SAVING = RS ( 1,03,000 – 67,000) = RS 36000
SUPPOSE THE TAXABLE INCOME IS RS 10,00,000FROM CURRENT TAX SLABTAX FOR 1ST RS 1,60,000 = NILTAX FOR NEXT3,40,000= RS 34,000 @ 10 %TAX FOR NEXT 3,00,000 = RS 60,000 @ 20%TAX FOR NEXT 2,00,000 = RS 60,000@ 30%TOTAL TAX LIABILITY (EXCLUDING EDUCATION CESS @ 3% ) = RS(34000+ 60000+60000) = RS 1,54,000
NOW, AFTER DTCTAXABLE INCOME = RS 10,00,000TAX FOR 1ST RS1,60,000 = NILTAX FOR NEXT RS 8,40,000 = RS 84,000@ 10%TOTAL TAX LIABILITY (EXCLUDING EDUCATION CESS @ 3%) = RS 84,000TOTAL SAVING = RS ( 1,54,000 – 84,000) = RS 70,000
SUPPOSE THE TAXABLE INCOME IS RS 15,00,000FROM CURRENT TAX SLABTAX FOR 1ST RS 1,60,000 = NILTAX FOR NEXT RS 3,40,000= RS 34,000 @ 10 %TAX FOR NEXT RS 3,00,000 = RS 60,000 @ 20%TAX FOR NEXT RS 7,00,000 = RS 2,10,000@ 30%TOTAL TAX LIABILITY (EXCLUDING EDUCATION CESS @ 3% ) = RS(34000+ 60000+210000) = RS 3,04,000
NOW, AFTER DTCTAXABLE INCOME = RS 15,00,000TAX FOR 1ST RS1,60,000 = NILTAX FOR NEXT RS 8,40,000 = RS 84000@ 10%TAX FOR NEXT RS 5,00,000 = RS 1,00,000TOTAL TAX LIABILITY (EXCLUDING EDUCATION CESS @ 3%) = RS (84000 + 1,00,000) = RS 1,84,000TOTAL SAVING = RS ( 3,04,000 – ,184,000) = RS RS 1,20,000