New Direct Tax code - 1.4.2012

Some of the amendments in New Direct tax code which was approved by cabinet needs attention of indian tax payers. This will be applicable from 1.4.2012 instead of 1.4.2011.

1. ELSS(Equity Linked Savings Scheme), repayment of principal amount of the housing loan,NSC, term deposits with banks for 5 years or more and ULIPs would not be eligible for deduction under the Sec.80C from 1.4.2012. Only superannuation benefits like PF, pension, Life insurance policies without ULIP are eligible for deduction upto Rs.1,00,000 per year.
2.It is important to note that only life insurance policies where the premium does not exceed 5% of the capital sum assured in any year during the term of the policy would be eligible for deduction under Sec.80C.
3.Addition deduction of Rs.50,000 is allowed under sec.80c for Premium paid for health insurance policy by an individual for self, spouse, his dependent children or parents . Also, any sum paid towards tuition fee to any school, college , university, or any other educational institution situated in India for the purpose of full time education of any two children of an individual would be eligible for deduction.
4.An individual can claim deduction for interest paid on loan taken for pursuing his higher education or higher education of his spouse, child or a student under his legal guardianship.The principal loan repayment will not eligible for this rebate. Higher education means any course of study pursued after passing the senior secondary examination or its equivalent conducted by any board or university, recognised by the central or state government or any authority authorised by the government.

5.The LTA will be clubbed as a part of the income and deduction is also allowed subsequetly. The idea behind this reporting mechanism is to ascertain the amount of money an employee gets as the LTA. So far, LTAs don't reflect in either salary slips or in Form 16. After the amended DTC Rules , the LTAs will also find mention in Form 16 issued by employers.

6.The basic exemption limit for individual income tax is up from Rs 1.6 lakh to Rs 2 lakh. Thus single tax slab is suggested for male and female. The male will gain tax advantage of Rs.4000.(10% on Rs.40000). For female, tax limit is raised to 2 lakhs from 1.90 lakhs thus tax gain of Rs.1000/- (10% on Rs.10000). Also, for senior citizens above the age of 65, the basic exemption limit has been raised to Rs 2.5 lakh. For them also, the limit is raised from 2.4 lakhs to 2.5 lakhs thus tax gain of Rs.1000 on Rs.10000/-.

7. No Long term capital gain tax for securities held more than a year.
8.For short term capital gains in securities, the taxes are reduced . Gains will be taxed at 50% of applicable taxes for individuals, HUF etc. So for individuals, the tax rate may be 5% for the persons in the tax slab of 10%, 10% for the persons in the tax slab of 20% etc. This is against existing uniform tax rate of 15% uniformly to all categories.
8.For corporate, it will not apply and corporte have to pay at maximum rate of 30%.
9.Corporate tax is reduced from 33.22% to 30% due to abolition of surcharge and education cess. All corporate taxpayers will now be liable to MAT, including those availing of the incentives linked to investments and profits.
10.Companies can carry forward MAT credit that is equivalent to the difference between the corporate tax and the actual MAT paid for 15 years instead of current 10 years.
11.DTC Bill proposes to impose a five per cent dividend distribution tax (DDT) on mutual fund houses and ULIP insurers on income distributed by them. This will reduce income to investors in mutual funds and ULIP holders slightly less amount as 5% will be deducted in advance by mutual funds and insurers on investors’ behalf. This is applicable for funds investing 65% in equity or more.
12.For rest of the schemes like debt oriented etc the tax will be applicable rates rather than 5% and it will be heavy. In these cases, TDS will be 10%.
13.Annual value for house property will be actual rent received and not notional rental value. For deductions under rented house under house property, only 20% of annual value will be given as rebate for repairs instead of 30%.
14.The wealth tax rate of 1% is now applicable for assets above Rs 1 crore. Earlier, this rate was applicable on assets above Rs 30 lakh. Earlier, any cash holding above Rs 50,000 was considered as part of wealthand new code proposes to increase it to Rs 2 lakh. Deposits in banks abroad are also going to be a part of wealth . Also, watches, art and painting have been brought under wealth tax net.