Direct Rax Code

Changes in Income Tax Rates
INCOME TAX RATES(%)

Income Individual Women Senior citizen
Slab (Rs.) Current Proposed Current Proposed Current Proposed
1,60,000 Nil Nil Nil Nil Nil Nil
1,90,000 10 Nil Nil Nil Nil Nil
2,00,000 10 Nil 10 Nil Nil Nil
2,40,000 10 10 10 10 Nil Nil
2,50,000 10 10 10 10 10 Nil
5,00,000 10 10 10 10 10 10
8,00,000 20 20 20 20 20 20
10,00,000 30 20 30 20 30 20
12,00,000 30 30 30 30 30 30
Proposed DTC increase the limit of income exempt from tax:-
CURRENT PROPOSED PROFIT TO
COMMON
PEOPLE
2.00.0
This approval aims to abolish the distinction between the individual & women
tax payer, as far of payments of taxes are concerned.
Rising cost of living with each day, an additional disposable income of

4000/- & 1000/- does not sound much appealing.
CURRENT PROPOSED CURRENT PROPOSED
INCOME SLAB INCOME SLAB RATE RATE
1,60,000 – 5,00,000 2,00,000-5,00,000 10% 10%
5,00,000-8,00,000 5,00,000 - 10,00,000 30% 20%
8,00,000-more than 10,00,000 – more than 30% 30%
The maximum amount that a tax payer can save in maximum income
slab is Rs.24000/- per annum
There is marginal relief for those who have income between 2,00,000-
10,00,000
Loss to government:
The total loss of government will around Rs. 53,172 crores in tax revenue on
account of the increase in exemption limits and tweaking of slabs in the Direct
Taxes Code Bill, which will come into effect from April 1, 2012
Benefit to tax payer:

The changes, when they take effect, will help save up to Rs. 41,040 for people
earning more than Rs. 10 lakh a year.
Special Economic Zones
It will lose all income tax benefits. if the direct taxes code replaces the Income
Tax Act of 1961 without any change.
The SEZ Act allows:-

SEZ units to enjoy direct tax exemption for 15 year period.
For the first five years, 100% export linked profit is exempted.
For the next five years, it is 50%.
In the remaining five years, SEZ units can claim exemption on 50% of the
reinvested export profits.
The bill tabled in Parliament proposes to replace current BENEFITS from SEZs
Profit-linked to investment-linked:
Special economic zone (SEZ) developers and units availing tax incentives were to be
granted profit-linked tax incentives and new units and developers were to be entitled to
investment-linked tax incentives as per the RDP.
MAT (Minimum alternate tax):-

Increase MAT from 18 per cent to 20 per cent of the book profit of a company. It also
seeks to levy dividend distribution tax at 15 per cent.
The code is government’s attempt to streamline and rationalize the direct tax structure
and widen the tax-base by lowering tax rates but minimizing exemptions and linking
them to investments to encourage production activity.
Corporate tax rates: The corporate tax rate in the original DTC was 25% that would
have been looked at extremely positively. In the revised code, it is 30%, still an
improvement on the 33.22% prevailing currently
Capital gain: The retention of the zero tax rate on long-term equity gains
Short-term gains are currently taxed at 17% on listed equity shares; such gains will now
be charged at 50% of the base rate, i.e., 5%, 10% or 15%, depending on the applicable
slab rate for individuals, 15% for corporate.
FIIs: Buying or selling securities by FIIs is to be charged capital gains

FIIs will not to be subjected to tax deducted at source and will have to pay advance tax
Changes in proposed DTC:
Currently available interest deduction of `1.50 lakh on home loan on self-occupied

property has been retained,
Sec 80C, the bill proposes a two-tiered deduction:-

The first tier is a `1 lakh deduction for savings in respect of contributions to the
employee provident fund, PPF, pension fund etc.
The second tier is a deduction with a ceiling of Rs.50,000 reserved for deduction in
respect of life insurance and health insurance premium as well as for tuition fees.
New ULIPs post DTC will not have EEE(exempt-exempt-exempt ) benefit. However,
existing ULIPs will continue to get EEE benefit
The premium paid by an individual for a life insurance policy for self, spouse or
children will be eligible for this deduction .
premium does not exceed 5% of the capital sum assured in any year during the
term of the policy would be eligible for this deduction.
Securities Transaction Tax (STT) and Education cess are out .
Life Insurance payments and mutual fund income are liable for 10% TDS (source
HRA no longer available.

NRI:-
Individual shall be resident in India in any financial year if he is in the country
for more than 59 days in that year and has been in India for more 365 days in the
four preceding financial years.
A phrase “being outside India” in the existing income tax law exempted
individuals who stay outside the country for six months from paying taxes
Current personal exemption limit of Rs 1.60 lakh and the deduction of Rs 1 lakh
u/s 80C now exempted from the proposed DTC.
Moreover, all capital gains earned by a non-resident will attract a flat tax of 30
per cent, irrespective of the amount of capital gains.
While a resident Indian will be required to pay tax of Rs 3.84 lakh on his taxable
income of Rs 25 lakh, an NRI earning equivalent capital gains will be called upon
to pay almost double tax of Rs 7.5 lakh,
Interest on housing loan :-
An individual can claim deduction on interest paid up to `1.5 lakh on a loan taken for
acquisition, construction, repair or renovation of a house property in the financial year
in which such property is acquired or constructed.
This deduction would be allowed only if the house property is owned by the person
and is not let-out in the financial year.
Further, the acquisition or construction of the house property should be completed

within three years from the end of financial year in which the loan was taken.
Encourage company to convert in LLP(Limited Liability Partnerships)
The provision for conversion of a company into LLP(Limited Liability Partnerships ) has
been introduced in the DTC.
The conditions are predominantly the same as introduced by the Finance Act, 2010 in
respect to conversion of private companies/unlisted companies into LLP.
However, this exemption continues to be available only to companies with a sale

turnover of Rs 60 lakh, which may not be very beneficial for large corporate.
The base date for determining the cost of acquisition is to be shifted from April 1, 1981
to April 1, 2000.
Consequently, all unrealized capital gains on assets for the period between April 1, 1981
and March 31, 2000 will not to be liable to tax.
Anti avoidence rule:-
The Direct Taxes Code Bill has proposed General Anti-Avoidance Rules (GAAR) to
check arrangements with obtaining tax benefits as the main objective .
If the tax authorities find that there has been a misuse or abuse of the provisions of
DTC, or a transaction lacks commercial substance, the officials can use GAAR.
FDIs:-
The government proposed to allow foreign firms to bring in new technology and set up
new independent business without clearance from their existing local joint venture
partners.
A foreign player with a joint venture, set up before January 12, 2005, now faces several
barriers if it wants to set up a new business without approval of the domestic partner.
The relaxations will not be applicable to the joint ventures entered after January 12, 2005.
Thank you….

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Changes in Income Tax Rates

INCOME TAX RATES(%)

Rising cost of living with each day, an additional disposable income of

Benefit to tax payer:

The SEZ Act allows:-

MAT (Minimum alternate tax):-

FIIs: Buying or selling securities by FIIs is to be charged capital gains

Currently available interest deduction of `1.50 lakh on home loan on self-occupied

Sec 80C, the bill proposes a two-tiered deduction:-

Securities Transaction Tax (STT) and Education cess are out .

HRA no longer available.

Further, the acquisition or construction of the house property should be completed

However, this exemption continues to be available only to companies with a sale

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