Anubhav Sood
Helga Cardoza
Ragini Rastogi
Sumit Kothari
Vani Subramanian
New DTC is said to replace the existing Income Tax Act, 1961
It is expected to be implemented from April 1st, 2012
It was tabled in the Parliament on August 30th, 2010. Since then, lots of
changes have taken place and lesser benefits as compared to the original
proposal
To eliminate distortions in the tax structure
To introduce moderate levels of taxation
To expand the tax base
To improve tax compliance
To simplify the language
To lower tax litigations
Individual Tax Slabs have been modified
Before After Tax Slab
Up-to INR 180,000 Up-to INR 200,000 (for senior Nil
(for women 190,000 citizens 250,000)
senior citizens(>60 years) 250,000 and
>80 years 500,000)
INR 180,000 to 500,000 INR 200,000 to 500,000 10%
INR 500,000 to 800,000 INR 500,000 to 1,000,000 20%
Above INR 800,000 Above INR 1,000,000 30%
No preferential treatment for women
Surcharge and Education cess proposed to be abolished
An individual earns Rs.10lakh
CURRENT TAX RATE UNDER DTC TAX RATE
Tax Slab Rate Tax payable Tax Slab Rate Tax payable
1,80,000 to 5,00,000 10% 32,000 2,00,000 to 5,00,000 10% 30,000
5,00,001 to 8,00,000 20% 60,000 5,00,001 to 10,00,000 20% 1,00,000
8,00,001 and above 30% 60,000 10,00,001 and above 30%
1,52,000 1,30,000
An NRI is liable to pay tax on global income if he is in India for a period
more than 182 days in a financial year, currently. But in new bill, this
duration has been changed to just 60 days
This is very unfair to Seafarers
Medical Allowance Reimbursement: Raised to Rs. 50,000 from Rs.
15,000
Leave Travel Allowance: Currently exempted from tax, will be taxable
under DTC
ULIPs, Term Deposits, NSC, Long term Infra bonds: Currently exempted
from tax will be taxable under DTC
Provident Funds, Pension Scheme, Retirement benefits: Tax
exemptions at all 3 stages (EEE) – savings, accretions and withdrawal.
Earlier DTC wanted to tax withdrawals
House Rent Allowance: Proposed to be removed
Standard Deduction : Been reduced from 30% to 20%
Only let-out property to be taxed. The concept of ‘deemed let-out’
property has been abolished
Income from any other house property, even if let out for the business of
the assessee, is to be taxed as income from house property
House property located in a SEZ that is used as hospital, hotel,
convention centre or cold storage to be considered as income from
business
No time limit for carry forward and set off of loss from house property
Current Scenario
The base date to be shifted from 1.4.’81 to 1.4.2000
DTC proposes to abolish Securities Transaction Tax (STT)
Instance ITA DTC
Indexation Investments held for 36 Investments held for 12 months
benefit months or more or more from the en of the
financial year in which it is
acquired
Equity Share Short Term Asset : 15% Depends on slab rate of the
subject to STT Long Term Asset : Exempt individual
Other Short Term Asset : 30% Depends on slab rate of the
investments Long Term Asset : 20% individual
Current Scenario
Tax on amount of money beyond the value of Rs. 1 crore
Wealth tax at 1% = no change of rate from current tax rate
Wealth to include luxury commodities like helicopters, archaeological
pieces, antiques, paintings, etc
Foreign assets, investment and deposits to be included in wealth
estimation
Tax Rates
Particulars ITA (Base Rates) DTC
Indian Company 30% 30%
Foreign Company 40% 30%
BPT - 15%
DDT 15% 15%
MAT 18% 20%
Effective rate for foreign co. 42.23%* 40.50%
Effective rate for Indian co. 42.73%** 39.13%
* Including surcharge and education cess
** After DDT
Minimum Alternate Tax (MAT) : Increased from 18.5% to 20%. Tax
credit allowed shall be excess of tax on book profit over tax over normal
provisions of DTC
Branch Profit Tax (BPT) : Introduced at 15% on profits of Foreign
Company branches with private Equity in India and immovable property
held
Special Economic Zones (SEZ) : Exemptions continue until 2014 as long
as they are registered on or before March 31st, 2012 under SEZ Act of
1961
Corporate: The DTC proposals should lead to better corporate
profitability and productive use of capital in the long-run
Lower tax liability for companies and no changes in capital gains tax for
foreign institutional investors (FIIs) are beneficial for the capital markets
and ensure greater investor interest
Rent calculation is made simple as rent received or receivable in a
financial year is taken into consideration
ULIPs : This is a big blow to investors since they will no longer enjoy the
dual advantages of growth and tax benefit
Expected loss to government : 53,000cr (around 14,000cr from
individuals and 39,000cr from corporate)
A comprehensive tax levy of the manufacture, sale and consumption of
goods and services at the national level
France was the first to implement this in 1954. 140 countries worldwide
follow this system
To integrate State economies and boost overall growth
Abolition of other taxes such as CST, octroi, stamp duty, etc. thus
avoiding multiple layers of taxation that currently exist
Increase tax base and reduce exemptions
Dual GST system – Central and State
No distinction between goods and services
Rate is expected to be around 14-16%
Prices are expected to fall as sellers will transfer the benefit of reduced
prices to buyers
This system allows the set-off of GST paid on the procurement of goods
and services against the GST which is payable on the supply of goods or
services
Petroleum products and alcohol will be out of this ambit
Proposed date for implementation was 1st April, 2010. however, now
pushed to 1st April, 2012
It is necessary to receive agreement on various issues from the State
governments e.g. GST rates, constitutional amendments
States expect reduction in tax collections
Drafting of legislation and implementation will take a long time
(1)speeds up economic union of India;
(2)better compliance and revenue buoyancy;
(3)replacing the cascading effect [tax on tax] created by existing indirect taxes;
(4)tax incidence for consumers may fall;
(5)lower transaction cost for final consumers;
(6)by merging all levies on goods and services into one, GST acquires a very simple and transparent character;
(7)uniformity in tax regime with only one or two tax rates across the supply chain as against multiple tax
structure as of present;
(8)efficiency in tax administration;
(9)may widen tax base;
(10)increased tax collections due to wide coverage of goods and services; and
(11)improvement in cost competitiveness of goods and services in the international market.
Revised Discussion Paper on DTC, June 2010
The Direct Taxes Code Bill, 2010 by Deloitte
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