Presentation by Vijay Vora

8/8/2019 Presentation by Vijay Vora

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DIRECT TAX CODEDIRECT TAX CODE

20112011

By Mr. VIJAY VORABy Mr. VIJAY VORA

(Chartered Accountant)(Chartered Accountant)



About Income TaxAbout Income Tax

Earlier Income Tax Act 1922Earlier Income Tax Act 1922

Current Income Tax Act 1961Current Income Tax Act 1961

Direct Tax Code 2011Direct Tax Code 2011

(discussion paper)(discussion paper)

ACT changes after 50 years of its existence ACT changes after 50 years of its existence



New Opportunities &New Opportunities &

ChallengesChallenges New Direct Tax Code (DTC)New Direct Tax Code (DTC)

Coming into effect by April 2011 afterComing into effect by April 2011 after

nearly 50 years of India s History innearly 50 years of India s History inTaxationTaxation

Understanding therefore of variousUnderstanding therefore of variousimplications ,provisions ,application andimplications ,provisions ,application andimpacts to Individualsimpacts to Individuals and Corporates areand Corporates areof great importance.of great importance.



DIRECT TAX CODES /DIRECT TAX CODES /

SCHEDUL

ESSCHEDUL

ES Full of Sections / Schedule / Rules / Regulations andFull of Sections / Schedule / Rules / Regulations and

Definitions.Definitions.

It contains 285 sections, 18 schedules .It contains 285 sections, 18 schedules .

Rules (are yet to be prescribed), 318 definitions forRules (are yet to be prescribed), 318 definitions forvarious clarifications.various clarifications.

DTC also has made various references to otherDTC also has made various references to otherlegislations and acts (nearly 50+).legislations and acts (nearly 50+).

The Direction of DTC indicates Growth for 21The Direction of DTC indicates Growth for 21st st Century.Century.However this needs to be viewed later after itsHowever this needs to be viewed later after itsimplementation.implementation.



Tax For Aam AdmiTax For Aam Admi

Tax currently levied at Rs 1,60,000Tax currently levied at Rs 1,60,000 now will be onnow will be on

Rs 3,00,000. 10% brackets to start from this level.Rs 3,00,000. 10% brackets to start from this level.

20% brackets from Rs 10 Lacs to 25 Lacs under DTC in20% brackets from Rs 10 Lacs to 25 Lacs under DTC in

place of Rs 3 to Rs 5 Lacs earlier.place of Rs 3 to Rs 5 Lacs earlier. Currently in DTC 30% Above income bracket of Rs 25Currently in DTC 30% Above income bracket of Rs 25

Lacs where as earlier it was Rs 5 Lacs.Lacs where as earlier it was Rs 5 Lacs.

Exemptions like Childrens Education Allowance ,MedicalExemptions like Childrens Education Allowance ,Medical, LTC, HRA all withdrawn., LTC, HRA all withdrawn.

Housing LoanHousing Loan interest and repaymentsinterest and repayments -- deductionsdeductionswere not considered separately.were not considered separately.

Deductions available on Housing dropped which wasDeductions available on Housing dropped which wasallowed up to Rs 1,50,000 for interest paid.allowed up to Rs 1,50,000 for interest paid.



Conversion of EEE concept to EETConversion of EEE concept to EET

with effect from 1.4.2011with effect from 1.4.2011

Increase in deduction limit from current level of RsIncrease in deduction limit from current level of Rs1,00,000 to Rs 3,00,000.1,00,000 to Rs 3,00,000.

New Limit to cover PF / Super Annuation / LIC premium/New Limit to cover PF / Super Annuation / LIC premium/Tuition fee for 2 children.Tuition fee for 2 children.

Tax Treatment on securities , Mutual Funds annuities ,Tax Treatment on securities , Mutual Funds annuities ,bonds , equities. However rollover is permitted.bonds , equities. However rollover is permitted.

Any addition or accretion will not be taxed till Any addition or accretion will not be taxed tillaccumulated in A/C.accumulated in A/C.

Any withdrawal or receipt from these accounts will be Any withdrawal or receipt from these accounts will betaxed in hands.taxed in hands.

EEE = Exempt + Exempt + Exempt EEE = Exempt + Exempt + Exempt

EET = Exempt + Exempt EET = Exempt + Exempt -- TaxTax



STATUS OF PF/ PPF/STATUS OF PF/ PPF/

IN

SU

RAN

CEIN

SU

RAN

CE Any withdrawal from balances of PF /PPF before Any withdrawal from balances of PF /PPF before

31.3.2011 will not attract any tax.31.3.2011 will not attract any tax.

After 1.4. 2011 any receipt /withdrawal will be taxable. After 1.4. 2011 any receipt /withdrawal will be taxable.

Retirement after 1.4.2011 will attract Tax onRetirement after 1.4.2011 will attract Tax on Leave encashment (not exempted from tax)Leave encashment (not exempted from tax)

Gratuity , VRS or Commutation in computing PENSION Gratuity , VRS or Commutation in computing PENSION will be taxable unless amount is deposited in Retirement will be taxable unless amount is deposited in Retirement Benefit Account (RBA).Benefit Account (RBA).

Amount so deposited in RBA is exempted. Any addition Amount so deposited in RBA is exempted. Any addition /accretion is also exempted but /accretion is also exempted but

Any withdrawal from RBA will be Taxable!!! Any withdrawal from RBA will be Taxable!!!



JUSTIFICATION FOR INSURANCEJUSTIFICATION FOR INSURANCE

Many insurance Schemes / products will attract TAX.Many insurance Schemes / products will attract TAX.

Any sum received under an Insurance policy including Bonus / Any sum received under an Insurance policy including Bonus /additions / interest shall be taxed as Gross Residuary Income inadditions / interest shall be taxed as Gross Residuary Income inIncome Tax.*Income Tax.*

Maturity Value of Insurance when received onMaturity Value of Insurance when received on

Death of Insured Party and Premium payment does not exceed 5% onDeath of Insured Party and Premium payment does not exceed 5% oncapital sum assuredcapital sum assured ( 20 years Insurance Policy ), under exemption( 20 years Insurance Policy ), under exemptioncategory.category.

Current schemes like Money Bank Policy, Guaranteed Plans underCurrent schemes like Money Bank Policy, Guaranteed Plans underULIPS and other returns will attract TAX!! *(clarification on only BonusULIPS and other returns will attract TAX!! *(clarification on only BonusTaxed). 10 (10 D) Section.Taxed). 10 (10 D) Section.



CAPITAL GAINCAPITAL GAIN--INDEXATIONINDEXATION

Indexation Base Year shifted from 1.4.1981 toIndexation Base Year shifted from 1.4.1981 to1.4.2000.1.4.2000.

Indexation applicable to all aspects held for oneIndexation applicable to all aspects held for oneyear +year +

Long term Capital Gain ( LTCG) and Short TermLong term Capital Gain ( LTCG) and Short TermCapital Gain distinction is now ended.Capital Gain distinction is now ended.

All Capital Gains to be taxed at an applicable All Capital Gains to be taxed at an applicableRates. Concessional Rates as earlier applicableRates. Concessional Rates as earlier applicable

were removed.were removed. LTCG resulted from Shares and Mutual FundsLTCG resulted from Shares and Mutual Funds

will be fully taxable from 1.4.2011.will be fully taxable from 1.4.2011.



TAX For NRI IncomeTAX For NRI Income

Proposal has been made under DTC forProposal has been made under DTC forIndians staying out of country.Indians staying out of country.

Flat rate of Tax be levied at Flat rate of Tax be levied at-- 20% interest and other Investment Income20% interest and other Investment Income

30% on all Capital Gain.30% on all Capital Gain.

35% Tax at source be deducted on all35% Tax at source be deducted on allresidual / other income.residual / other income.



TDS Net increasedTDS Net increased

Current provision of TDS on contract Payment @ 1%Current provision of TDS on contract Payment @ 1%now also cover service contract. (TDS be deducted @ 1now also cover service contract. (TDS be deducted @ 1% form payment made to Service Provider in respect for% form payment made to Service Provider in respect forbills for telephone , Insurance, Electricity, courierbills for telephone , Insurance, Electricity, courier,banking etc.,banking etc.

No mention of any limit of Professional Fees for TDS (No mention of any limit of Professional Fees for TDS (Presently Rs 20,000).Presently Rs 20,000).

TDS Forms:TDS Forms:

No mention of Forms 15 G and 15 H exempting personsNo mention of Forms 15 G and 15 H exempting personsform TDS.form TDS.

No provision for TDS at lower Rate.No provision for TDS at lower Rate.



Tax on Charitable and NonTax on Charitable and Non--

Profit OrganizationsProfit Organizations New provisions/ mention made about NonNew provisions/ mention made about Non-- Profit Profit

Organization (NPO).Organization (NPO).

New Terminology added of Permitted WelfareNew Terminology added of Permitted Welfare

Activities (PWA). Activities (PWA).

All present Charitable and other Trust to obtain All present Charitable and other Trust to obtainfresh registrationfresh registration requiring NPO identity.requiring NPO identity.

NPO to be taxed on surplus @ 15 % Flat NPO to be taxed on surplus @ 15 % Flat NoNobasic exemption available to them.basic exemption available to them.

(Continue)(Continue)



(continue«)(continue«)

No benefit on accumulation of income (asNo benefit on accumulation of income (asat presently available )at presently available )

NPONPO not categorized be taxed at 30 %not categorized be taxed at 30 %

Certain charitable / community Trust andCertain charitable / community Trust andMembers Association not to be treated asMembers Association not to be treated aseligible NPO.eligible NPO.



PROVISION FOR MINIMUMPROVISION FOR MINIMUM

AL

TERN

ATE TAX (MAT).AL

TERN

ATE TAX (MAT). MAT @ 2 % be paid on Gross AssetsMAT @ 2 % be paid on Gross Assets Value . Value .

This is investment linked TAX benefit /This is investment linked TAX benefit /incentive.incentive.

Companies not making book Profit but Companies not making book Profit but having huge investments will have to payhaving huge investments will have to payhuge Tax.huge Tax.

(Continue..)(Continue..)



(continue..)(continue..)

Companies into high capital intensiveCompanies into high capital intensivesector like Power/ Energy / Infrastructure/sector like Power/ Energy / Infrastructure/Investment Companies / Loss makingInvestment Companies / Loss making

Units / Corporates are affected.Units / Corporates are affected. No provision for MAT credits or anyNo provision for MAT credits or any

provision for carry forward outstandingprovision for carry forward outstanding

amount.amount. Globally MAT is not on Investment but onGlobally MAT is not on Investment but on

Profits !!!Profits !!!



INCOME TAX STRUCTUREINCOME TAX STRUCTURE --

CHARTCHART



Permissible deduction ChartPermissible deduction Chart



THANK YOU ALLTHANK YOU ALL

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Presentation by Vijay Vora