Finance Minister, Pranab Mukherjee has tabled the draft of Direct Tax Code on Monday, 30th August 2010 in Parliament.
Major highlights and changes to check in DTC are:
- Postponed DTC to be applicable from April 1, 2012
- Income Tax slabs has been changed and raised giving some relief to tax payers
- Exemption of Rs 100,000/- under 80C is limited to PF, Pension and Annuity Funds
- Additional deduction of Rs. 50,000/- provided
- No change in long term capital gain tax for listed securities and equity mutual funds
- Change in formula for short term capital gain tax
- STT to remain there
- Corporate Tax is maintained at 30%
- MAT is increased to 20%
- 5% Tax on Maturity of Mutual Funds and equity oriented Life Insurance
- 5% Tax on Dividend Distribution (DDT) for equity mutual funds
- Tax break for SEZs
The above mentioned updates for new tax code may differ in the final draft as it has now been postponed by one year. This is actually the third revised draft after being first proposed by the cabinet.
Revised Tax Slabs:
0 - 2 lacs : No Tax
2 - 5 lacs : 10%
5 - 10 lacs : 20%
Above 10 lacs : 30%
Additional 50,000/- is for health insurance, pure life insurance, education and any medi-claim type of policy.
If there will be some changes or modifications required in the above points, they will be updated. Still there are few points need some clarification. Nothing is clear about LTA whether it will become Taxable or remain Non-Taxable.
As an update, Finance Ministry has cleared that individuals will continue to enjoy the benefits of LTA as before. So, nothing much really changed for individual tax payers except the changes done for Sec 80C.
ELSS (Tax Saving Mutual Funds), ULIPs, Tax Saving FDs will not come under section 80C from April 2012.