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Direct Tax Code
Prepared By:
Yash Rathore - 57
Siddharth Yadav-35
Ajeet Patil-58
Swati Lele-14
Shubha Saxena-62
Spurti Roy-06
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DIRECT TAX CODE (DTC) The Direct Tax Code (DTC) 2009 is to come into
force on 1 April, 2011, if enacted.
1. Earlier Income Tax Act and Wealth tax Act(Covering Income Tax, TDS, DDT, FBT andWealth taxes) are abolished and single code of Tax, DTC in place.
In Income-Tax we were using Assessment Yearand Previous Year. Now the concept of Assessment Year and Previous Year is replacedwith a new concept of Financial Year whichmeans a period of 12 months commencing from
01 April and ending on 31 March.
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RESIDENTIAL STATUS Resident status of an individual is to be determined on the
basis of his status in India
Indian Company to be treated as resident in India
Foreign Company to be treated as resident in India if the
control and management of its affairs is situated wholly or
partly in India in the financial year.
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Resident based taxation to be applied for
residents and accordingly worldwide income to
be taxed.
We have in India three categories of assesses viz.
Resident
Non-ordinarily resident (NOR)
Non-resident
Second category i.e. NOR to be abolished.
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Income to be classified into two groups:
(i) Income from ordinary source(ii) Income from special source
Income from Ordinary source will include:
(i) Income from employment (salary) andperquisites(ii) Income from house property(iii) Income from business(iv) Income from capital gains
(v) Income from residually source (other source)
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Income from Special Source to include specified income(i) of non-residents viz. winning from lotteries, horse
races, royalty and dividend on which DDT has been paid
etc.
A separate schedule is given in DTC which provides
working of taxable portion of income from special source.
Loss can be carried forward to indefinite period. If in
any year return is not filed within due date, the whole
of the loss i.e. current year as well as all previous
year¶s loss carried forward will get lapsed.
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EET
EET based taxation for all permitted savings like PF,Superannuation fund, LIC and New Pension SystemTrust, i.e. contribution is Exempt,accumulation/accretions is Exempt and allwithdrawals at any time will be subject to Tax (taxedunder Income from residuary source). However,rollover of balance from one account to other won¶tbe taxed.
The EET based taxation will not be applicable for balance Accumulated as on 31st March 2011. That isany contribution/accumulation/accretions to PPF from1st April 2011 when withdrawn will only be taxed,withdrawal of contribution/accumulation made upto31st March 2011 and accretions in case of PPF willbe exempt.
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An aggregate deduction of Rs 300,000 isproposed for savings maintained with permittedintermediaries (approved retirement benefitstrusts & life insurers) and children education.Investment in equity linked savings schemes of
MFs, saving FDs with banks, housing loanrepayment, etc, would no longer be eligible forthe deduction.
The existing deductions in respect of interest on
educations loans and medical premium/expensesis sought to be continued
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Corporate taxation The corporate taxregime in India, for years, is plagued on the
one hand, with a higher base rate and onthe other hand, with sector-specific taxincentives (exemptions/deductions). Thiscomplicated the effective tax computation
as also resulted in protracted litigation. The code seeks to rationalize corporate
taxation in a big way. The corporate tax
rate has been proposed at 25%.Consequently, the tax incentive provisionshave been largely eliminated.
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Business income : Under the new model, theincome from business would be computed as
gross earnings minus business expenditure. Allreceipts from business, including capital receipts,shall form part of gross earnings. Thus, forinstance, profit from sale of business capitalassets/slump sale of business undertakings,
would now be taxable as business income (asagainst capital gains under the current Act). Also,remission of any loan, otherwise a capital receipt,would form part of gross earnings. Business
expenditure is classified under three categoriesOperating expenditure, permitted financialcharges and capital allowance.
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House property income: The code largelysimplifies taxation of house property income. The
taxable gross rent shall be the actual rentreceivable upon letting out or a notionalpresumptive rent computed at 6% of the ratablevalue, whichever is higher. If no ratable value isfixed, the actual cost would be taken in lieuthereof.
While exemption for one self-occupied property(SOPs) continues for individuals, the deductionfor repairs & maintenance is proposed to be
reduced to 20% of the gross rent, from thecurrent level of 30%. Besides, the currentdeduction for housing loan interest up to Rs150,000 available for sops is sought to be done
away with.
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Capital gains tax: The code seeks to bifurcatecapital assets as investment assets and business
assets. Income arising upon transfer of aninvestment asset would only be taxable as capitalgains.
Secondly, and more importantly, the code seeksto completely eliminate the distinction betweenshort-term and long-term assets
Long-term assets, though, would continue to beeligible for indexation benefits. In another majorchange, the cost base for an asset acquired priorto April 1, 2000, can be taken, at the option of thetaxpayer, as the fair market value as on that date.In cases where the cost is incapable of beingdetermined, the cost shall be taken as nil.
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The Securities Transaction Tax (STT)-basedtaxation of listed equity shares / equity linked MFunits is proposed to be abolished. Consequently,capital gains on transfer of such assets would be
taxable at the normal rate under the new regime,as against a full exemption for LTCG and a lower15% rate for STCG, under the current regime. STTis sought to be abolished, in a move which shouldbenefit day traders significantly. Further, theCode also proposes to do away with the specialtax regime for FIIs / NRIs.
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PROPOSED RATES FOR INDIVIDUAL:
Slab of IncomeRate of Tax
0 to 1,60,000/- NIL
1,60,001/- to 10,00,000/- 10%
10,00,001/- to 25,00,000/- 20%
25,00,001/- and above 30%.NOTE:
Females below 65 years, the basic exemption limit
Rs.1,90,000/-
Senior citizens, the basic exemption limit Rs.2,40,000/-.
For Domestic Company 25% Foreign Companies 25%
Profit of Branch Office of Foreign Company 15% .
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Category Existing Rate As per DTC
Income-tax 30 percent 25 percent
MAT Levied at 15percent
of the Adjusted book
profits in the case of
those companieswhere income-tax
payable on the
taxable income
according to the
normal provisions of
the Act is lesser thanthe same.
Tax on gross assets
introduced as under:
0.25% of Gross Assets
for Banking Companies. 2% of Gross Assets for
other Companies.
Dividend
Distribution Tax 15% 15%
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WEALTH T
AX
Wealth Tax will be abolished for Corporate
Wealth Tax is chargeable for individuals, HUF and
private Trust.
Wealth Tax @ 0.25% of net wealth will be
charged if the value of wealth exceeds Rs.50
crores.
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Thank You