What is the DTC all about?- Business News
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What is the DTC all about?

India wants to simplify its direct tax laws, mainly its Income Tax Act, which is now nearly 50 years old. The government wants a modern tax code in step with the needs of an fast-growing economy.

  • New Delhi,  September 15, 2010  
  • |  
  • UPDATED   15:16 IST

India wants to simplify its direct tax laws, mainly its Income Tax Act, which is now nearly 50 years old. The government wants a modern tax code in step with the needs of an fast-growing economy. Deduction for individuals on account of tax sops will be:

  • Up to Rs 1 lakh for approved long-term saving i.e. provident fund (PF), superannuation fund, gratuity fund, pension fund
  • Up to Rs 50,000 for expenditure on tution fees of children, pure life insurance premia and health insurance payment
  • Up to Rs 1,50,000 for interest paid on house loans
  • Exemption limit proposed at Rs 2 lakh per year, up from Rs 6 Lakh.
  • Separate deduction for interest on education loan and for payment of expenses of disabled or disabled dependant
  • The exemption limit for senior citizens, is sought to be raised marginally to Rs 2.5 lakh from Rs 2.40 lakh now
  • An individually tax payer earning more than Rs 10 lakh would save up to Rs 41,040 annually.
  • Tax burden would reduce by Rs 21,450 for those earning annual income between Rs 5 lakh and Rs 10 lakh, while those making Rs 2 lakh to Rs 5 lakh could be richer by Rs 7,660.
  • Individuals over 65 years could see tax burden lessen by Rs 4,420 if they earn Rs 5 lakh a year, while those earning Rs 10 lakh will save Rs 18,300 tax.

What is the DTC all about?


The new Direct Taxes Code(DTC) Bill aims to replace profit-linked tax incentives with investment-linked incentives. The new tax code is expected to widen the tax base, end unnecessary exemptions, moderate tax rates and add to the government's coffers. The federal budget has estimated about $92 billion (Rs 9,200 crore) in direct tax receipts for the year that ends in March 2011.


What is the purpose

  • Integrate all direct tax laws with a single legislation
  • Simplify the language through use of direct and active speech
  • Provide stability in direct tax rates
  • Strengthen taxation provisions for international deals
  • Minimise exemptions to result in a higher tax-GDP ratio

Personal income tax

  • Corporate tax to remain at 30 per cent but surcharge and cess - which currently amount to an extra 3.2 per cent - have been dropped.
  • The Minimum Alternate Tx (MAT) rate has been increased from 18 to 20 per cent in the new code.
  • Government proposes to retain a zero capital gains tax for those who hold on to shares for more than a year
  • MAT will be levied on book profits and all companies with MAT credit will be allowed to carry it forward for 15 years
  • Dividend Distribution Tax - tax on distributed profits of a domestic co- will be 15 per cent
  • The tax on the income distributed by an MF to its unit holders of equity funds will be 5 per cent.