DIRECT TAX CODE

- by Jay Gosrani, MBA Sem. III (JVIMS, Jamnagar)

COMPARSION OF
RELEVANT PROVISIONS
UNDER INCOME TAX
ACT AND DTC FIRST
DRAFT & DTC REVISED
AS APPLICABLE TO
INDIVIDUALS
 INCOME TAX SLABS

Particulars Provisions DTC First Draft DTC Observation/

under revised Remarks
Income Tax Act
Tax Rates Upto 1.6 Lacs : Nil Upto 1.6 Lacs : Nil Rates to be It is expected that
(Individual / +1.6 – 5 Lacs : 10% +1.6 – 10 Lacs : 10% prescribed the rates
HUF) +5 – 8 Lacs : 20% +10 – 25 Lacs : 20% after prescribed under
considering the First DTC
+8Lacs : 30% +25 Lacs : 30% draft
the overall
impact of the would be
eg.: eg.: substantially
Income : 25 Lcas Income 25 Lcas changes
reduced to bring it
suggested in
Tax : 6.04 Lacs Tax Rs.3.84 Lacs down at current
revised draft. levels.
 Taxability on withdrawal
of Retirement Benefit

Particulars Provisions DTC First Draft DTC revised Observation/

under Remarks
Income Tax Act
Taxability E-E-E Regime E-E-T Regime E-E-E Regime* This is
on i.e. i.e. *It will be a diluted supposed to be
version of the existing
withdrawal Investment: Exempt Investment :Exempt one of the most
EEE regime as the
from Income: Exempt Income: Exempt revised draft has not path breaking
PF/PPF, Withdrawal:Exempt Withdrawal: Taxable categorically relief. However
ULIPS, committed to complete it is suggested
Pension EEE regime. to register the
Fund, etc. Certain investment e.g. protest and
New ULIP, New
pressurize the
Endowment Policy
may not qualify under authorities to
new EEE regime. reinstate the
existing EEE
regime.
 Taxability of various
components of Salaries

Particulars Provisions DTC First Draft DTC revised Observation/

under Remarks
Income Tax Act
House Rent Exemption is No No Change It is suggested to
Allowance available U/s exemption/relief is register the protest
10(13A) prescribed and pressurize the
authorities to
reinstate the
existing
exemptions.
Leave Travel Exemption is No No Change
Allowance available U/s exemption/relief is
10(7) prescribed
Allowance for Exemption of No exemption is No Change It will not have any
personal Rs.100/300 per available in respect major impact on
expenses eg: month was of any allowance the salary
children available for personal computation
education, purposes
hostel
allowance
 Taxability of various
components of Salaries

Particulars Provisions DTC First Draft DTC revised Observation/

under Remarks
Income Tax
Act
Employer Exempt upto Contribution No Change It is possible that
contribution to Rs.1 Lacs per with in the exemption will be
Superannuation annum prescribed limit linked to the
Fund will be exempt quantum of salary.
Medical Exempt Under It will be No Change Will benefit all the
Reimbursement Proviso to available on employees in the
/ section 17 same lines with organization.
facility some increase
in current
monetary limit of
Rs.15k
 Taxability of various
components of Salaries

Particulars Provisions DTC First Draft DTC revised Observation/

under Remarks
Income Tax
Act
Retirement Permanent Exemption Permanent It appears that
benefit : VRS, exemption is available Exemption. the amount of
However the
Gratuity, available under under EET exemption will be
amount is not yet
Leave various sections. scheme. prescribed. more or less at
Encashment, etc i.e. temporary existing levels.
exemption

Perquisites As per As per Rules, No Change Rules expected

Perquisites not yet more or less on
valuation Rules Prescribed the same line as
the existing Rules.
 Taxability of various
components of Salaries

Particulars Provisions DTC First Draft DTC revised Observation/

under Remarks
Income Tax
Act
Meal coupons, Meal coupons are No Exemption is Permanent
Reimbursement exempt uptoRs.50 prescribed Exemption.
However the
of telephone/ per meal and
amount is not yet
Mobile bills reimbursement of prescribed.
Telephone/Mobile
bills are fully
exempt
Set off of Not allowed Allowed Allowed It will benefit those
Business employees who are
Loss also engaged in
against Business activity. .
Salary Income
 Income from House
Property

Particulars Provisions DTC First Draft DTC revised Observation/

under Remarks
Income Tax
Act
Computation of Actual Rent or Actual Rent or 6% Actual Rent It is a very
taxable rent in Fair market value of cost of Property pragmatic step as
case where of rent whichever whichever is higher. it will resolve the
property is is higher issue of taxability
given on Rent of notional rent
Taxable Rent of Any one Property Any one Property: Nil if property It will curb the
the property if : Nil Nil is not actually menace of notional
given on rent
held for personal All other All Other Property: tax in case where,
use. property: Fair 6% of cost of more than one
Market value of Property property is held for
rent personal use.
Standard 30% of Rent It is reduced to No change It is calibrated in
Deduction income is 20% view of the above
allowed relief
as deduction.
 Capital Gains

Particulars Provisions DTC First Draft DTC revised Observation/

under Remarks
Income Tax
Act
Sale of Listed Fully Fully taxable at Limit likely to be Even if one intends to
shares/ exempt normal rates reduced as EEE hold the shares, he
Equity oriented however the regime is proposed should sale it and buy
Mutual benefit of now. However the back the same to
Funds after Indexation is details of savings book the profit
instruments are under
they are available.
not yet prescribed. current regime to
held for +12 avail the benefit of
months & exemption /
STT is paid. concession in tax.
Sale of Listed Taxable Taxable at Taxable at Normal
shares/ Equity @ applicable Rates applicable to Caution: The above
oriented Mutual special Normal Rates individuals advice is a general
one and may not hold
Funds after Rate of
good in all the cases.
they are held 15% Consultants advice
for -12 months should be sought.
& STT is paid.
 Capital Gains

Particulars Provisions DTC First Draft DTC revised Observation/

under Remarks
Income Tax
Act
Base Year for 1.4.1981 1.4.2000 The benefit of A deduction at a
Indexation: Indexation is not specified % of capital
available
For listed gains will be allowed
Equity shares and such gains
or Units of will be taxed at a
Equity oriented concessional rate.
Mutual fund.
For Other 1.4.1981 1.4.2000 No change Any capital gains
Assets arising till 1.4.2000
will be exempted from
capital gains.
Levy of STT Yes No Yes, will be Revised DTC has
calibrated. deviated from the
promise made under
original DTC