Direct Tax Code

by

Ms. Ankita Agrawal

Mumbai

Outline
Background ITA vs DTC Major Changes Tax Rates Sources of Income Corporate Tax and MAT International taxation Wealth Tax

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Background
DTC 2009 unveiled in August 2009 The Government received over 1,600 representations on DTC 2009 RDP released in June 2010 on 11 specific issues DTC 2010 tabled in the Lok Sabha on 30 August 2010 A brave attempt to clean up the maze, Indias Income tax law has become with innumerable amendments After clearance from the Parliamentary Standing Committee, the Bill may be passed in the Winter Session The DTC 2010 to be effective from FY commencing 1 April 2012
319 Sections and 22 Schedules in DTC 2010 vis--vis 298 Sections and 14 Schedules in the ITA Simplified Legislation ?

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ITA vs DTC
ITA
Complexity

DTC
Flexibilty

Costs
Judgements Tax Base

Reduced Litigation
Simple Language

Consolidation

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Major Changes
Financial year

Residential Status Definition of Assessee Compliance by Government Assessee Scope of Income Expanded

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Rates of Income Tax

Proposed Slabs
(DTC 2009) Upto INR 160,000 INR 160,000 to 1,000,000 Above INR 2,500,000

Proposed Slabs
(DTC 2010) Upto INR 200,000 INR 200,000 to 500,000 Above INR 1,000,000

Tax rate
(%) Nil 10 20 30

INR 1,000,001 to 2,500,000 INR 500,001 to 1,000,000

exemption for women to be exemption for women to be Rs. 1.9 lakhs and Rs. 2.4 Rs. 2 lakhs and Rs. 2.5 lakhs lakhs for senior citizen for senior citizen

New Dates of Returns:

Non Business : 30-6 Others : 31-08

Firms, AOP, BOI will be taxed at 30 % without any exemption limit

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Sources of Income

Ordinary Sources -Employment - House property -Business - Capital Gain - Residuary

Income

Special Sources Winning from Lotteries, Games etc ,Non residents Income

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Income From Employment

Permissable deduction - Professional tax, Allowances, VRS, Gratuity & Pension Non Permissable deduction
- LTA, - Medical Reimbursements, Contribution to approved funds, HRA (Limit) Public sector Vs private sector employees

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Income from House Property

Gross Rent to be calculated on the basis of actual rent
received or receivable and not on presumptive basis Interest on Housing Loan Deduction for repairs @ 20 % Arrears of Rent Income from business property Co-owners of property

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Income from Business

Classification of Assets
- Investment Assets - Business Assets : Trading and Capital Sale of Carbon Credits

Non Moving Creditors

Finance lease
Rate of deduction for scientific research Treatment of Deffered revenue expense

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Capital Gains
Capital Asset <-> Investment asset Long term and Short Term Base date Gains on Equity Shares/Units - Long term (STT/ Exempt) - Short term (STT/50% taxed at 30%)

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Corporate Taxation and MAT

Foreign Company tax rate 30% and Branch Profit tax on Foreign Companies @ 15%
Income distributed by mutual funds to unit holders : 5% of income distributed

MAT
Asset and Book profits based levy SEZ developers/Units Mat Rate Carry forward of credit MAT credit to lapse in case of conversion of a private company or an unlisted public company into a limited liability partnership No specific provision for grandfathering of unutilized MAT credit carried forward from ITA

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International Taxation
Introduction of CFC
- Total income of residents to include income attributable to a CFC

- Meaning of CFC

Introduction of GAAR - powers to CI to treat an arrangement as Impermissable avoidance

Agreement

Tax residency for foreign companies

-Place of effective management Transfer Pricing

- Advance pricing agreement

- Risk based assessment - Definition of AE expanded
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Wealth Tax
Every person (other than a NPO) will be liable to pay wealth-tax
Wealth-tax payable at the rate of 1% on net wealth exceeding INR 10 Million Specified assets for computing net wealth - Archaeological collections, drawings, paintings, sculptures or any other work of art - Watches with a value in excess of INR 50,000 - Bank deposits outside India, in case of individuals and HUFs, and in any other case, any such deposits not recorded in the books of account - Interest in a foreign trust or any other body located outside India other than a foreign company; - Any equity or preference shares held by a resident in a CFC - Cash in hand in excess of INR 200,000 in the case of an individual and HUF
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Graphic

THANK YOU
Presented by Ms Ankita Agrawal

ankitaca89@gmail.com