The Finance minister
proposed new direct tax code in the parliament in FY 2010.It will be effective from 1st
April 2011.
Theme of the direct tax code bill:
1) Less investment instruments so less confusion for tax payers to invest and get tax exemptions.
2) Invest in long term
investment instruments to get tax exemptions.
3) Opt for term insurance
for higher converge for dependants (More details to follow).
4) Large limit for medical
expenses.
5) Emphasis on long term investment by no long term capital gain tax.
Highlights of direct tax code bill for individual:
Tax Exemptions for
Individual Salaried People - Rs 2 lakh
Tax Exemption for Woman -
Rs 2 lakh
Tax Exemption for Senior
citizens - Rs 2.5 lakh
Tax Slab
Income between Rs 2 lakh -
Rs 5 lakh = 10%
Income between Rs 5 lakh -
Rs 10 lakh = 20%
Income above Rs 10 lakh =
30%
Income tax exemptions with EEE (Exempt-Exempt-Exempt)
Total Exempted income = 3
Lakh
A = Total
of Rs 1 Lakh
Provident Fund (PPF)
Pure Insurance product
New Pension Scheme (NPS)
Government Provident Fund (GPF),
Recognised Provident Funds (RPF)
B= Total of Rs 50000
Life Insurance premium payment
Health insurance premium payment
Tuition fees
C = Total of Rs 1.5 Lakh
Interest
amount of housing loans
HRA and Medical bill reimbursements:
HRA exemption will be continue with minor modification
Medical bills
reimbursement limit is increased to Rs 50000 from Rs 15000
Income tax Exemptions withdrawn on
ULIP (Unit lined insurance
product)
ELSS MF (Equity linked
saving scheme)
NSC (National saving
certificate)
Home loan principal amount
Leave travel allowances
But the investment made
before 31st MAR 2011 will remain EEE.
Overall, I feel this is
balanced direct tax code with few pros and cons.The withdrawal of ELSS and home
loan principal amount from tax saving instruments is not welcome change.
Again this is no final
direct tax code for all the future years and The finance ministry will keep
review and update as and when it’s required.Hope for the best.
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