The Direct Tax Bill has given bonanza to individual savers, as proposed in the revised Direct Tax Code (DTC) circulated in June 2010. For individuals, the bill has proposed to continue with exempt-exempt-exempt (EEE) method of taxation on investments up to Rs 3 lakh in a fiscal year in provident fund, pension fund and pure life insurance products. Under EEE, tax will not be levied during all the three stages — when investment is made, interest earned and when the money is withdrawn.
In the original DTC, the finance ministry had proposed to levy tax at the time of withdrawal of savings, making it exempt-exempt-tax (EET). As a large number of people protested against EET method, in the bill, the government has proposed not to tax these investments even at the time of withdrawal.
The bill has also allowed tax deduction against the payment of interest on home loan up to Rs 1,50,000 in a year. This also did not figure in the original discussion paper circulated in August 2009. But in the revised discussion paper in June 2010, the finance ministry proposed to continue with the tax benefit on home loan, accepting the request of the construction sector.
RELEVANT SECTION IN DTC, 2010
Deduction of interest on loan taken for house property.
74. (1) A person, being an individual or a Hindu undivided family, shall be allowed a deduction, in respect of any amount paid or payable by way of interest on loan taken for the purpose of acquisition, construction, repair or renovation of a house property in the financial year in which such property is acquired or constructed or any subsequent financial year, subject to the conditions specified in sub-section (2).
(2) The deduction referred to in sub-section (1) shall be allowed if—
(a) the house property is owned by the person and not let out during the financial year;
(b) the acquisition or construction of the house property is completed within a period of three years from the end of the financial year in which the loan was taken; and
(c) the person obtains a certificate from the financial institution to whom the interest is paid or payable on the loan.
(3) The interest referred to in sub-section (1) which pertains to the period prior to the financial year in which the house property has been acquired or constructed shall be allowed as deduction in five equal instalments beginning from such financial year.
(4) The interest referred to in sub-section (3) shall be reduced by any part thereof which has been allowed as deduction under any other provision of this Code.
(5) The amount of deduction under this section shall not exceed one lakh and fifty thousand rupees
CHANGE EXPECTED: For individuals, the bill has proposed to continue with exempt-exempt-exempt (EEE) method of taxation on investments up to Rs 3 lakh in a fiscal year in provident fund, pension fund and pure life insurance products.
QUERY:
Is it that the present Rs. 1 Lakh limit has been revised to Rs. 3 Lakh ? Please advice