The Government of India (GOI) had released a draft Direct Taxes Code (DTC) along with a Discussion Paper in August 2009 for public comments. Since then, a number of inputs on the proposals outlined in these documents have been received from a large number of organizations and individuals. These inputs have been examined and major issues on which various stakeholders have given their views have been identified. The GOI, today, on 15 June 2010, has released a Revised Discussion Paper (RDP) that addresses these major issues. The issues addressed in the RDP are :
- Minimum Alternate Tax (MAT)
- Tax treatment of savings
- Taxation of income from employment
- Taxation of income from house property
- Taxation of capital gains
- Taxation of non-profit organizations
- Special Economic Zones – taxation of existing units
- Concept of residence for companies incorporated outside India
- Double Taxation Avoidance Agreement vis-a-vis domestic law
- Wealth Tax
- General Anti Avoidance Rule (GAAR)
Each of the chapters in the RDP describes the DTC proposal, highlights the issues and concerns and details the revised proposals in response to these concerns. This RDP is available on the following websites:
www.finmin.nic.in
www.incometaxindia.gov.in
Download Revised Discussion Paper on Direct Taxes Code from this site
The GOI has indicated that responses to the RDP are invited up to 30 June 2010.
An initial review of the revised proposals in the RDP suggest that a number of concerns expressed by various stakeholders have been given due consideration by the GOI. For example, the RDP proposes to continue with the existing system of levying MAT on book profits rather than tax on gross assets as proposed in the DTC. Similarly, the proposal on ‘treaty override’ has been limited largely to anti-avoidance cases. The proposal to introduce GAAR continues, but with more safeguards. The RDP also suggests that a Controlled Foreign Company regime may be introduced.
There are many cases where the tax payer has invested in savings instruments like endowment policies and ULIPs out of his income without availing any tax exemption at the time of investment. For example, where the amount invested was beyond the ceiling prescribed by sections 88/80C of the Income Tax Act, 1961, no tax exemption would have been availed. The maturity proceeds of such instruments are presently wholly exempt under section 10(10D) of the Income Tax Act, 1961 irrespective of whether for the investments made therein exemption was availed or not at the time of investment. Even after introduction of DTC, further investments may have to be made according to the terms of such instruments.
Further, after introduction of DTC, a tax payer may invest in new savings instruments where no exemption is available at the time of investment.
In all such cases, at the time of withdrawal/maturity, it would be unreasonable to tax the investment which was made out of funds on which no exemption was availed at the time of investment, as it would result in double taxation of the same income.
DTC should therefore also take care of the following situations: –
(i) In respect of instruments obtained before the commencement of DTC having EEE status, investments made both before and after the commencement of DTC should enjoy EEE status, whether or not the tax payer has availed tax exemption at the time of investment.
(ii) Investments in new instruments obtained after the commencement of DTC, which will not enjoy EEE status under DTC, should not be taxed at the time of withdrawal/maturity having regard to social conditions in India.
(iii) In any event, in order to avoid double taxation, at the time of withdrawal/maturity there should be no taxation of the amount invested in such instruments without availing any tax exemption at the time of investment.
Sir,
Under Superannuation benefits Fund Scheme i.e. retirement benefits, annuity amount received by the employee is exempted from Income Tax. If 2/3 of Annuity amount is invested in LIC by the employer on the behalf of employee and employee gets fixed monthly pension from LIC for a specified period say 15 yrs. Please advise, whether Monthly pension received from LIC will be taxed or not.
Its intersting to know about the GAAR. will it result in ending the syatem of scrutiny or reassessments as exist under the current income Tax Act?
Retire employee”s amount must be tax free and should not be taxed their amount in future.
maheshbhai
HRA IS NOT CLARIFIED
I AM GETING HRA FROM EMPLOYER
GET TEX BENEFIT BY PROVISING RENT RECEIPT
WHAT IS THE STATOUS IN NEW LOOK PLEAS GUIDE
Dear Sir,
This is a personal opinion and not related to the organization where I am employed.
As far as the EEE and EET schemes in respect of long term investment like GPF,RPF, PPF, Insurance and pension funds should be exempted even after the introduction of DTC and should not be restricted only to the investments and accrual up to the introduction of DTC.
In other words, any investment for the purpose of long term and retirement should be tax free even at the time of withdrawal even though they are invested or accrued after the introduction of DTC.
After retirement, the individual may not have any other source of income and therefore, the individual has to live with the amount that he has been saving through out his life and that the withdrawal of the said amount at the time / after superannuation his life will put a severe hardship on the individual.
Would therefore, request your good self to kindly look into this aspect before introduction for the following reasons:
1. Savings Scheme
2. Social Security
3. Funds for the Government
Further,
1. The tax should be on the gross total income (of all heads put together) at the slab of the individual rather than being taxed under each head.
2. In other words, an individual should pay the tax at a single rate irrespective of the income under various heads.
3. The loss or gain under one head should be able to set off against any other head rather than restricting only to the salary for the loss or gain under the head income from House Property.
4. There should not be any distinction between Govt and non Govt employees for the purpose of taxation {equality of law/ individual both are subjected to the same expenses being an employee}
5. There should be an increase in the limit of transportation up to which the tax is exempted.
6. The DTC talks about the taxability of LTA which under the existing laws are exempted under Section 10 should continue.
7. The taxes paid by the individual like the service tax on various exemptions should also get set off against the total tax payable. The underlying principle is that the same amount cannot and should not be subjected to multiple taxes because of various statutes.
8. The reason is when a dealer / manufacturer / service provider are able to set off the tax paid by them against the output tax payable by them, the same benefit should also be given to an individual to set off various taxes (direct or indirect) to direct taxes. Else the tax under the head the salary should be on the take home salary rather than the gross salary of the individual (the salaried class also incurs expenditure like that of the profession / business that needs to be reduced from the total income of the individual). This will boost the confidence of the salaried class. Though the amount of tax collected from the head salary is less when compared to other heads of income, but the tax base is huge in number (number of assesses)
9. The tax paid by the individual during the days of his income if deposited in an account wherein the tax paid serves as a pension for the person on retirement. This will be a boon for all the aged people and also reduces the burden on the Government.
10. In other words, the limit on the investment should be increased from the proposed 3 lacs to 5 lacs and all the investment should be covered under one section rather than multiple sections / different heads of income. It is like this :
Total Income = Income from all the heads
Less : Expenditure (including the individual under the head salary)
Less : Deductions (under one section irrespective of the heads of income)
Total Taxable Income
Tax on Total Income @ %
Less : Set off
Total tax
Regards,
S.Ramaswamy