NEW TAX DRAFT CODE :HIGHLIGHTS

The 47-year-old direct tax law in India may soon be history. The draft of a new direct tax code was unveiled on Wednesday and will become law in 2011 after a process of due consultation.

But what's more important is the big shift proposed in the way we compute tax and the entire philosophy behind taxation.


Here are some of the simplified Highlights of the the Draft Tax Code bill (I have highlighted the ones that are important):

1.Higher income tax slabs, lowering net payable taxes.
New tax slab
Up to Rs1.6 lakh: No tax
income between Rs160,000 and Rs10,00,000 20% tax
for income between Rs10,00,000 and Rs25,00,000
30% tax for income over Rs25,00,000

2.Lowers the incidence of tax on corporate and individual incomes

3.Reintroduces wealth tax and capital gains tax, albeit at lower levels:securities transaction tax (STT) is scrapped, capital gains tax unified to one in the long and short term and wealth tax reduced to 0.25 per cent from one per cent with an increase in limit to Rs 50 crore.

4.Scope of income tax expanded to include value of perks, gifts, profit in lieu of salary and capital gains but excludes farm income

5.Removal of most exemptions

6.All long-term savings to come under EET

7.Tax exemption to PPF and other pension schemes on withdrawals accumulated up to March 31, 2011.

8.The code proposes to abolish STT.

9.Wealth to be taxed on net basis; Amount in excess of Rs500mn to be taxed at 0.25%
Moves the base year for calculation of capital gains tax to April 2000

10.Dividend will continue to be tax-free in the hands of investors
Effective corporate tax rate at 25% with no surcharge or cess

11.MAT to be levied on gross assets as against book profits now
MAT to be 0.25% for banking and 2% for others
MAT carry forward to be disallowed

12.Business losses to be carried forward indefinitely

13.No tax deduction on interest payable on any government security

14.Wealth tax liability to be discharged by payment of prepaid taxes

15.Rationalization of taxes for all non-profit organizations

16.Annual disclosure of profits of non-life insurance businesses

17.Govt may enter overseas agreements for double taxation avoidance

18.No tax deduction on interest payable to banking firms and insurerance companies.

Download full tax code bill 2009

http://finmin.nic.in/DTCode/Direct%20Taxes%20Code%20Bill%202009.pdf