Direct Tax Code

Direct Tax Code:

Direct Tax Code by Ms. Ankita Agrawal Mumbai

Outline:

Outline Background ITA vs DTC Major Changes Tax Rates Sources of Income Corporate Tax and MAT International taxation Wealth Tax CHARTERED ACCOUNTANTS NUMBER ONE IN NUMBERS

Background:

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, India’s 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-à-vis 298 Sections and 14 Schedules in the ITA Simplified Legislation ? CHARTERED ACCOUNTANTS NUMBER ONE IN NUMBERS

ITA vs DTC:

ITA vs DTC Reduced Litigation Flexibilty Complexity ITA DTC Costs Judgements Consolidation Simple Language Tax Base CHARTERED ACCOUNTANTS NUMBER ONE IN NUMBERS

Major Changes:

Major Changes Financial year Residential Status Definition of Assessee Compliance by Government Assessee Scope of Income Expanded CHARTERED ACCOUNTANTS NUMBER ONE IN NUMBERS

Rates of Income Tax:

Rates of Income Tax Proposed Slabs (DTC 2009) Proposed Slabs (DTC 2010) Tax rate (%) Upto INR 160,000 Upto INR 200,000 Nil INR 160,000 to 1,000,000 INR 200,000 to 500,000 10 INR 1,000,001 to 2,500,000 INR 500,001 to 1,000,000 20 Above INR 2,500,000 Above INR 1,000,000 30 exemption for women to be Rs. 1.9 lakhs and Rs. 2.4 lakhs for senior citizen exemption for women to be Rs. 2 lakhs and Rs. 2.5 lakhs for senior citizen Firms, AOP, BOI will be taxed at 30 % without any exemption limit New Dates of Returns: Non Business : 30-6 Others : 31-08 CHARTERED ACCOUNTANTS NUMBER ONE IN NUMBERS

Sources of Income:

Sources of Income Income Ordinary Sources Employment House property Business Capital Gain Residuary Special Sources Winning from Lotteries, Games etc ,Non resident’s Income CHARTERED ACCOUNTANTS NUMBER ONE IN NUMBERS

Income From Employment:

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 CHARTERED ACCOUNTANTS NUMBER ONE IN NUMBERS

Income from House Property:

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 CHARTERED ACCOUNTANTS NUMBER ONE IN NUMBERS

Income from Business:

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 CHARTERED ACCOUNTANTS NUMBER ONE IN NUMBERS

Capital Gains:

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 % ) CHARTERED ACCOUNTANTS NUMBER ONE IN NUMBERS

Corporate Taxation and MAT:

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 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 MAT CHARTERED ACCOUNTANTS NUMBER ONE IN NUMBERS

International Taxation:

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 CHARTERED ACCOUNTANTS NUMBER ONE IN NUMBERS

Wealth Tax:

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 CHARTERED ACCOUNTANTS NUMBER ONE IN NUMBERS

Graphic:

Graphic

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THANK YOU Presented by Ms Ankita Agrawal ankitaca89@gmail.com