If you've been too busy buried under heaps of files or running after runny-nosed toddlers then you've probably missed a very, very significant event. This time it's not-very-exciting news! The Direct Tax Code Bill was introduced few weeks back in Parliament and if passed, will replace the Income Tax Act 1961 by April 1, 2012. It's not that me hate change; it's just that this bill makes me ask "What's in it for us?"
Here are few reasons why we aren't fans of the DTC Bill.
1) According to the present Income Tax laws, tax exemption limit is Rs1,60,000 and for women it is Rs1,90,000. With the new bill, the limit has been raised to Rs2,00,000 which would be a good thing except that our Finance Minister chose to take away the extra incentive for women. A mere Rs10,000 increase in exemption is what we get.
What this means: If you make Rs2,00,000 per annum, you'll save Rs1000 and if you make Rs10,00,000, you'll save about Rs21,000 while a guy would save Rs4000 and Rs24,000 respectively. Bah!
2) If you have a home loan, you're not going to like this one bit! Earlier those who had a home loan could avail of a tax benefit for up to Rs1,00,000 on principal and Rs1,50,000 on interest. Now only the interest component of a housing loan will be considered for deduction.
What this means: You will have the heavy burden of an EMI and you will have to make tax-saving investments depending on how big your interest component is.
3) The bill does not make any mention about Leave Travel Allowance (LTA) and Leave Travel Concession (LTC) in exemptions which means in all likelihood the benefit has been taken away.
What this means: You can forget about getting your holiday tickets etc reimbursed. It's all part of your salary and will be taxed!
4) You've sworn by tax-saving instruments like Equity Linked Saving Schemes (ELSS) and Unit Linked Insurance Plans (ULIP). Well, not anymore. Income from these tax-efficient financial products was not being taxed all this while but if the bill is passed, it will be taxed at 5%.
What this means: You can still invest in these instruments to save tax but the higher returns from them will be taxed.
Disclaimer: All of the above are interpretations of the Direct Tax Code Bill. However, the bill is not in effect and these points will not affect you till bill is passed!