All You wanted to know about Direct Tax Code (DTC)

• The cabinet recently approved the Direct Tax Code (DTC) bill that is going to replace the Income Tax Act, 1961 and the Wealth Tax Act, 1957
• The Direct Tax Code will come into effect from FY 2012-13 starting from 1st April, 2012. You would file your first income tax return under the DTC after 31st March, 2013.  

• Exemptions (Currently available under Section 80C)

  upto Rs. 1,50,000 (up from the current Rs. 1,00,000

  However, the limit of Rs. 1,50,000 would have 2 sub-limits: 

  • Rs. 1,00,000 for approved long term savings (geared towards retirement) like the new pension scheme (NPS), provident fund (PF), superannuation, gratuity, etc.
  • Rs. 50,000 for some other investments, like pure life insurance (term insurance) and health insurance premiums, children's tuition fees, etc.
  
  
  

  Income Tax Benefit of a Home Loan

  The income tax benefit for the interest component of a home loan has been retained, and the limit for it remains Rs. 1,50,000.

  However, no income tax benefit would be available for the principal component of the home loan – principal repayment would not result in any tax saving.
  

   

  Long Term and Short Term Capital Gains

  n a very welcome relief to real investors (read: long term investors), the long term capital gains from shares and equity mutual funds (MFs) would remain to be completely tax free – there would be no tax on long term capital gains (LTCG)

   

  Wealth Tax

  A wealth tax would be levied at a rate of 1% on net wealth of a person over Rs. 1,00,00,000 (Rs. 1 Crore). Net wealth is defined as all assets less any debt.
  (Currently, wealth tax is levied on assets over Rs. 15,00,000 or Rs. 15 Lakhs)
  “Assets” for the purpose of calculating wealth tax would include jewellery, urban land, buildings, automobiles, bank deposits outside India, share in foreign trusts, shares held in foreign companies, watches over Rs. 50,000 in value, works of art and cash-in-hand over Rs. 2,00,000.
  

    

• Income Tax (IT) Slabs / Brackets

  This is the topic that is of most interest to everyone!
  Here are the proposed income tax slabs for individuals:
  
  Men and women under 65 years of age
  
  

  Income	Income Tax (IT) Rate
  Up to Rs. 2,00,000	0%
  Rs. 2,00,001 to Rs. 5,00,000	10%
  Rs. 5,00,001 to Rs. 10,00,000	20%
  Above Rs. 10,00,001	30%

  
  Men and women over 65 years of age
  
  

  Income	Income Tax (IT) Rate
  Up to Rs. 2,50,000	0%
  Rs. 2,50,001 to Rs. 5,00,000	10%
  Rs. 5,00,001 to Rs. 10,00,000	20%
  Above Rs. 10,00,001	30%