Bangalore Real Estate Trends

Direct Taxes Code Kicks In From 2012

New Delhi: The simplified Direct Taxes Code (DTC) Bill,introduced in Parliament on Monday,which will become effective April 1,2012,holds a few surprises including the decision to withdraw tax deduction on the principal component of housing loans.

The bill,which will replace the Income Tax Act,1961,seeks an increase in exemption threshold of individuals from the current Rs 1.60 lakh to Rs 2 lakh and reduce corporate taxes to a flat 30%.

Revenue secretary Sunil Mitra,briefing the media on the bill,pointed out that only interest component of a housing loan will be considered for deductions.

So if your equated monthly instalment is Rs 1.50 lakh and comprises an interest outgo of Rs 75,000 and an equal amount as principal,you can avail of a deduction of only the interest,or Rs 75,000.

The DTC operation has been put on hold for a year to allow all three categories tax practitioner,taxpayer and tax administrator enough time to become adequately familiar with the new provisions.The bill will now be referred to a parliamentary committee for examination.

If you were depending on a housing loan to cover most of your deduction,the decision to exclude principal will bring it down substantially.Housing loan comprises 50% of the total deduction of up to Rs 3 lakh on savings.Other deductions allowed for individual taxpayers include Rs 1 lakh on pension,PF and gratuity funds,and up to Rs 50,000 for tuition fees of children,pure life insurance premium and health insurance.

There is no mention of LTA or LTC in the bill exemption list,indicating that these sops have been done away with.Incentives have been withdrawn from women taxpayers by clubbing them with men on the exempted income slab of Rs 2 lakh.The earlier proposal was to place women taxpayers along with senior citizens at a higher slab.Senior citizens exemption limit has been raised to Rs 2.50 lakh.

More Money in Your Hands

The Direct Taxes Code will be effective from April 1,2012. First return of income under its norms will be filed after Mar 31,2013.

Deduction of up to 3 lakh allowed

1. 1 lakh on pension,PF and gratuity funds
2. Upto 50,000 for expenditure on tuition fees,pure life insurance premium and health cover
3. Up to 1.5 lakh for interest paid on housing loan.No deduction on principal
4. LTA will be taxed every year

Capital gains

Capital gains on listed securities held for more than a year will not be taxed.If held for less than a year,it will be taxed at 5%,10% or 15% Securities transaction tax to continue.

MF/ ULIP Income from equity-oriented mutual funds or ULIP shall be subject to tax @ 5%

_{Source: Times of India Dt:31-8-10}