The Standing Committee on Finance has recommended a very liberal tax regime in its suggestions on the Direct Taxes Code Bill, 2010 ( DTC). The key recommendations made by the committee affecting individual tax payers are:
The basic exemption limit as contained in DTC is recommended to be enhanced from 2 lakhs to 3 lakhs and the tax slabs are also to be expanded wherein individuals to pay tax at 10% on income between 3 lakh and 10 lakh, 20% on income between 10 and 20 lakhs and 30% on income above 20 lakh.
Payment and reimbursement of medical insurance premium be made tax-free. Under DTC, it is considered a taxable perk. Committee has also recommended taxing the stock option benefits only at the time of sale/alienation rather than on vesting.
DTC proposed to tax the rental income from commercial properties as income from house property. The committee has recommended to tax the same as income from business, the same way it is being done now.The standard deduction for repairs, etc., which is proposed at 20% in DTC has also been recommended to be enhanced.
4.)For deduction of housing interest for loan taken for self-occupied house, it has been recommended to include repairs and renovation loans. Accordingly, where any loan is taken for repairs and renovation completed in 3 years would qualify for deduction up to 1.5 lakhs. Presently, it is allowed up to 30,000)
Security Transaction Tax (STT) to be removed and capital gain tax regime should be brought back in relation to shares, securities and mutual funds, etc.
6.)Deductions and Exemptions
DTC proposed to restrict the deduction of 100,000 only to the approved fund(s) viz. approved provident fund, pension fund, superannuation fund, PPF. The committee has recommended that the above limit be raised to 1.5 lakhs.
Under DTC, an additional deduction of 50,000 is proposed to cover payments such as life insurance premiums (premium not to exceed 5% of sum insured), health insurance premiums and the tuition fee. The said limit has been recommended to be raised to 1 lakh and life insurance policies where premium does not exceed 10% should also be eligible for deduction. Further, a separate deduction of 20,000 is recommended for medical insurance of senior citizens.
An additional deduction of 50,000 has also been recommended for higher education.
The Committee has recommended that wealth tax be levied on taxable wealth above 5 cr at progressive rates .Shares of controlled financial corporation are recommended to be excluded from taxable wealth.
Under DTC, foreign nationals qualifying to be ordinarily resident are proposed to be taxed on their global wealth. The committee has recommended to keep the existing tax provisions of not levying any wealth tax on assets of such foreign nationals situated outside India.
8.) NRI to cheer as the benefit of applicability of 182 days condition to determine residency of NRIs on visit to India is recommended to be restored in DTC in line with the existing laws.