New Direct Tax Code disappoints Investors

POSTED BY manish ON August 27, 2010 COMMENTS (106)

Update Aug 30 ,2010 , 5:00 PM   : This post should be now considered as post with old information as after DTC was tabled in Parliament , there were many changes in DTC.

Also DTC Bill has been delayed by 1 yrs and will come into effect from Apr 2012 , Link

Cabinet has finally approved the Direct Tax Code and now it would go to Parliament for approval and as per tax expert Subhash Lakhotia is would be easily passed by the Parliament. Finally the Tax system of our country is going to simplify after New tax code comes into effect from Apr 2011 next year. The bad part is that the tax slabs have been revised and now its much lesser than what was proposed earlier (Link)

Change in Tax Slab

New Tax Slab : 10% for 2-5 lacs , 20% for 5-10 lacs and 30% for above 10 lacs

Proposed Tax Slab earlier :  10% on 1.6-10 lacs , 20% for 10-25 lacs and 30% for above 25 lacs.

Some More Features

  • Deductions from taxable income will be available for interest on housing loans up to Rs 1.5 lakh per annum
  • For women and senior citizens, the exemption limit would be Rs 2.5 lakh per annum
  • Upto 1 lacs could be saved for payments into PF and similar superannuation schemes
  • Deduction of up to Rs 50,000 for life insurance and health insurance premiums or tuition fees.
  • Securities Transaction Tax (STT) and Education cess are out .
  • Life Insurance payments and  mutual fund income are liable for 10% TDS  (source)
  • HRA no longer available.

You should note that all these changes are going to happen from Apr 2011 (next year). For this current year, everything is same (you will get same old 80C deductions)

Why Public might get disappointed

The biggest blow is the change in the tax slab, especially investors who earn in range of 5-10 lacs per year , earlier Financial minister promised that the tax would be 10% upto 10 lacs , but now there is 20% tax for 5-10 lacs range , which means that effectively the tax paid would be 2 times of what it would have been earlier. Also even for high earning people who make in range of 10-25 lacs , earlier it would have been 20% , but now it would be 30% , which is good enough disappointment 🙂 .

Here is a nice video which would give you good insight on what to expect from Direct Tax Code .


Comment on how you feel about the tax slab ? Are you happy about it or disappointed ? I think it would be a big disappointment for a lot of people, at least personally I am disappointed by that 🙂 .

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106 replies on this article “New Direct Tax Code disappoints Investors”

  1. DTC says:

    For life insurance, in case of death, currently, the money that the survivor/nominee gets is tax free. Is DTC saying that this money that the survivor gets is now going to be taxed?

    1. DTC

      no , its not going to be taxed 🙂

      Manish

  2. punee says:

    Hi Manish
    Thanks for ur reply.One more doubt that at the time of maturity my policy will be taxable?

    1. Puneet

      Which policy ? MF or ULIP or Endowment ?

      Manish

  3. puneet says:

    Hi
    I have jeevan anand policy and that is money back policy.My premimum is less than 5% of sum assured but i have doubt that till now i was getting tax rebate on premium i was paying.Now there will be tax rebate on this premium amount or not.

    1. Puneet

      It will still be there . Till 2012 (for next 2 yrs) , we have the old law under which you can invest upto 1 lacs and get tax exemption (its not called rebate) . After Apr 2012 , its limited to 50k .

      Manish

  4. Ashwani says:

    Manish,

    What do you think about the imposition of 5% DDT on dividends declared by Equity MF’s? Sheeesh !!! And DDT on ULIP’s, do ULIP’s even declare dividend?

    These folks sitting in the Finance Ministry are a bunch of jerks, IMHO.

    1. Ashwani

      Tough to give immediate response , will talk on this later 😉 . Better you share your thoughts in detail

      Manish

  5. Jayesh says:

    Hi Manish,

    As always, your blog is very informative and lucid language help us to understand the complex issue is relatively simpler manner.

    Now, Principal component from housing loan has been removed from 80C. What will be the probable impact on real estate. Do you / readers of this blog forsee any reduction in property rates. I think there will be an impact as most of the them buy house as investment and tax saving

    Regards,
    Jayesh

    1. Jayesh

      I dont see much impact because of it , anyways earliar most of the 80C was filled up becasue of EPF and other instruments rather than home loan principal component . so this is not a big deal

      Manish

  6. Ashwani says:

    Hello,

    I’m not sure about old insuranse policies issued before DTC comes into effect. I have some money back policies from LIC and also investements in Jeevan Aastha. Will maturity proceeds be now taxable or only insurance policies sold after April 1, 2012 will be treated under EET.

    A report by E&Y reads

    “Amounts received during the term of the insurance contract under cash back insurance policies would become taxable; Threshold of 5% of sum assured seems to be too low — may affect even genuine policies; No grandfathering provisions for presently issued policies;”

    1. Ashwini

      You will have to pay the tax incase your premiums are more than 5% of SA, becasue you will make the payments even after DTC comes , for now I would say DTC is like a Chameleon which changes its color every other day .

      Manish

  7. S S says:

    Thats not what was proposed originally, not even clsoe to that. They have messed up the whole idea of DTC.

    1. Agreed

      Even I am scared that after 1-2 yrs again a lot of things will change and I have write a new post 🙂

      Manish

      1. rishabh parakh says:

        hey bro

        i heard that DTC will now come in to effect from 2012 onwards

        1. Yes 🙂

          I have updated this information in the start of the post

          Manish

    1. Harpreet

      Thanks for the link , will soon post the updates about DTC

      Manish

  8. SNV says:

    Manish,

    The god listen to the prayers of men it seems, that the govt is going to put men and women under one category of basic exemption Rs. 2L.
    http://timesofindia.indiatimes.com/business/india-business/New-tax-code-takes-away-sop-from-women/articleshow/6465034.cms

    Revenue secretary Sunil Mitra, briefing the media on the bill, pointed out that only the interest component of a housing loan will be considered for deduction. So, if your equated monthly instalments add up to Rs 1.5 lakh and comprise an interest outgo of Rs 75,000 and an equal amount as principal, you can avail deduction of only the interest or Rs 75,000.

    Incentives have been withdrawn for women taxpayers by clubbing them with men, with income up to Rs 2 lakh exempt. The earlier proposal was to place women taxpayers and senior citizens at an exemption level of Rs 2.5 lakh.

    1. SNV

      yea .. I saw that yesterday . You seem to be excited on bring women limits down to men 🙂 .

      Manish

  9. Nilesh Panchal says:

    I think as per my knowledge the New Tax Code will effect from April 2012, in your article you mentioned April 2011. Please check if I am not wrong. Second there is a exemption in Pure Life Insurance Premium which means people will now get the importance of Term Insurance and will get covered themselves with risk cover.

    1. srinivasu says:

      dear all !
      WELLCOME
      thanks for this service.
      kindly note this DTC is effective from 1 st april 2012.so we have enough time.
      i think it is not clear on EEE for life insurance premiums.let us wait…
      by the bye have you checked the NEW ulips ?
      commissions have come down to 6 % maxium.
      we were told to highly CONCENTRATE on traditional plan for which every thing is same .

      1. what do you mean by “we were told to highly CONCENTRATE on traditional plan for which every thing is same .”

        also there is no confusion on the status of Life Insurance , for all the life insurance where premium is more than 5% of SA , it would be EET else EEE . Pure life cover policies like term insurance would be EEE >

        Manish

  10. Santosh says:

    interesting thread of comments here. Though, I am not a big fan of getting into minutiae of how much tax I will pay & how much I save. But, for most salaried people who plan taxes thru housing loan (esp. individual like Pattu), removing HRA & reducing deduction for home loan is certainly a big blow.

    I am actually more disappointed at the maze of exemptions & deductions still remaining. What was Congress harping on was DTC will make tax compliance & administration simpler. But there are still exemptions remaining? Why on earth we need them. Reduce the actual tax slabs & the whole thing would have been simple. I mean, as a person, I would still be required to plan – so much Insurance, so much PPF, etc. etc.
    It would be best if Government would have moved to Tax-Exempt-Exempt regime. Tax everything in the beginning at lower rates & let me be “free” to do whatever I do in certain select instruments! U.S. has this regime. People who are working in U.S. can throw some light here.

    1. gaurav says:

      US does not have a TEE regime. Only one vehicle is available for this and it is the Roth IRA with limits on how much you can put in it. Mostly everything else is EET or TTT.

      1. Thanks for the reply 🙂

        Manish

  11. nixon says:

    tax should be based on family income rather than individual income

    1. Arch says:

      Good point!
      In countries like Singapore there is tax exception if your dependent is not working.

    2. Arch says:

      Good point!
      In countries like Singapore there is tax exemption if your dependent is not working.

      1. Thats a nice thing , indirectly they consider family income and not personal

  12. avs says:

    There is so much of black money in india just because people are not feeling comfortable to give 30% of their income as tax, even if they are making crores. If rates are kept low for first 10lacs, it helps middle class and slashing the maximum rates to 20% will help govt to uncover huge pile of black money.
    HNI invests in property & than let it on rent, they get deductions on interest as well as on principal and the best part is that the loss can be carried forward for eight years.

  13. Vinayaka says:

    First of all there is nothing ‘DIRECT’ about this tax code. it would have been direct had the govt reduced the tax rates and removed all the tax incentives. Why should the renters subsidize the people who buy houses ? Why should the uneducated folk subsidize education for other people?

    1. Vinayaka

      Agree 🙂

      Manish

  14. shaheen khan says:

    one more thing. the exemption limit of 3 lacs i have mentioned should be for both men and women. when will the govt. stop being discriminatory? but i do like to add here that senior citizens who cannot earn unlike their young peers due to old age should be exempt from paying tax upto 5 lacs income p.a. 🙂

    1. Yea .. No distinction should be there for men and women and I support that tax for senior citizen should be removed , anyways we dont have any social security 🙂

      Manish

      1. Sohil says:

        I think those 3Lakh draft have been change to 1.5 lakh now.Do take a note of same Manish Sir once its out

        1. Sohil

          Yes noted, but lets wait more now , as DTC is now shifted till 2012

          manish

  15. shaheen khan says:

    extremely disappointing. here are my recommendations. i know its futile but nonetheless, here they are:

    1. no income tax upto 3 lacs per annum. afterALL, 25000/- p.m. just about manages to run the household in todays’ high inflationary times !

    2. exemption under section 80c upto 3 lacs for payment of life insurance policies, ppf, eppf, health policies etc.

    3. tax slabs:
    3,00,000-10,00,000 5%
    10,00,001-24,00,000 10%
    24,00,001-50,00,000 30%
    50,00,001- 1 crore 40%
    1,00,00,001 & above 50%

    In other words filthy rich should be taxed heavily. SPARE THE POOR PLEASE FM !

    1. Shaheen

      Thats too optimistic I guess , 3-10 lacs just 5% , not going to happen in the life time . But it looks juicy 🙂

      Manish

    2. Sohil says:

      Logically you are right.
      But it wont happen .The uber rich knows where to park the money(SEZ ,exports angle etc etc).And get full rebate
      But the upto 10 lakhs if they would have kept 10% rate even i would have loved to pay 20-50k taxes from my business rather than avoiding it.

    3. pravin says:

      d-uh.why should the filthy rich be robbed off 50% of their income? did they steal it from you?. if you wish ill for others,its gonna come back to bite you.
      taxation is theft.always.whatever be the noble sounding reasons it is imposed on. no different from serfdom.

      the govt wants to push india down the US path -everyone will now stop renting -no tax benefit.the only beneficiaries? the housing builders who’ll have more citizens taking unservicable loans to fuel useless consumption.

      1. shaheen says:

        dude. there is no need to get personal. if i was in the habit of wishing ill for others then i would not have added the comment that income exemption for senior citizens should be 5 lacs instead of 2.25 lacs presently. why should the filthy rich not be heavily taxed when they can afford to do so? why should the poor be asked to shell out 10% of their income when they can barely meet their expenses? remember people falling in the 10% tax bracket have not only themselves but others in the family to support too. they could be dependents like old parents, wife, unemployed or under age children. whereas a person earning 1 crore and above too might have these liabilities but 50% taxation will still leave him/her with 50 lacs to spare which is a lot of money my friend and can easily support many liabilities.

        secondly taxation is not theft. how do you propose to support the defense services of our country like the army, navy and the air force without tax? how do you propose to support the subsidies offered by our govt. for fuels like kerosene and LPG? how do you propose to support road building in remote areas of the country by the Border Roads Organization which leads to development of people socially and economically? How do you propose to offer cheap subsidized education in villages and far-flung areas of the country which do not interest private players who see education only as a money-minting business and not as social responsibility? How do you propose to support development in Space Study and Research & Technology by our govt. without tax money? The last but not the least, how do you propose to run the judiciary in our country without tax money?

        GOT BETTER IDEAS? PLEASE SHARE WITH US.

        1. Sohil says:

          See why the richs are not very heavily taxed is

          1: You never know where business will go if they are taxed heavily of course they will charge you much more than they are as paying tax will be their more concern than paying tax.SO a nano which comes under 1 lakh will cost 2.Than its ultimately the poorer who suffers

          2 : Indirect tax is also a part of our system and that takes care from the rich as they pay more that way.And inorder they serve to society they are given tax rebates which finally serve as job centres for the poorer.

          3: Heavily taxing wont reduce tax problem on the contrary it will increase tax robbery.Why do you think is the money going outside INDIA ?If the structures is more rationalized at-least it will be parked here.Big decisions are taken very slowly here .

          As mentioned earlier.Audit limit for businesses should be increased.
          Taxing at lower level should be more convenient like 10% upto 10Lakhs .
          Salary class should be given standard deduction as business people showing any liability can reduce their gross net but that is not the case with salary guys.

        2. pravin says:

          it is difficult not to get personal when your whole thinkin is permeated by socialist claptrap. the defense budget is the only justifiable tax.why do the rich have to pay more?because they can afford it?.thats a laughable justification.can somebody steal from you just because it is not much?

          taxation is forced extortion of money for activities which can 99% be done better by private individuals or groups. you think the govt is doing a gret job with a)education b)defense c)roads or whatever imagined noble activity you can think of?
          on the other hand it is difficult to not notice that things the govt has got away from a)mobile telephony b)computer industry have blossomed .
          you are a successful product of the socialist education system that venerates govt taxation.i am sure they would love more such serfs to be churned out.

          1. shaheen says:

            i never said that govt. is doing a great job. but whatever little it is doing, it requires funding. its done from the tax money that is collected from the general public, rich or poor. to be honest, even i desist from paying tax but got no choice, got to pay it if i fall in the income tax bracket. how many private individuals and companies are building roads, providing education, and doing other activities i have listed in my previous post, for the social and economic upliftment of the country? rich should be taxed more because they can afford to pay is in my opinion the right thing to do and every one is entitled to their opinion. why i say so, i have explained it already but if you could not understand it then i can do nothing about it. no need to get personal please.

  16. Jagbir says:

    I’m not disappointed with new revision of DTC as I was already under impression that Govt has no guts to implement the original proposed draft and would screw it almost up to the level of current I-T laws before implementation. Can anyone explain why house loans are cheaper than Education loan? the deep pocked real-estate lobby don’t let Govt to scrap exemption in Housing loans. Though, positive changes are happening but we should not expect drastic overhaul.

    1. Jagbir

      Are educational loans not cheaper than housing ?

      Manish

      1. nobody says:

        Hi

        I have taken educational loan from PSU. They charge between 10-12%

        1. Oops

          thats more than what I had thought

          Manish

    2. Thats what I call “key to happiness is low expectations”

      Manish

  17. Yogesh Tiwari says:

    Beyond April ’11, I wonder, after my next appraisal, will I still be saving more than what I m right now…!

    Yogesh Tiwari

    1. Roopesh Majeti says:

      Yogesh,
      I think, we need to rephrase the statement, “After my next appraisal, will I be earning more ..or paying more than iam doing currently ” 🙂

      Also one thing regarding HRA, folks who dont own a house and live in a rented house, are impacted mostly, than [ I should say “compared to” ] the folks, who are owning a house and paying EMI.

      1. Yes

        Agree , people living on rent would loose the HRA benefit , thats a blow 🙂 . However there might be some thing which employer should be doing like free accomodation or subsidised one

        Manish

  18. SNV says:

    I believe there is no tax on Long term capital gains in new DTC bill.

    1. SNV

      No , its there , where have you seen written that capital gains are tax free , it will be under EET regime

      Manish

  19. Nitin Gupta says:

    Hi Manish,

    you mentioned that “Upto 1 lacs could be saved for payments into PF and similar superannuation schemes “. Does it mean that the ppf limit that was 70k, is increased?

    1. Nitin

      No PPF limit is still 70K

      Manish

  20. Harpreet Kaur says:

    Dear Mr. Manish,

    I thing I wanna confirm.

    I was thinking to start PPF from this month. Since now the limit is upto 70000 and incase later on in the next year if it increases, will I be allowed to then extend my limit of putting money into it upto 1 lac or I will just stuck into the current limit of 70000 till next 15 years.

    1. Harpreet

      Yes , rules of that year would be applicable 🙂

      Manish

  21. pattu says:

    I was counting on the 3 lakh deductions! Now its just 1.5 lakh!
    What does
    “Life Insurance payments are liable for 10% TDS (source)” mean?
    These refer to maturity benefits from endowment policies etc. right

    1. I am not sure on that

  22. yogesh says:

    Hi Phani,

    You r correct india is bit lower than some of the nations.But indian govt doesn’t
    give any facility .

    In USA,UK ,I guess govt use tht money and provide education,insurance to people,right..i think thy provide some facility to common people after deducting the amt where as in india there is no such thing..

    1. Phani says:

      I agree with you… But India does provide Free education for minorities, Food for children, Government school, hospitals etc etc but unfortunately they are not well maintained… so no one thinks they owe the government taxes.. But still I am happy about the new tax code, i am definitely going to pay less taxes than what I used to pay 2,3 years ago.

      1. Phani

        You are right , but i think the point here is how govt divides the facilities , all the things you mentioned are not directly impacting/helping/reaching common people , so they are not happy

        Manish

      2. Pavan Kulkarni says:

        Phani,
        Looks like you haven’t been in India for a long long time. Or you have never been in India! Did you ever goto a government school? or worse a government hospital? I’ve been in US, Canada. There is no comparison between govt hospitals & schools there & here. I guess you need to know the ground reality before you comment on anything.

        1. Phani says:

          I agree with all the comments here…. They are mis using the funds that is a different issue.. all i am saying is that the taxes are lesser than what i paid 2,3 years ago.. may be not a lot but atleast little.. I am not sitting in USA.. :)… I travel to and fro… I just sighted an example that when i am in US they cut 35% or more from my salary… the problem of indian corruption is different from Income tax collections. If they have no corruption then we will also have all the great provisions as available in other countries…

  23. Phani says:

    In USA and other developed economies you are forced to pay 25-40% of your money as Income Tax, besides that they have to pay 5-10% as state taxes. Imagine social security and other contributions in these countries. I am in USA and I roughly pay 35% of my salary for taxes. India is way cheaper. Compare Indian tax rates with the rest of the world and you will thank Indian government for the lower rates. People have become so greedy that they are not happy about anything… 🙁

    1. Srinivas says:

      First of all, I am disappointed with new DTC.
      1. Having removed HRA, LTA,Medical bills and raising tax slab is a intelligent way of mathematics to fool people.
      2. If HRA is removed, then govt has consistently not doing anything to catch tax evaders, salary class employee pays rent and he gets no exemption and house owner does not know what is tax…he enjoys
      3. New tax saving instruments are PF, PPF, NPS, Superannuation and life insurance which are really long term. Some one who wants to invest 3 lakh next year, PF would cover say 50,000 then he has PPF or NPS which are really very long term. Since he is not getting HRA deduction, indirectly DTC says go for house loan and get 1.5L tax exemption. and invest 1L in PPF or NPS or life insurance.
      4. Atleast govt would have introduced ELSS with 5 years in tax saving.
      5. The house loan interest is only for one house which is self occupied.

      Govt is not ready to take a hit in it’s kitty as it needs to loot tax payers money via common wealth games, spend money on kasab, afzal guru.

      I remember honorable Supreme Court judge saying on 2007 “30 years before SC said only GOD can save India, but today I say even GOD cannot save India”

      1. Phani says:

        Srinivas,

        1. HRA is the only exemption that will effect aam admi. I agree… but a lot of people are mis using this by showing higher bills than they are paying to the house owner. I have worked in major MNC of India and atleast half of them were not showing proper bills. LTA – i dont spend 50,000 Rs etc on vacation every year… that exemption is useless to most of middle class. Any healthy family will not benefit much from Medical bills allowance.. BTW how many doctors in India and medical shops are providing bills.. It was always a big issue for me to request these bills. I am really happy that I dont need to bang my head every financial year regarding how to split my salary into these components.
        2. PF, PPF, NPS, Insurance are long term and yes average middle class is supposed to plan for long term and those who dont are the ones with bad financial planning. You have fixed deposits for short term objectives.

        As i say again.. you should compare these tax rates with other countries irrespective of whether benefits are available are not from government.. I dont see how i will not get more money than the taxes i paid in 2006,2007,2008 etc. You can bring your mathematics for an employee getting 5-8 lakhs per annum and prove that you are paying more taxes and then i will agree with you.

        1. Nishant says:

          I wonder wether removing HRA (but still retaining interest on housing loans) will actually exacerbate the property bubble in India. Pranab is a spokesperson of the real estate lobby in India.

          The DTC is extremely dissapointing I must say esp for the common man.

          1. Nishant

            Yes I think so , as tax emeptions on interest of housing loan is one thing which will make sure that investors are motivated to keep fueling the real estate madness 🙂 . However will removing exemption on HRA make significant difference , lets take your case ?

            Manish

    2. Raghav says:

      Phani,
      You can make any comment living else where. But the ground reality is that the standard of living , Infrastructure are never comparable between US and India. If we get the same life in Inida, we are ready to pay that 35+% as tax. Bt what we see here is that our tax money is being diverted to attract votes and parties win elections.

      1. Suman says:

        Totally, agree with you Nishant.
        Its very easy to stay in US and say Indian government is so generous.
        Just an example here, if my company send me abroad for 6 months for a project, I can pay US taxes (like Phani mentioned 35%-40%) and still save more than 6 lakhs INR by the time I come back.
        India is not US and people should understand this simple fact.
        HRA & Medical bills (Oh btw, every medical shop is bound to give you a bill if you ask for it, I never had to bang my head) gone would be a real headache for me from 2011.

    3. Nishant says:

      To compare US taxation with that of India is a joke esp if you see how the tax payers money is openly squandered and tranferred to swiss accounts.
      The quality of life here and in the US has absolutely no comparison.

    4. Minesh says:

      But you can not compare India & USA in terms of facilities, securities and rights…

    5. raja says:

      in usa they give proper basic ammenities to all people like roads ,housing,electricity by collecting tax from people.

      in india you dont see that and that is why we dont like these tax bands.

      stop giving advice sitting in us.we know what is what here.

      best of luck bro

      raja

      1. hey guys , lets not bash anyone on comments please 🙂

        Lets take the comment message and discuss it , I think what phani wants to say is that agents is doing its bit , but yes I understand that its not reaching common public , there are many things in between like corruption , uneven work in different areas .

        Manish

    6. aj says:

      what about the facilities you get in return for the tax paid?

  24. mynameisnotkhan says:

    Congress’ gift to aam admi. Jai Ho

  25. Hi Manish,

    You have mentioned that STT and Education Cess are out. I just wanted to confirm if Education Cess of 3% is out for individuals. I am doubtful of that. While I did not read anywhere that Education Cess has been removed for individuals, at the same time I did not even see anywhere below the tax slabs that education cess of 3% will be added. So just wanted to confirm if education cess of 3% for individuals has been removed or not?

    Best Regards
    Gopal Gidwani

    1. Gopal

      As far as I know and came to read , that now there wont be any cess applied , so its only 10% 20% 30% tax , thats all

      Manish

  26. chaitanya says:

    Hi Manish,

    Your blog is very informative and helps the common man to understand financial world. Thanks a lot for that.

    Coming to the present topic, i really dont understand what exactly the common tax payer is going to save bcoz of new tax code. As per i understand we r going to pay more tax in next financial year (i.e with DTC), than the tax we r paying this financial year. (I mean for the same salary)

    I am mentioning that with an example. Please correct me, if i am wrong.

    There is only one change related to tax slabs for the ppl who is having taxable income of below 8 lacs. Which is roughly around 10lacs of CTC. I feel this will be the case most of the tax paying ppl fall into. (May be around 70-80%).

    For all these ppl, the only tax slab change that will effect is the no tax zone is changed from 1.6 to 2lacs. So this is going to save us 4k Rs. Other than this i dont see any extra savings.

    But coming to the benefits we r loosing with DTC:

    1. There is no HRA exception. This is the major concern from my side. In the current system, HRA exemption roughly can be anywhere between 4k -10k per month based on our basic salary and city. (This number is a rough estimate, which many ppl will fall into who are having taxable salray less than 8lacs)
    In the current tax system, this could give us tax exception for 48k – 1.2 lacs an year.
    As in the DTC, we dont have this exemption, our taxable incoming will group by this amount, which results into paying of tax for this amt, which will be 9.6k – 24k. (I am assuming 20% slab).

    So we r saving 4k and paying extra of anywhere between 9.6k – 24k.

    2. There is no LTA facility in DTC. (I am not sure abt this point. But i read some where as no LTA in DTC)

    Bcoz of this our tax exemption will raise by roughly 10k- 15k. Will will be again paying extra 2k -3k .

    3. And finally they are removing ELSS schemes from tax savings. Except ELSS in 80C, all the other investment options are for very long term and gives us less interest rate. So now we need to invest for long term and still get less profit.

    Please clarify me whether my understanding is correct or not.

    1. Chaitanya

      Yes you are correct on all the points 🙂

      Manish

  27. Sohil says:

    Biggest blow is slab rate.

    What does pranab da means that old slab structure of 1.6 to 10,10 to 25 and 25+ was only given for illustration.

    Dont we who pay under 1.6 to 3,than 3 to 5 and than 5+ understands how taxing is done.

    Also 30% is psychology wise too high value.If i have 10 buks in my pocket government ask for 3 I wont be ready to give.If its 2.5 i can atleast think to give.lolz

    Also looking for 80C instrument stuff whose figure of 3L was mentioned.

    1. Sohil

      The taxation is progressive , so 10 lacs income does not mean 3 lacs tax , its lesser . Also in coming days there will be more clarity on sec 66 which is replacement of 80C .

      What do you think about ELSS removal from tax benefits ? How does it impact you ?

      Manish

      1. Sohil says:

        Agreed its progressive.But its like working in very slow pace.Last year only Pranab da increase the audit limit to 60L from 40L which he himself have placed in Indiras regime for small businesses.
        Now comparing 40L in 1980 time to 60L in 2010 how can there be parity.
        Only the stuff which makes us excited are shown but these things which may allow businesses to grow arent done.
        Regarding ELSS I started investing in market only after i made investment in MF.If such options arent provided people will always fear to place their money in markets

        1. Agree

          However over investment even thorugh ELSS are not there , that does not mean you should not invest in MF , you should anyways invest in them for long term , even after being taxable , they would provide good return

          Manish

          1. Sohil says:

            AGreed but here point was I fear from market and total noob how or where to invest.Than came to know i can reduce my liability by putting money in ELSS.I did the same.AFter 2 years i tracked the fund and showed good return which i compared with others investment.With that my interest in market started.If their is an option people might try to look and understand it.
            Similar stuff mentioned here
            http://www.valueresearchonline.com/story/h2_storyView.asp?str=15027

  28. Sathya says:

    Many blows remaining to come…

    1. Capital gains…
    2. 80C….
    Monday will show us the way…to hell or heaven…i dont know…;D

    Sathya

    1. Sathya

      Mostly The bill will be passed by parliament very easily , 80C is anyways gone , same with capital gains , this we knew already , didnt we ?

      Manish

  29. Pankaj Parashar says:

    Removing HRA is a big blow….

    1. the exemption on HRA is going away which is bad , but you will get HRA 🙂

      How much is this going to affect you and others ? thoughts ?

      Manish

      1. Pankaj Parashar says:

        oh ya…I meant the same..Removing HRA exemption is bad… it will take away the feel of fooling the govt. and taking some badla 🙂
        on a serious note, it will effect a lot coz it is a conderable chunk of the exemption….

  30. Sohil says:

    Life insurance payment tds applied.Failed to understand how and how much?

    Details will come on 30th when its house in parliament right?

    1. Sohil

      Things are still blurry , so wait for more days to get things clear 🙂

      Manish

      1. Anand says:

        If things are blurry, why do you post it here, with incomplete information?

        like you said, 10% TDS for mutual funds. But folks on CNBC Awaaz were saying that the current status of no tax after 1 year on MF will continue.

        1. Anand

          I read at other places and compile it , So its bound to happen that things are not 100% clear for most of the things , DTC is one thing which has always been very blurry and every one has its own way of interpreting what it means .

          As a reader, if things are incomplete , you should contribute in finding the information and helping me to improve it , what do you say ?

          Manish

          1. Sohil says:

            Agreed I wasnt aware of this point and now when i see the draft online ill search for same to know whether it exists or not.

            Also earlier even at one reputed site i read for ladies too 2.5l basic rate will apply.But things coming out now is only 2 categories general public and senior citizen will exist.Nothing as special status for ladies.

            1. Sohil

              A lot has changed after it was tabled at parliament , so we have to do the full analysis again .

              Manish

            2. Sohil says:

              Yup now it would be better to see the code in detail and than analyzed it taking time.As we have too much time but at the same time we can prepare our investments as a lot of deduction entities would come under tax preview now(elss,ulip etc)

            3. Will come up with more detailed analysis soon

              Manish

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