The Finance Minister in India tabled the Direct Taxes Code Bill, 2010 (DTC 2010) in the Parliament on 30th August 2010 which is proposed to come into force on 1 April 2012. With the objective of simplifying the procedures for investors and bringing in more revenue by widening the tax net the Direct Tax Code seeks to integrate all direct taxes as a single Act. Some of the salient features are listed below:
1. The concepts of “previous year” and “assessment year” are proposed to be done away with.
2. No change in the TDS rates.
3. The maximum rate of tax is proposed at 30%.
4. Savings limit eligible for deduction increased to Rs. 3 lakh from the current Rs. 1 lakh.
5. Tax exemption for senior citizens will be Rs 2.5 lakh.
6. Deductions like 80D, 80DD, 80DDE, 80U, 80E, 80 GG are retained.
7. Housing Loan Interest for Self Occupied house disallowed.
8. One can avail of tax exemption benefits of Rs 50,000 a year on medical reimbursement against the current ceiling of Rs 15,000.
9. Tuition fees for children will be allowed to Individuals and HUF.
10. Contribution to approved funds is deductible to the extent of Rs 1 lakh.
11. Wealth tax to be levied at 1% for wealth in excess of Rs 10 million.
12. Levy of surcharge and education cess is proposed to be done away with.
13. Advance Tax due dates and instalments remains the same.
14. In the case of a company, it is proposed that the company shall be resident in India if it is an Indian company or if the place of effective management is in India.
15. The corporate tax rate, which currently stands at 33% has been reduced to 30%, including cess and surcharge.
16. A domestic company would be required to pay a dividend distribution tax (DDT) of 15% on dividends declared.
17. A foreign company is required to pay an additional branch profits tax of 15% in respect of the branch profits.
18. Minimum Alternate Tax or MAT has been proposed at 20% on book profits.
19. MAT now applicable to SEZ developers and units in an SEZ.
20. Distinction between short-term investment asset and long-term investment asset on the basis of the length of holding of the asset to be eliminated.
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