Cut in short-term capital gains tax on equities a bonus for them.
The individual taxpayer should feel a bit relieved with the final version of the Direct Taxes Code (DTC). The key takeaways for them include the enforcement of the guidelines from April 2012. This will allow them time to adjust to the new realities. Two, retirement benefits will continue to get tax benefits.
A bonus: Short-term capital gains tax on equities has been slashed and status quo has been maintained on long-term capital gains. That is, zero tax on equities held for over a year.
While income-tax slabs have not been increased substantially, as proposed by the first draft, what should give them relief is the continuance of the exempt-exempt-exempt regime for retirement benefits such as employee provident fund and public provident fund.
The tax slabs have been raised marginally. The important point, though, being that tax rates of males and females have been brought under the same rate. The basic exemption limit is up from Rs 1.6 lakh to Rs 2 lakh for individuals, including both male and females. Also, for senior citizens above the age of 65, the basic exemption limit has been raised to Rs 2.5 lakh. “It does not make a great difference. The rate difference between males and females translated into an advantage of a mere Rs 250 per month (for females),” said Harsh Roongta, CEO, apnapaisa.com.
| MARGINAL GAINS Gender distinction removed, retirement benefits continue |
| * Single tax slab for both male and female taxpayers |
| * Retirement instruments like EPF, PPF to get tax benefits |
| * Short-term capital gains tax down from 15 per cent five, 10 and 15 per cent |
| * Wealth tax limit hiked to Rs 1 crore. Foreign accounts, art and painting brought under ambit |
Under the new regime, both female taxpayers and senior citizens are not likely to gain too much — just Rs 1,000 (earlier basic exemption Rs 1.9 lakh for females and Rs 2.4 lakh for senior citizens), whereas the tax liability for a male will go down by Rs 4,000.
The limit of Rs 1 lakh under Section 80C will continue. There will be another Rs 50,000 allowed for children’s tuition fees, medical and life insurance premiums. Besides, the Rs 1.5-lakh limit for interest payment on home loans will remain.
However, equity investments would be more lucrative from the earlier regime, especially in the short term. Short-term capital gains will be applied at 5, 10 and 15 per cent, 50 per cent less than the income-tax slabs. At present, there is a flat rate of 15 per cent tax on short-term capital gains.
Also, there will be no long-term capital gains on equities. The continuance of securities transaction tax (STT) is a defence mechanism to ensure that trading activity does not start increasing unabated.
“This is a big relief. There was a fear that the removal of the definition short and long term and taxation as per the income-tax slab, proposed by the first version of DTC, would hurt investor sentiment,” said a financial planner.
The wealth tax rate, though retained at 1 per cent, is now applicable for assets above Rs 1 crore. Earlier, this rate was applicable on assets above Rs 30 lakh.
There are some inclusions: Earlier, any cash holding above Rs 50,000 was considered as part of wealth. DTC proposes to increase it to Rs 2 lakh. Also, watches, art and painting have been brought under its ambit. Importantly, deposits in banks abroad are also going to be a part of wealth.
