FM has formulated new Income tax code and it is open for bublic discussion. The draft income tax code purposes to replace Income Tax Act 1961. Salient features in simplified terms are:
1)Lowers the incidence of tax on corporate and individual incomes
2)Reintroduces wealth tax and capital gains tax, albeit at lower levels
3)Scope of income tax expanded to include value of perks, gifts, profit in lieu of salary and capital gains but excludes farm income
4)Removal of most exemptions
5)All long-term savings to come under EET
Tax exemption to PPF and other pension schemes on withdrawals accumulated up to March 31, 2011.
5)The code proposes to abolish STT.
6)Capital gains on shares and securities to be taxed as income.
7)Distinction between long-term and short-term capital assets to go.
8)Wealth tax cap to be hiked to Rs 500mn.
9)Wealth to be taxed on net basis; Amount in excess of Rs500mn to be taxed at 0.25%
10)Moves the base year for calculation of capital gains tax to April 2000
11)Hike in tax deduction limit on savings to Rupees 3 lakhs
12)Higher income tax slabs, lowering net payable taxes.
New tax slab
a)Up to Rs1.6 lakh: No tax
b)10% tax for income between Rs160,000 and Rs10,00,000
c)20% tax for income between Rs10,00,000 and Rs25,00,000
30% tax for income over Rs25,00,000
d)Proposes highest tax rate of 30% on income of over Rs 25 lakh
13)Tax breaks on housing to be removed
14)Dividend will continue to be tax-free in the hands of investors
15)Effective corporate tax rate at 25% with no surcharge or cess
16)MAT to be levied on gross assets as against book profits now
17)MAT to be 0.25% for banking and 2% for others
MAT carry forward to be disallowed
18)Business losses to be carried forward indefinitely
19)No tax deduction on interest payable on any government security
20)Wealth tax liability to be discharged by payment of prepaid taxes
21)Income from certain transfers not to be treated as capital gains
22)Rationalization of taxes for all non-profit organizations
23)Annual disclosure of profits of non-life insurance businesses
24)Govt may enter overseas agreements for double taxation avoidance
25)No tax deduction on interest payable to banking firms and insurers.
There is attempt to simplify the IT structure. However I as a small investor purpose following:-
1)STT must not be abolished. It is a simpler way of tax collection.
2)Long term capital gain tax on stocks should continue. In any market long term investors should be encouraged. As it is today our market is dominated by speculators or day traders.
3)No tax on dividend at the hands of investors. It should continue to be taxed at co level. Source deduction are always better to administer.
5)PPF or other nominated tax saving instruments must remain Exempt-exempt-exempt,ie no change. Most of Indians have no pension or security or medical for their old age. Their savings in tax saving schemes are the only safety-security net available to them in old age. Therefore these instruments must remain tax free at ll stages.
I have initiated the thread to discuss the issue before it becomes law. I have already given my views. I request members to put across their view point.
When STT was introduced, it was stated by the then Finance Minister that the Government mopped up very little in the form capital gains on shares.
To ensure some amount is shelled out by everyone dabbling in share market, STT was introduced, first at a very small rate. Sensing that this was a gold mine, slowly the rates were increased.
Even though it makes life of brokers and investors, traders, speculators a bit difficult, this is one sure way of realising money from market players, who generally escape taxation. Even today, with all the IT, PANs TANs, Contract Notes mentioned ID of investor/trader/speculator, a good number of persons do not file a return and escape taxation.
Not taxing Long Term Capital gains on shares is a bold step which not only reduces volatility in the markets but also encourages persons to hold the shares for longer periods. On the contrary, traders who buy and sell (not on the same day) contribute to volatility of the market.
For this reason, my opinion is
1. Long Term capital gains on stock market gains should be exempt from taxation.
2. Short term gains should be taxed at maximum marginal rates applicable to individuals so that the lure of keeping 85% of the gains to oneself is diminished and the sheen of short term trading is taken away.
STT, in my opinion, should not be abolished.
--------------ese.---------------------------
The subject matter non cognition of taxing authority becomes obvious when they no only want to tax LT gain but at the same rate as ST gain. Either the morons do not know LT gains are obtained with a riskier stance than ST gain and hence deserve lower tax or the greed to grab whatever they can in the name of tax over rides ommon sense and policy encouragement of LT investment in the market.
Dear Tally,
Had entered the market to avail the benefits of LTCG and by clubbing it with business income will keep a lot of investors away for the simple reason it is not worth the risk.It would be prudent to put in a FD.Like Subasu sir suggested,it would be better if short term traders are taxed more.I would suggest a model.For diffirent periods within the year have diffirent slabs.Like 60pc if held for less than 3 months and something similar to that.And absolutely no LTCG.
At present when the GOI should be doing more to encourage people to invest ,it is doing exactly the opposite.
STT is a simple way of collecting taxes at source.And yet by some stupid suggestions to abolish this transparent way of generating revenue on a daily basis,these morons want to complicate it further
Dear Friend, In my view, the DTC & specially the E-E-T part should be implemented as early as possible.
I`m agree nobody wants to pay tax if asked. If nobody is paying Tax than how the govt. `ll create for all the common public the social securities & other basic facilities?
All savings be it long or short term should be taxed. This `ll help to all of us. People `ll invest keeping in mind their requirements, their goals & not for merely to save Tax.
A lot of noise has been made on account of introduction of E-E-T. I had calculated personally that even after abolishing various Tax free allowances, Tax incentive like home loans etc. the over all Tax `ll come down due to hefty increase in general Tax slabs of 10, 20 & 30%.
To understand the importance of E-E-T, just try to understand this way.
Petro products prices r controlled by Govt. of India. Prices should be more than what they r at present. To bridge the gap, what Govt. is doing? subsidizing the petrol products. From where this subsidy is coming? in the form of OIL bonds issued to OMCs. What r these Oil bonds actually? It`s a debt Govt. is taking from market. How Govt. `ll pay this debt in future? Why issuing more debt papers (read bonds). What impact this `ll have over all? In common economics, Govt has expenses more than what it earns. Popularly known as fiscal Deficit. What this fiscal deficit `ll finally impact? We the common public in the form of high inflation.
Just look this whole picture from another perspective. Most of the Govt. backed schemes have 8% benchmark interest rate. (PPF, NSC, KVP......). It means, banks or financial Institutions or corporates `ll have to pay more interest than this 8% rate to mobilize funds for capacity expansions. Say 11% or 12% or even higher. To payback such high interest rates, the profitability should be around 16-20% profit margin. This in simple language `ll increase the price of products from the manufacturer to the consumer. Ultimately we, the consumer `ll pay these high interest rates.
For specific point of home loan. The withdraw of Tax incentives may provide initial hiccups but once the dust settles, the business `ll be as usual. There is more to it. If the loan is taken for a rent out property, the tax incentive `ll continue as usual (of course with a reduced std. deduction of 20% than the current one of 30% for maint. of house).
Taxing of savings indirectly means that we want to encourage consumption, and then ultimately we will have to borrow to invest, but who will then lend, when the country becomes pauper ?
60% tax on income from trading - Lol. The volume in the markets will also drop 60% if that happens.
How about charging 60% tax when venture capitalist and promotors unload their shares to public, and when insiders sell or reduce their stake, and ST traders who buy and sell in Bulk.
Let them abolish the LTCG tax all together.
Each is an individual`s chocie based on his or her capacity. You are seeking benefits of LTCG, that suits your style of investing and financial risk appetite. Does not mean it suits every one.
Besides, where will the govt go for revenue if every one hold for a year and avoid paying zero tax on LTCG.
Yes, they will implement it as well as adopt and adapt it (para5), for it is what they want, to increase consumption expenditure, for it will bring in more taxes, for them ...
rest ask BSR
| NIFTY 
