The Direct Tax Code (DTC) will come into effect from FY 2012-13 starting from 1st April, 2012 and you would file your first income tax return under the DTC after 31st March, 2013. Thus, one must aware of impact of the DTC.

Treatment of savings (as per EEE regime or EET regime)

Proceeds  from various savings schemes like Provident Fund (PF), Public Provident Fund (PPF), life insurance, annuities, etc. would continue to remain under the current EEE regime, which means a triple tax benefit for you – you would get tax saving for making the investment, the interest would be tax free, and the withdrawal too would be tax free.

However, the EEE regime is applicable only in the pure life insurance and annuity schemes and Unit Linked Insurance Plan (ULIP) has been kept out of this which means that ULIP would be covered under EET regime i.e., proceeds from ULIPs would be taxed.

Moreover, the EEE regime is applicable to New Pension Scheme – NPS – administered by Pension Fund Regulatory and Development Authority (PFRDA).

Treatment of Perquisites and retirement benefits

An employer’s contribution to an approved provident fund, superannuation fund and New Pension Scheme within the limits prescribed shall not be considered as salary in the hands of the employee.

Retirement benefits received are proposed to be exempt, subject to specified limits. This includes gratuity, Voluntary Retirement Scheme (VRS) proceeds, commutation of pension linked to gratuity received and encashment of leave at the time of retirement.

Perquisites in relation to facilities/reimbursement provided by an employer to its employees shall be valued as per the existing law with appropriate enhancement of monetary limits.

Treatment of home loan interest

The DTC proposes to follow the existing method of tax deduction on home loan at least for the interest paid. In case of the house being self-occupied, the individual will be eligible for deduction of interest on capital borrowed for acquisition or construction of the house, subject to a ceiling of Rs 1.5 lakh, from the gross total income.

We will keep you posted for more on the same.  We at Taxmantra.com have the expertise in handling issues relating to individual taxation (Tax Returns + Tax Support+ Tax Planning).

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