Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
 
 
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
 
 
 
 
Popular Search: empanelment :: VAT Audit :: ARTICLES ON INPUT TAX CREDIT IN VAT :: form 3cd :: list of goods taxed at 4% :: ACCOUNTING STANDARD :: Central Excise rule to resale the machines to a new company :: articles on VAT and GST in India :: VAT RATES :: ACCOUNTING STANDARDS :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: TAX RATES - GOODS TAXABLE @ 4% :: cpt :: due date for vat payment :: TDS
 
 
News Headlines »
 New board for indirect taxes to become operational from June 1
  9 changes that came into effect from April 1
 First time filing income tax? Here's all you need to know about Form 16 and Form 26AS
 New Opening Financial Controller Chartered Accountant (Manufacturing Plant) A Leading Company
 Income Tax Filing 2017: All you want to know about the single page ITR form SAHAJ
 How to benefit from investments in tax saving mutual funds
 60 per cent of income tax notices on fishy cash deposits returned
 All about income tax return form Sahaj
 Why seeing Form 26AS is a must before filing tax return and how to access it
 No tax on notice period pay cut
 Interpretation Of Central Goods And Services Tax (Cgst) Act (Part-1)

New tax code may penalise long term
January, 15th 2010

The new tax law may penalise long-term investors

Most finance ministers in the past gave direct tax reforms a miss, preferring discretion to valour, until P. Chidambaram took the bull by its horns and drafted a new code to replace the Income Tax Act of 1961. The new code is expected to simplify the tax procedures and adopt international best practices. But it could be tough on investors because their overall tax burden is likely to increase.

The biggest blow to investors is the removal of tax exemption for long-term capital gains. The code proposes abolishing the securities transaction tax of 0.25 percent, which by itself, would have been welcome. But the code also imposes capital gains tax on all gains made by selling shares, irrespective of the time they were held for. Thus it eliminates the distinction between short-term and long-term gains.

Earlier, gains from the sale of shares after one year were tax-free. Now they will be clubbed with your income and charged at the slab rates going up to 30 percent.

The tax code introduces the Exempt-Exempt-Taxation (EET) method for savings. Under this method, investors will enjoy tax benefits at the time of investment and growth, but will be taxed when they withdraw the money. Earlier, investments enjoyed tax benefits on all the three legs, under the Exempt-Exempt-Exempt system. The only saving grace here is that contributions made to provident and pension funds schemes until March 31, 2011, will continue to enjoy the full exemption.

A key segment to be hit from the EET system will be equity-linked savings schemes (ELSS). These schemes are popular with tax savers. But the new system could make ELSS dividends taxable.
Hiresh Wadhwani, partner at Ernst & Young, says the DTC is doing things backwards. He says the code accords tax benefit to a saver when he has earning potential, but will tax him in his old age. This might work better in a developed country but not in India. We need a TEE system, Tax-Exempt-Exempt, for the Indian context, he says.

The burden of wealth tax is also likely to increase. Surely, the code proposes raising the exemption on wealth tax to Rs.50 crore and a tax of 0.25 percent for wealth above that threshold. That is, a wealth of Rs. 51 crore will attract a tax of only Rs. 25,000. Sounds good. But the definition of wealth has now been expanded to include shares and financial instruments.

So, even promoter holdings in companies become taxable. But even then, its a minimal rate. I think its quite fair, especially for rich promoters who have multiple holdings on listed entities, as they will see increased outflows annually, says Uday Ved, head of tax at KPMG India.

The direct tax code is not yet law and the government is reviewing many aspects of it. It might be a bit harsh on the investors in the form P. Chidambaram got it drafted when he was finance minister, but there is still hope that Pranab Mukherjee may soften it a bit.

 

 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2017 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Software Development Software Programming Software Engineering Custom Software Development Requirement Based Software Development Software Solutions Software Serv

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions