By: Parizad Sirwalla, Partner, Tax - KPMG

The implementation of the Direct Tax Code, it seems, is uncertain at the moment. One has to wait and see the final shape of DTC. However, some DTC proposals on personal tax, has already been announced in the Budget 2012. In that sense, you could very well say that DTC has managed a limited backdoor entry.

Amendment in tax slabs

The basic threshold has been increased to 2 lakh for all individuals below 60 years. This eliminates the preferential slab to women and also set the peak rate of 30% over income exceeding 10 lakh. These slabs are in sync with DTC proposals though the parliamentary standing committee (PSC) had proposed more generous slabs.

Life insurance premium

DTC envisaged that deduction towards premium for life insurance policies be limited to annual premium of 5% of the sum assured. PSC proposed moderating this limit to 10% and recommended grandfathering of policies. In line with the PSC recommendation, Budget 2012 has set this limit to 10% from the existing 20% and applied it only to policies issued after April 1, 2012.

Age for senior citizens

PSC recommended dropping the age of senior citizens from 65 to 60 years. This was partially implemented in Budget 2011 by reducing the age for applying tax slabs. Budget 2012, further aligned the age limit to 60 for claiming specified deductions like medical premiums.

Mandatory tax audit

In line with DTC, the Budget has proposed raising the turnover threshold for mandatory tax audit to 1 crore for businessmen and 25 lakh for professionals, as against the existing limits of 60 lakh and 15 lakh.

Though these amendments are a move towards the implementation of DTC, the fate of many other proposals is yet uncertain:

Residential status

DTC proposed a change in the 'residency' definition which has significant impact on the Non Resident Indian (NRI)/Persons of Indian Origin (PIO) visiting India. It proposed to reduce the threshold stay in India for triggering residency to 60 days instead of 182 days.

However, it is notable that PSC recommended to restore the 182 day rule for NRIs/PIOs subject to conditions. Also, DTC recognises a Resident and a Non-Resident (NR) and the prevailing concept of a Not Ordinary Resident (NOR) has been removed.

However, like the current law, DTC does stipulate a threshold presence of 729 days or more in the preceding seven years for taxing overseas income in India.