The Union Cabinet yesterday approved a new series of direct taxing rules which proposes to increase the income tax exemption limit from the 1.6 lakh mark to 2 lakh, leaving more amounts in hands of people and also a reduced tax rate for the companies.
This Direct Taxes Code which is also known as DTC seeks to replace nearly 50 years old tax law. The Code will then be referred to a committee of selected members of both Parliament houses.
As for the senior citizens and women, the limit for exemption will be 2.5 lakh per year. As of now, women need to pay tax on the income of 1.9 lakh per year and more and the senior citizens have to pay on 2.4 lakh and more.
The maximum which anyone can profit from this DTC proposal as far as savings is concerned is 26,000 per year. Talking on the plus side for the individual tax givers, any withdrawal from their provident funds will not be liable to be taxed as the actual Direct Taxes Code had offered to do. Moreover, the deductions from taxable income is now available for interest on the house loans up to 1.5 lakh per annum as well as on the payments into Provident fund schemes up to 1 lakh. There is even the deduction available of 50,000 for the health insurance and life insurance premiums and the tuition fees.
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The Changes in the Direct Tax Code wrt to deductions made on Investments may badly hit companies selling Tax Saving Mutual Funds, ULIPS etc.
and even the ULIP wins the case, it will ultimately loose, as no-one would invest in them as they no longer would be tax saving