There is now consensus among members of the parliamentary committee on finance which is scrutinising the Direct Taxes Code (DTC) Bill to raise the tax exemption limit to Rs. 3 lakh per annum and the tax-saving investments limit to Rs. 2.5 lakh.
The committee, headed by BJP leader and former finance minister Yashwant Sinha, on Friday met to discuss the bill and there was an agreement to raise tax exemption to give relief to the middle class, which is facing high inflation. Earlier, some members had wanted the tax exemption level raised to Rs. 5 lakh. The standing committee on finance has decided to finalise its report on the DTC by March 2.
Even some Congress members who met Union finance minister Pranab Mukherjee on Thursday for pre-Budget consultations asked for a substantial increase in the tax exemption limit to provide relief to the middle class.
Currently the tax exemption limit is Rs. 1.80 lakh for men and Rs. 1.90 lakh for women. The DTC Bill, which was introduced in Parliament, had proposed that the tax exemption limit be set at Rs. 2 lakh.
The current tax-saving investment limit — which includes investments in provident fund, life insurance, children’s education and infrastructure bonds — is Rs. 1.2 lakh. The committee wants it raised to Rs. 2.5 lakh.
The DTC Bill introduced by the government had raised the tax-saving deduction limit to Rs. 3 lakh. The bill proposed that people could invest up to Rs. 1 lakh in long-term saving instruments like provident funds, superannuation funds, gratuity funds and pension funds, and withdrawals from these funds will not be taxed. People can claim tax deduction up to Rs. 50,000 on expenses like tuition fees of children, pure life insurance premiums and health insurance payments. The bill had also proposed that Rs. 1.5 lakh interest paid on construction or acquisition of property for self-use could be claimed for tax deduction.
The government had proposed in the bill that there would be a separate deduction for interest on education loans and for payments of expenses of disabled persons.
Five-year bank FDs and ELSS schemes of mutual funds had been removed as tax-saving instruments by the DTC Bill. Profits earned on equity mutual funds held for one year will not be taxed. The government has retained zero long-term capital gains tax on stocks; this means shares held for more than a year will not be taxed.
The DTC Bill introduced by the government had raised the tax-saving deduction limit to Rs. 3 lakh. The bill proposed that people could invest up to Rs. 1 lakh in long-term saving instruments like provident funds, superannuation funds, gratuity funds and pension funds, and withdrawals from these funds will not be taxed. People can claim tax deduction up to Rs. 50,000 on expenses like tuition fees of children, pure life insurance premiums and health insurance payments. The bill had also proposed that Rs. 1.5 lakh interest paid on construction or acquisition of property for self-use could be claimed for tax deduction.
The government had proposed in the bill that there would be a separate deduction for interest on education loans and for payments of expenses of disabled persons.
Five-year bank FDs and ELSS schemes of mutual funds had been removed as tax-saving instruments by the DTC Bill. Profits earned on equity mutual funds held for one year will not be taxed. The government has retained zero long-term capital gains tax on stocks; this means shares held for more than a year will not be taxed.
Sorce:-The Asian Age
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