All insurance plans will become taxable – this is terrible news for life insurance policy holders. How capital gains will be calculated will be a major issue. The cap gains calculation will have to be done by the life insurance company – after all they know all the transactions. So software guys enjoy..all life insurance companies, their sales people will all need some software…..

Even in case of SIP investments of mutual funds i think the cap gains will have to be done by the fund house. Individuals will find it difficult to calculate the tax on a long term SIP.

80 C equivalent will be Rs. 300,000 only pension plans will be allowed under this. Not clear about the Templeton India Pension Plan – gut feeling is it should be covered, so go pump! I only hope more such plans are sanctioned for other mutual funds – if you have taken away the tax benefits of ELSS you might as well give them this benefit.

E E T IS JUST POSTPONED those under the age of 65 stop rejoicing…the day you withdraw it could still be there…

YOUNGSTERS should not bother too much about the taxation status today when they withdraw, say 30 years hence the law will be very different.

Cap Gains – if it becomes a reality as proposed and the initial limit is very low – it will force people to go from direct investing to a mutual fund investing. You hope that the fund manager will do all the churning and you need not worry about tax. However I hope the ‘tax’ lost on the fund manager’s churning is not slapped on the unit holder (ala USA).

Capital Gains is back cruelly! However if there is some minimum exemption (say Rs. 10 lakhs) it will mean that only people like Mr.  Narayanamurhty and Mr. Deepak Sathwalekar need to worry about cap gains. Many of the smaller guys will end up paying some marginal tax.

However the keeping of the STT (sorry I expected that) is not shocking. It is so easy to collect (just from the 4-5 successful exchanges) that no government would give it up.

Could not see any impact on the Housing taxation treatment – some minor changes but nothing major. The limit of Rs. 1.5 lakhs of interest is still available on the one house. The housing loan repayment is not available as a deduction…under sec 80C – or its equivalent. This could dissuade people from buying except for those who are looking for a negative gearing…

However the cruelty is typical of the Government of India. We have a fantastic habit and capability of picking the worst provisions from all over the world but no old age benefits, no social security,….nothing of that sort is provided. Sad, but true.

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  1. Hi Subra,

    I’ve been following your posts for long time now. I’m 30(& single) and understand I should plan for my retirement as early as possible. However given the changes foreseen in DTC, should I start planning now or after April 2011, when DTC is established?


  2. Subra,

    As per my knowledge in second version of DTC EEE apply for EPF PPF and Life insurance components. Is that true?.

  3. Is it not that Second version of DTC is also EET except that retirement benefits and life insurance will be under purview of EEE?

  4. Hi Subra,

    As per dicussion paper of DTC (new): “Investments made, before the date of commencement of the DTC, in instruments which enjoy EEE method of taxation under the current law, would continue to be eligible for EEE method of tax treatment for the full duration of the financial instrument.”

    Does that mean that if I start a SIP in ELSS scheme this year for 10 years then I will continue to get EEE benefit when I sell these units?

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