I hate reading ‘draft proposals’ – and this hatred came from the student days hangover. When we were studying for the CA exam we had to know the ‘ACT’ and the changes that were made in the 6 months before the exam. Now if we read the ‘draft provisions’ there was a chance that we would get confused. That hatred for the draft proposals continues…
However the Direct Tax Code was supposed to create far reaching changes. It turned out to be nothing – perhaps because the originator of the D T C is busy fighting the naxalites, the maoists, and the Congressmen who think he is intellectually arrogant (I could not agree more with you Digvijay Singh!).
When I spoke to a very senior person in practice (partner do not want to name his firm, but it is huge) he said the same thing – ‘I do not want to get confused, if you want I will send you a pdf on what our firm has made’ – he said somebody lower down makes it, he does not consider it worth reading, only distributing.
Sorry chief tera to baand baja diya. (he is a good friend and reads this blog)
“The Act even if it goes through is for 2013 (CA’s think on P Y ended basis). In 3 years time, the government could fall, government could make changes in the provisions, the Finance Minister could change, EET could be introduced by a separate bill,…..) just too many imponderables”. This is true.
However I still did a quick ‘find’ and ‘find next’ to see the status of dividends FROM NON-EQUITY FUNDS’ and I could not find whether it is tax free. Sad, but could not find an answer. This means dividends from non-equity mutual funds will be added to your income.
The public provident fund has a life of one year – and every year one has to hope that there is a notification. This puts tremendous pressure on everybody who has assumed P P F to be a ‘must’ in the tax saving scheme of things. Again go to the mercy of the babuji.
I believe that the EET was shot down by Dr. MMS who asked ‘how can you tax provident fund’ – I completely agree. The fact that the returns are truncated thanks to the government is bad enough. If they wish to tax P P F it should be indexed – then the tax will not matter. Or they should levy 1% withdrawal tax – like an exit load in a mutual fund instead of subjecting it to INCOME TAX.
So the direct tax code reminds me of the Akbar and Birbal story (making the horse fly)…God bless the babu.
IMPORTANT TAKE: there is no clarity on how important the D T C will be. Housing, mutual fund and life insurance lobbies will work over time to ensure that they are all included in the tax concession. So please do not make any change in your existing life insurance, home loans, ELSS, etc. just let it continue till the D T C actually becomes an Act and is implemented. Do not buy a life insurance policy, pension plan etc. based on tax benefits. Do not be in a hurry to ‘surrender’ your life insurance plans, do not change from dividend option to growth option (if they make the dividends taxable only in the case of corporates, dividend payout / reinvestment could still be a good option…so WAIT….
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