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INCOME TAX - DRAFT DIRECT TAX CODE 2009

MEMBER'S COMMENTS

Tax code bitter for government employees and butter for the rich - Part III

Shri Govardhana Rao

I propose the following changes to the Direct Taxes Code Bill, 2009.

Sl. No.

Sections

Observations

Resultant changes

1. Section 6. This section itself has to be deleted The contribution of the employer to the Contributory Provident Fund will be exempted from the Income Tax.
2. Section 22 (1) To be amended to include Value of LTC, Amount of encashment of un-availed Earned Leave, Medical Reimbursement, Value of Concessional Medical Treatment paid for or provided by the employers, Principal and interest component of Housing Loan, HRA as per salary or actual paid whichever is higher without any limitation. Value of LTC, Amount of encashment of un-availed Earned Leave, Medical Reimbursement, Value of Concessional Medical Treatment paid for or provided by the employers, Principal and interest component of Housing Loan, HRA as per salary or actual paid whichever is higher without any limitation will be eligible for deductions.
3. Section 22 (2) This section itself has to be deleted. VRS Emoluments, the amount of any gratuity, the amount of any death-cum-retirement gratuity, the amount received in commutation of pension are not taxed even if it is not deposited in Retirement Benefits Account maintained with any permitted savings intermediary in accordance with the scheme framed and prescribed by the Central Government in this behalf.
4. Section 44 (1) This section has to be amended suitably so that the income earned from security whether, shares or Mutual Fund units which were held for a period of more than one year should not be treated as capital gain and not taxed to Income Tax. This will encourage public in general and employees in particular to invest in Stock Market and reap the Benefits. The income earned by investment in equity, Mutual Fund after investment period of more than one year will be Income Tax free.
5. Section 56 (2) (b) (d) (f) (r) (x) (y) The Clauses (b) (d) (f) (r) (x) (y) to sub-section 2 of section 56 has to be deleted since it wants to tax the following items as Income from residuary sources:
1. Interest, other than interest accrued to, or received by, permitted financial institutions;
2. Employees Contributory fund;
3. Life insurance policy Maturity Benefit;
4. Withdrawal from any account maintained with any permitted savings intermediaries including the principal amount of the savings, interest, dividend, bonus, capital appreciation or any other form of return on the investment;
5. Any amount received, or withdrawn, under any circumstances from the account maintained under the Capital Gains Savings Scheme representing the principal amount or any accretion thereto;
6. Any amount received, or withdrawn, under any circumstances from the Retirement Benefit Account referred to in sub-section (2) of section 22, representing the principal amount or any accretion thereto.
The following items will be tax free:
1. Interest, other than interest accrued to, or received by, permitted financial institutions;
2. Employees Contributory fund;
3. Life insurance policy Maturity Benefit;
4. Withdrawal from any account maintained with any permitted savings intermediaries including the principal amount of the savings, interest, dividend, bonus, capital appreciation or any other form of return on the investment;
5. Any amount received, or withdrawn, under any circumstances from the account maintained under the Capital Gains Savings Scheme representing the principal amount or any accretion thereto;
6. Any amount received, or withdrawn, under any circumstances from the Retirement Benefit Account referred to in sub-section (2) of section 22, representing the principal amount or any accretion thereto.
6. Section 57 (3) (a) This has to be removed so that whole maturity benefit of LIC policy is tax free. LIC maturity benefit will be tax free in full.
7. Section 57 (3) (b) Has to be amended in order to increase the limit of Family Pension to at least Two Lakhs per Annum from Rs.15,000/- specified. Family pension up to Rs. Two Lakhs is exempted.
8. Section 57 (3) (c) Has to be amended in order to put no limit to the transaction from Rs.50,000/- specified The gift received in a family is exempted from Income Tax.
9. Section 59 (1) Sl.No. (4) (i) of the table annexed to Rule 3 of the First Schedule has to be deleted so that income by way of winnings from- (i) any lottery or crossword puzzle is taxed at normal rate treating it as Normal Income and not as ‘Income from Special Sources’. Income by way of winnings from- (i) any lottery or crossword puzzle is taxed at normal rate and not at peak rate of 30% when it is treated as ‘Income from Special Sources’.
10. Section 69 (2) (a) Has to be amended so that the limit is increased from Rs.20,000/- to at least Rs.50,000/. This is because the Cost of Medical Treatment has increased and one has to insure for a higher sum in order to get proper treatment in case needed. The Medical Insurance premium up to Rs.50,000/0 for Senior Citizen is exempted.
11. Section 69 (2) (b) Has to be amended so that the limit is increased from Rs.15,000/- to at least Rs.30,000/. This is because the Cost of Medical Treatment has increased and one has to insure for a higher sum in order to get proper treatment in case needed. The Medical Insurance premium up to Rs.30,000/0 for a person is exempted.
12. Table annexed to Rule 3 of the First Schedule Insert Sl.No. 5 so that for any assessee Income of:
1. Amount of encashment of un-availed Earned Leave,
2. Commuted pension,
3. Retirement gratuity,
4. VRS emoluments,
5. Matured value of GPF, LIC, PLI ULIP,
are taxed at the effective rate of 0.25%.
1. Amount of encashment of un-availed Earned Leave,
2. Commuted pension,
3. Retirement gratuity,
4. VRS emoluments,
5. Matured value of GPF, LIC, PLI ULIP,
will be taxed at 0.25% Only* not at 10%, 20% or 30%.

*If the Govt. wants to bring EET regime then the income tax on final maturity amount of any savings instruments and provident benefit, gratuity should not be taxed more than Wealth Tax rate of 0.25% because it is nothing but wealth for the unfortunate employee.

1. Direct Taxes Code Bill, 2009
2. Discussion Paper

I request all the employees to send their comments on the link provided for by the Ministry of Finance or to referencer (login required - for members only) immediately. I also request the Members to deliberate in respect of other aspects like computation of income from House Property, calculation of Capital Gain Tax, etc.

Shri Govardhana Rao, Superintendent of Customs, Bangalore (via e-mail) - 03-09-2009 (The author can be contacted at parakirao@gmail.com)

The views expressed in this article are those of the author and are not intended to represent the views of www.referencer.in

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