8/18/2019 Tax Treatment of Savings
1/3
Tax treatment of savings
The DTC has proposed contributions up to Rs 3 lakh in a year
(both by employer
and employee) to any account maintained by a permitted savings
intermediary be
exempt from tax, and ould remain untaxed if it remained in that
account!
"ithdraals are to be included in income from residuary sources,
and taxed
accordingly!
#xisting schemes are to be grandfathered! $ince the sitching
over to complete
exempt%exempt%exempt (###) method of taxation is seen to
involve
administrative, logistical and technological challenges, the
revised discussion
paper proposed to continue ith ##T for specified
instruments till further notice!
The proposal for introducing Retirement &enefits 'ccounts
scheme also shelved
for the same reason! Difficulty in putting in place a universal
social security benefits tilted the balance!
Taxation of income from house property
The DTC had proposed presumptive basis for calculating notional
rent from house
property (at the rate of ) ith reference to cost of
construction*ac+uisition! t
has also proposed to disallo deductions on interest paid on
loans for self%
occupied houses! -o, rent received*receivable in a year ill be
gross rent!
-o presumptive basis to be used for calculation! Deduction
on interest paid on loantaken for construction*ac+uisition ill be
alloed for one house that has not be let
out, sub.ect to overall limit of Rs /!0 lakh!
Minimum alternate tax
The DTC had proposed to 1'T at the rate of 2!0 on the value of
gross assets in
the case of banking cos and at the rate of for all other
companies!
Carry forard for claiming tax credits in subse+uent years as not
to be alloed!
$ince this creates problems for loss%making companies and
companies ith long
gestation period, the revised discussion paper has proposed to
use book profit as
the basis!
8/18/2019 Tax Treatment of Savings
2/3
Taxation of capital gains
The Code sought to eliminate the distinction beteen shortterm
investment and
long%term investment on the basis on the length of the holding
period!
The gains ere to be included in the total income of the
financial year in hich the
investment as transferred, and sub.ect to tax at applicable
marginal rate for
residents and at 32 for non%residents! DTC had also proposed
abolishing
$ecurities Transactions Tax! Capital 4ains $avings $cheme as
also envisaged, to
allo capital gains to be deposited in that scheme and postpone
tax liability!
The revised discussion paper says that capital gains ill be
considered as income
from ordinary sources in case of all taxpayers , including
non%residents at the rate
applicable to that taxpayer!
Capital gains on investment assets (e+uities and units of e+uity
oriented funds)
held for more than a year to be computed after deducting a
specified percentage,
ithout indexation , and added to total income of the
taxpayer!
The scheme ill be beneficial for those in loer income groups!
Capital gains on
asset held for less than a year from the end of the financial
year in hich it is
ac+uired to be computed ithout specified deduction or
indexation!
5roposal for Capital 4ains $avings $cheme dropped as it is
difficult to administer!
$TT to stay, but to be caliberated! ncome of 6s from trading in
securities to bedeemed as income chargeable under the head of
capital gains! -o TD$ to be
deducted on capital gains of 6s!
