Under DTC,claim 20% deduction on rent for repair at let-out house

As per the new Direct Taxes Code Bill,2010,you will be entitled to a 20% deduction on the gross rent of the house,towards repairs and maintenance of the property.

I am a senior consultant with a software company and invest around Rs 1,00,000 every year under various schemes like PPF,life insurance and EPF eligible under section 80C of the Income Tax Act,1961. Please provide an overview of the equivalent tax incentives that will be available under the DTC Bill.

—Arvind Singhal

As per the DTC,a maximum deduction of up to Rs 1,00,000 would be available towards contribution to any approved fund (in the name of self,spouse or children). A maximimum combined deduction of Rs 50,000 will be allowed to an individual or HUF towards life insurance (provided the annual premium does not exceed 5% of the capital sum assured),health insurance and children’s education. A maximum deduction of Rs 1,50,000 can be availed of against the total income.

I am an NRI staying in Dubai for the last 10 years. Every year,I stay in India for approximately four months. Currently,my income in Dubai is not taxed in India,since my stay is within 182 days. How will things change under the DTC?

–ML Kutty

The DTC will limit the number of days for persons of Indian origin visiting India to 60 days instead of 182. According to the DTC,the person of Indian origin visiting India would be treated as a resident if the stay exceeds 60 days and if the stay in India in the preceding four fiscals exceeds 365 days. If you are treated as an Indian resident for tax purposes,your worldwide income would be taxable in India.

I had invested in an unlisted company in April 1994 and I’m planning to sell the shares in this fiscal. Will it be tax efficient to sell the shares now or wait till DTC is introduced?

—Ramesh Yadav

As the shares are unlisted and not applicable for securities transaction tax,you would be liable to pay long-term capital gains tax on your net gain at 20.60%. While computing capital gains,you will be eligible for indexation of the cost of acquisition. Under the DTC,no special tax rates are provided in case of long-term capital gains on shares of unlisted firms. It would be taxable depending on the applicable income slab rate. For computation of long-term capital gains,the cost of acquisition will be computed by applying the cost inflation index to the cost of acquisition. The current tax impact and that after the DTC need to be worked out keeping these factors in mind.

—* The writer is founder of RSM Astute Consulting Group

* Send your queries at fepersonalfinance@expressindia.com