At the time when the western world gripped in financial crisis is trying to put an end to tax Havens, the Indian Government in its new Direct Tax Code has encouraged Foreign Investors to route money through Tax Havens and enjoy Tax FREE Returns.
This is a step backwards from earlier draft of the Direct Tax Code. FIIs investing from tax haven were exposed to taxation on capital gains under the Old DTC as the Old DTC was supposed to OVERRIDE the Double Tax Treaties. The Revised DTC retains the tax incentives on capital gains for FIIs from tax havens (like Mauritius, etc). This in effect encourages Businessmen and Politicians to launder their Black money back into the country and also enjoy Tax Free returns on the same thus Killing the India Middle Class.
ULIPs: Non “pure life insurance products” (such as ULIPs, unit-linked insurance policies) will be subject to EET i.e. taxed at the time of redemption.
Taxation Of Income From Employment – Retirement Benefits And Perquisites Retirement Benefits Account scheme would be excluded from the defition of salary. Also retirement benefits received by an employee will be exempt subject to specified monetary limits. Appropriate method of valuation of perquisites would also be worked out whilst market valuation would not be imputed to rent free accommodation. Relief to salary earners but at a dilution of DTC principles.
Taxation Of Income From House Property Gross rent will be the amount of rent received or receivable for the financial year and would not be calculated at a presumptive rate of 6% of the rateable value or cost of construction/acquisition. Also the house property which is not let out, the gross rent will be nil.
Taxation Of Capital Gains Income under the head “Capital Gains” will be considered as income from ordinary sources in case of all taxpayers including non-residents and taxed at applicable rate. However, for capital asset held for a period of more than one year, a distinction would be made for investment in Listed equity shares or units of an equity oriented fund which would be computed after a deduction at a specified percentage of capital gains without any indexation.