Impact of Direct Tax Code on investment policy
The investment world is the future. It is planning for the tax-adjusted returns for future years. Since investors that their investments in computing today, one must take into account the tax card is set for a substantial change in April 2012. This change will come if the code of the new direct tax law passed by Parliament this winter session.
The new tax code will have an impact on investment avenues, such as insurance, housing loans, PPF, mutual funds and stocks. The many tax breaks that exist today is no longer valid as the government slowly migrates to the exemption from exemptexempt (EEA) the plan of a simple tax structure and easy.
The Code of direct taxes (DTC) is just one step in that direction. Investors now have to get used to having fewer exemptions and plan their investments to return more than a tax standpoint.
Impact on Mutual Funds:
Equity-linked savings (ELSS): The main reason why investors invest in ELSS funds is to save taxes. At the end of each fiscal year is there a point to subscribe to ELSS funds. The biggest change that will come under the new DTC is that tax exemptions for ELSS funds is no longer valid. They are treated like any mutual fund shares for tax purposes.
With the NSC and ELSS 5 years tax-free savings Bank Fixed Deposits (FDs) has been taken to deduct Section 80C.
And action-oriented equity funds: Equity-oriented funds, tax benefits have been transferred to an exception mechanism based on a reduction mechanism. Thus, the transfer of units of equity, there is a 100 % deduction for long-term benefits of capital and a reduction to 50 % of short-term capital gains.
Income subject to such deduction will be taxed at the normal rate. Levy, securities tax (STT) on transfer of these units will continue. This can reduce the marginal costs of taxation for individual investors are taxed at the slab of 30 %. Income distributed by equity funds continue to be exempt in the hands of investors. But these distributions is now proposed to be subject to tax income distribution is payable by the mutual fund at a rate of 5 %.
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Debt Funds: If the debt fund investors have to pay tax rates that apply to income and capital gains in the short term. In the long-term capital gains points to fund debt (other than equity funds), indexed to the mutual benefit taxed, if necessary. Currently, these units are taxed at a rate of 20 % (and indexing benefits), and 10 % (without indexation benefits), shutter speeds for over a year. Index takes into account inflation during the holding time, and allows the investor to change his price.
Source: [ET]
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