Recently, the Finance Minister proposed the new Direct Tax Code that is likely to be effective from 2011. This proposed Code will in effect replace the Income Tax Act, 1961. Broadly it proposes to:
* Raise the tax slabs for individuals substantially as per the table below:
Tax Rate Existing (Rs) Proposed (Rs)
Nil 160,000 160,000
10% 160,001-300,000 160,001-1,000,000
20% 300,001-500,000 1,000,001-2,500,000
30% Above 500,000 Above 2,500,000
(Source: Direct Tax Code Bill, 2009)
* Increase the Section 80C limit from Rs 1 lacs to Rs 3 lacs
* Make the investments in saving schemes like provident fund, life insurance, New Pension Schemes, EET (Exempt-Exempt-Tax). This will be applicable to all contributions made after the commencement of the Code
* Scrap the exemption on the interest on home loans of Rs 1.5 lacs
* Abolish Securities Transaction Tax (STT). This will bring down the transaction cost for investors
* Remove the distinction between short-term and long-term Capital Gains Tax. This means capital gains will be taxed irrespective of the investment horizon
* Raise the wealth tax limit to Rs 500 lacs and lower the rate to 0.25%
The new Direct Tax Code has to be first passed by Parliament before it can be implemented. When implemented, it will boost savings of individuals.
Friday, August 14, 2009
Friday, July 17, 2009
SUPERANNUATION SCHEME PROVIDED BY LIC
The employer contributes a certain fixed percentage of the salary of each member. Such contributions are accumulated with interest and the accumulated amount (Corpus) is utilised to provide following Pension benefits.
An organization today, has not only to man the various positions with competent and trained personnel but also has to create an environment wherein they can give their best and derive a sense of well-being, a sense of fulfillment and security and take pride in their continued association with the organisation. Provision of pension may provide an attraction for such persons to continue in the organisation and give their best to the organisation, as with continuous improvement in longevity.
BENEFITS
1) ON RETIREMENT
On retirement of a member, the corpus (contribution plus interest) is utilised to provide the following:
(a) Commuted Value (Equivalent to 1/3rd of the corpus) which is tax free
(b) The corpus that remains after providing for the commuted value is taken as the purchase price to provide for pension
2) ON DEATH.
The pension is payable on the life of the beneficiary. Corpus is utilised towards the payment of pension of the type that the beneficiary may opt and the benefit so received is tax-free. A lump sum is payable by way of death benefit besides the pension if the employer has taken Group Insurance Scheme in conjunction with the Group Superannuation Scheme as under.
GROUP SIZE SCALE OF COVER MAXIMUM COVER
10-49 2 Months salary for each year of o/s service 1.75 lacs
50-99 -do- 3.00 lacs
100 & more -do- 4.00 lacs
3) ON WITHDRAWAL
(a) He can get equitable interest transferred to the superannuation scheme of the new employer provided the rules of both the schemes provide for the same.
(b) He may opt for a pension from the normal retirement date as provided in the old employer's scheme.
(c) He may opt for payment of commuted value and pension, immediately in which case the benefits would be taxable. The members will have option to commute 1/3 or 1/2 of the total accumulation and the balance can be in the form of annuities. The commuted portion of accumulation is subject tax.
LIC PROVIDES FOLLOWING OPTIONS TO THE EMPLOYEE TO BE EXCERCISED BY HIM /HER ON THE EXIT DATE
1) Life Pension ceasing at death.
2) Life Pension with return of capital on death.
3) Life Pension guaranteed for 5, 10, 15 or 20years and life thereafter.
4) Joint Life Pension payable to the last survivor of the employee and spouse.
5) Joint Life Pension payable to the last survivor of the employee and spouse with return of capital on death of the last survivor.
PROCEDURE FOR INSTALLING THE SCHEME
Since the Superannuation Scheme is a welfare measure adopted by the employer, he can take the following decisions.
ELIGIBILITY:
The employer has to decide to which class/classes of employees he desires to extend the scheme. The eligibility conditions may be defined on the basis of designation or salary.
CONTRIBUTION
The maximum annual contribution that an employer can make to the Pension Fund and Provident Fund is restricted by Income tax provisions to 27% of the annual salary (basic plus D.A.). I.e. if the employer is contributing 12% to PF, he can contribute upto 15% to Superannuation Scheme.
Mostly the employer contributes, but if so desired, both the employer and the
employees may contribute.
EFFECTIVE DATE:
The employer can decide to contribute from any date viz the Date of joining of
the employee or any subsequent date or from current date. The contributions can be made in advance for a period or in arrears.
LOCK IN PERIOD:
There can be a lock-in period to be decided by the employer during which period, if the employee leaves organisation, the contributions made by employer
Can be adjusted for next year contributions. It can be zero lock in period also.
ADVANTAGES OF THE LIC MANAGED PENSION FUND
The LIC managed Pension fund has the following added and distinct advantages.
1) The Contributions made to individual accounts will be credited with interest every year depending on the fund size.
2) The problem of liquidity gets automatically eliminated as soon as the fund is managed by LIC.
3) We conduct free actuarial valuations of the funds administered by us from time to time.
4) The administration of the fund is carried out by us in a scientific manner and claims are promptly settled.
5) Group Insurance in conjunction with the Group Superannuation Scheme can be taken by an Organisation to provide for an attractive lump sum payment on unfortunate death of a member while in service at very nominal cost.
TAX BENEFITS
The provisions relating to the approved Superannuation Scheme are set out in Part 'B' of the fourth Schedule to the Income-Tax Act. 1961 and Part XIII of the Income Tax Rules 1962. The income Tax concessions will be available only if the scheme is approved by the CIT.
1) The annual contribution is treated as a deductible business expense in terms of Section 36(1) (iv) of the IT Act and qualifies for FBT (2005-06 onwards with relaxation up to Rs. 1 lakh per member per year.)
2) In terms of Notification issued by the Central Board of Direct Taxes, 80% of the contribution (s) towards the past service liability are treated as deductible business expense spread over in the subsequent years of payment. (Note: Under the recent case of 1999 between CIT Vs Sirpur Paper Mills, the Hon. Supreme Court held that deduction of 100% must be granted in the year of payment.)
3) The employee's contribution, in the case of Contributory scheme is taken for exemption under section 80c of the Income Tax Act.
4) In terms of section 17(2) (vi) the contributions paid by the employer are not treated as perquisites in the hands of the employee concerned.
5) In terms of Section 10 (25) (iii) of the Income Tax Act, the interest on the fund is exempt from tax.
6) In terms of Sections 10(13) of the Income Tax Act, the benefits payable on death are exempt from tax.
7) In terms of Section 10(10A) (ii) of the act, the admissible commuted value on retirement is tax-free.
The latest interest rates declared for the year 2008-09 are as under:
Fund Size as on 31/03/2008 or on the date of
Commencement/switch over during the year 2008-09 Rate of Interest
Percentage per annum
Below Rs.25 lakhs 9.00%
Rs. 25 lakhs or more but less than Rs. 1 crore 9.15%
Rs. 1 Crore or more but less than Rs.5 Crores 9.25%
Rs. 5 Crore or more but less than Rs.10 Crores 9.30%
Rs. 10 Crores or more but less than Rs. 50 Crores 9.40%
Rs. 50 Crores or more but less than Rs.100 Crores 9.45%
Rs. 100 Crores or more but less than Rs. 400 Crores 9.50%
Rs. 400 Crores or more but less than Rs.800 crores 9.55%
Rs. 800 Crores or more 9.60%
To avail and more details Call at 9972660645 or 9480240513.
An organization today, has not only to man the various positions with competent and trained personnel but also has to create an environment wherein they can give their best and derive a sense of well-being, a sense of fulfillment and security and take pride in their continued association with the organisation. Provision of pension may provide an attraction for such persons to continue in the organisation and give their best to the organisation, as with continuous improvement in longevity.
BENEFITS
1) ON RETIREMENT
On retirement of a member, the corpus (contribution plus interest) is utilised to provide the following:
(a) Commuted Value (Equivalent to 1/3rd of the corpus) which is tax free
(b) The corpus that remains after providing for the commuted value is taken as the purchase price to provide for pension
2) ON DEATH.
The pension is payable on the life of the beneficiary. Corpus is utilised towards the payment of pension of the type that the beneficiary may opt and the benefit so received is tax-free. A lump sum is payable by way of death benefit besides the pension if the employer has taken Group Insurance Scheme in conjunction with the Group Superannuation Scheme as under.
GROUP SIZE SCALE OF COVER MAXIMUM COVER
10-49 2 Months salary for each year of o/s service 1.75 lacs
50-99 -do- 3.00 lacs
100 & more -do- 4.00 lacs
3) ON WITHDRAWAL
(a) He can get equitable interest transferred to the superannuation scheme of the new employer provided the rules of both the schemes provide for the same.
(b) He may opt for a pension from the normal retirement date as provided in the old employer's scheme.
(c) He may opt for payment of commuted value and pension, immediately in which case the benefits would be taxable. The members will have option to commute 1/3 or 1/2 of the total accumulation and the balance can be in the form of annuities. The commuted portion of accumulation is subject tax.
LIC PROVIDES FOLLOWING OPTIONS TO THE EMPLOYEE TO BE EXCERCISED BY HIM /HER ON THE EXIT DATE
1) Life Pension ceasing at death.
2) Life Pension with return of capital on death.
3) Life Pension guaranteed for 5, 10, 15 or 20years and life thereafter.
4) Joint Life Pension payable to the last survivor of the employee and spouse.
5) Joint Life Pension payable to the last survivor of the employee and spouse with return of capital on death of the last survivor.
PROCEDURE FOR INSTALLING THE SCHEME
Since the Superannuation Scheme is a welfare measure adopted by the employer, he can take the following decisions.
ELIGIBILITY:
The employer has to decide to which class/classes of employees he desires to extend the scheme. The eligibility conditions may be defined on the basis of designation or salary.
CONTRIBUTION
The maximum annual contribution that an employer can make to the Pension Fund and Provident Fund is restricted by Income tax provisions to 27% of the annual salary (basic plus D.A.). I.e. if the employer is contributing 12% to PF, he can contribute upto 15% to Superannuation Scheme.
Mostly the employer contributes, but if so desired, both the employer and the
employees may contribute.
EFFECTIVE DATE:
The employer can decide to contribute from any date viz the Date of joining of
the employee or any subsequent date or from current date. The contributions can be made in advance for a period or in arrears.
LOCK IN PERIOD:
There can be a lock-in period to be decided by the employer during which period, if the employee leaves organisation, the contributions made by employer
Can be adjusted for next year contributions. It can be zero lock in period also.
ADVANTAGES OF THE LIC MANAGED PENSION FUND
The LIC managed Pension fund has the following added and distinct advantages.
1) The Contributions made to individual accounts will be credited with interest every year depending on the fund size.
2) The problem of liquidity gets automatically eliminated as soon as the fund is managed by LIC.
3) We conduct free actuarial valuations of the funds administered by us from time to time.
4) The administration of the fund is carried out by us in a scientific manner and claims are promptly settled.
5) Group Insurance in conjunction with the Group Superannuation Scheme can be taken by an Organisation to provide for an attractive lump sum payment on unfortunate death of a member while in service at very nominal cost.
TAX BENEFITS
The provisions relating to the approved Superannuation Scheme are set out in Part 'B' of the fourth Schedule to the Income-Tax Act. 1961 and Part XIII of the Income Tax Rules 1962. The income Tax concessions will be available only if the scheme is approved by the CIT.
1) The annual contribution is treated as a deductible business expense in terms of Section 36(1) (iv) of the IT Act and qualifies for FBT (2005-06 onwards with relaxation up to Rs. 1 lakh per member per year.)
2) In terms of Notification issued by the Central Board of Direct Taxes, 80% of the contribution (s) towards the past service liability are treated as deductible business expense spread over in the subsequent years of payment. (Note: Under the recent case of 1999 between CIT Vs Sirpur Paper Mills, the Hon. Supreme Court held that deduction of 100% must be granted in the year of payment.)
3) The employee's contribution, in the case of Contributory scheme is taken for exemption under section 80c of the Income Tax Act.
4) In terms of section 17(2) (vi) the contributions paid by the employer are not treated as perquisites in the hands of the employee concerned.
5) In terms of Section 10 (25) (iii) of the Income Tax Act, the interest on the fund is exempt from tax.
6) In terms of Sections 10(13) of the Income Tax Act, the benefits payable on death are exempt from tax.
7) In terms of Section 10(10A) (ii) of the act, the admissible commuted value on retirement is tax-free.
The latest interest rates declared for the year 2008-09 are as under:
Fund Size as on 31/03/2008 or on the date of
Commencement/switch over during the year 2008-09 Rate of Interest
Percentage per annum
Below Rs.25 lakhs 9.00%
Rs. 25 lakhs or more but less than Rs. 1 crore 9.15%
Rs. 1 Crore or more but less than Rs.5 Crores 9.25%
Rs. 5 Crore or more but less than Rs.10 Crores 9.30%
Rs. 10 Crores or more but less than Rs. 50 Crores 9.40%
Rs. 50 Crores or more but less than Rs.100 Crores 9.45%
Rs. 100 Crores or more but less than Rs. 400 Crores 9.50%
Rs. 400 Crores or more but less than Rs.800 crores 9.55%
Rs. 800 Crores or more 9.60%
To avail and more details Call at 9972660645 or 9480240513.
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