In its second draft of the Direct Tax Code (DTC), the Union ministry of finance has brought back many small perks not included in the first draft last year. Here's a checklist for retail investors.

EEE on investments:

The new draft proposes to give 'exempt-exempt-exempt' (EEE) treatment of taxation to the Government Provident Fund (GPF), Public Provident Fund (PPF), Recognised Provident Funds (RPFs) and pension schemes from the Pension Fund Regulatory and Development Authority (PFRDA). Pure life insurance products and annuity schemes will also be subject to EEE benefit.

Though this move to revert to the EEE model of taxation on saving instruments is positive for investors, it has a catch. Rajesh Srinivasan, leader-global employer services, Deloitte said, "The government may calibrate the tax slabs, rates and monetary limits for exemptions to compensate for the potential revenue loss on account of this change." The 'exempt- exempt- tax' (EET) regime proposed in the previous draft would have led to taxation on withdrawal from PPF, etc. However, now investors can continue to use debt options and not change their investment plans. "Also, only term insurance benefits will be tax-free, so those invested in unit-linked investment plans (Ulips) or equity-linked saving schemes (ELSS) may rethink, as they will be taxed," said Arnav Pandya, a certified financial planner.

Exemption on retirement benefits:

Retirement benefits are proposed to be exempted, subject to specified monetary limits. Therefore, the amount received from gratuity, a voluntary retirement scheme (VRS), pension linked to gratuity and encashment of leave at the time of superannuation may be exempted, subject to specified limits, for all employees.

No change in perquisites' law:

However, perquisites related to employer-provided medical facilities and reimbursements shall be valued as in the existing law. Homi Mistry, partner, Deloitte, said: "Currently, most employers allow medical refund up to Rs 15,000 annually. Monetary limits could be revised upwards."

No presumptive computation of rent: The first draft proposed to determine notional rent at six per cent while computing income from house property. It had also proposed that the higher figure between the actual contractual annual rent and that calculated based on the presumptive rate would be considered for computing tax. "One already pays property tax, municipal and society charges for a property. Levying a presumptive rate for rateable value would not be accurate, as it will mostly be in excess of the contractual annual rent and increase the burden on the tax payer," added Sadagopan.

Interest repayment limit retained:

The draft says one will be eligible for deduction of interest repayment on capital borrowed (home loan) for acquisition or construction of a property, subject to a ceiling of Rs 1.5 lakh, from the gross total income.

However, there is no clarity on whether the Rs 1.5 lakh limit will be inclusive in the total investment limit of Rs 3 lakh (under Section 80, rechristened as Section 66) for individuals.

Source: http://epaper.business-standard.com/