For those who were worried that withdrawing money from provident fund accounts would be taxed in the future, there might be some good news coming.
The Direct Taxes Code (DTC) Bill, which was approved by the Cabinet on Thursday, is likely to propose to continue with exempt-exempt-exempt (EEE) method of taxation on investments up to Rs 3 lakh.
Finance Minister Pranab Mukherjee will introduce the Bill in Parliament next week.
At present, all three stages of savings—income, deposit and withdrawal—are exempt from tax (EEE). The first draft of the DTC Bill released in August last year had proposed to move away from EEE tax regime to EET — where savings would taxed at the time of withdrawal — triggering howls of protest from the salaried class.
The discussion paper on DTC released in June proposed to provide EEE benefits for government provident fund, PPF, New Pension System, pure life insurance products and annuity schemes.
“If the government has included it in the DTC then it is a welcome move but we do not know the exact provisions of the direct tax code,” said Dinesh Kanabar, deputy CEO and chairman, Tax, at KPMG India.
Other than this the approved DTC bill is also expected to have a proposal to continue with the deduction on payment of interest on the home loan with a cap of Rs 1.5 lakh per annum.
Sources said that DTC bill is also likely to exempt equity and mutual funds from long-term capital gains tax.