Ulips, equity-linked MF dividends to be taxed under DTC

 
“The mutual fund or life insurer or person responsible for making payment of distributed income on its behalf, as the case may be, shall be liable to pay tax to the credit of central government within period of 14 days from the date of distribution or payment of such income, whichever is earlier,” Direct Taxes Code (DTC) Bill said.

As such, these MFs and life insurance companies which part invest the funds in the equity market (Ulips), are now liable to pay tax at the rate of 5 per cent on the dividend paid.
At present, there is no DDT applicable to equity fund schemes or insurers on income distribution to unit or policy holders. This norm is applicable to mutual fund schemes and insurance policies that invest over 65 per cent of the total proceeds in equity shares, or equity-oriented mutual funds.

Further, salaried taxpayers may have less kitty for holidays from April 2012, with the government proposing to scrap tax incentives on leave travel allowance in the new direct tax regime DTC.

DTC aims to replace the archaic Income Tax Act and other direct taxes legislation like Wealth Tax Act, from April 1, 2012. It proposes, among other things, to remove a plethora of exemptions and effect changes in income tax slabs.

While DTC proposes to retain exemptions such as house rent allowance and leave encashment, it seeks to remove LTC from the list. The exemption limit for medical reimbursements, however, is sought to be increased.