DIRECT TAX CODE

This is a news item appeared as answer in The Tribune to a query/question raised by a reader.

Question: We have come to know that under Direct Tax Code for sec.80C one can invest as under:

1. PPF-Rs. 1 lakh maximum
2. LIC-Rs. 50,000 maximum

Does it mean that u/s 80C under the Direct Tax Code, total investment eligible for tax rebate would be Rs. 1.50 lakh as against Rs. 1 lakh currently?

A. Under the new Direct Tax Code(DTC), while the upper limit for total tax saving investments is indeed enhanced to Rs. 1.50 lakh as compared to Rs. 1 lakh currently, nonetheless there are certain condition. The Rs. 1.50 lakh deduction is split into two parts-Rs. 50,000 and Rs. 1 lakh, respectively. The Rs. 50,000 deduction is specifically available only in respect of life insurance premium paid (where the sum assured is at least 20 times the premium), health insurance mediclaim and tuition fees of children. On the other hand, the Rs. 1 lakh limit is available in respect of provident fund, superannuation fund,gratuity fund and contributions to NPS.

In the case of PPF, at least it seems from the initial reading, that the limit will stay put at Rs. 70,000. It is pertinent to note here that the Rs. 70,000 limit is as imposed by PPF rules. Therefore, unless the rules in the PPF Act are changed, the limit will continue top apply.