You can almost expect a relief from sighing at the TDS figure on your salary slip every month. Effective from year 2012, The Direct Taxes Code brings good news for salaried employees. Though there are always two sides of the coin, one side may shine better in this case.
To start with, medical reimbursement in the non taxable slot has been increased from Rs15000 to Rs 50000. This comes as a refreshing change as the earlier limit amounted to only Rs 1250 a month and barely covered the doctor’s consultation and medicine costs.
It gets better, LTA which was claimed every alternate year (twice in a block of four years) will change the way it is presented in your tax return. The old system requires LTA to be totally exempted from tax when claimed. Once the code is effective, LTA will be a part of the salary but meet the criteria for deduction. For example, if your taxable income is, say,7 lakh, and the LTA component is Rs 40,000 a year, you will deduct it from your total income. Currently, your total income would have been shown as 6.6 lakh.
This may cause some companies to rework their compensation packages. There has also been talk of proposing an allowance which supports personal expenditure details of which have not been revealed yet.
The not so great news is that some non monetary prerequisites may become redundant. Those who avail the Rs 20000 exemption investing in infrastructure bonds will be allowed to avail this benefit for only the current year. The present deduction under section 80C of the Income Tax Act on fixed deposits (done for tenure of five years or more) will not be applicable. Currently, it is part of the investment limit of 1lakh where individuals can claim tax breaks.