Income from House Property:
Individuals borrowing for constructing or acquiring a house property would continue to enjoy the tax benefit on payment of interest subject to a ceiling of Rs 1.5 lakh. Also, gross rent would not be computed at a presumptive rate of six per cent as proposed earlier in the direct tax code (DTC). This is likely to give a boost to short term investors who in the lower strata as anyone who takes loan for construction or acquisition would continue to enjoy tax benefit.
Religious institutions not exempt earlier in the DTC would now be exempt subject to certain conditions as the revised draft DTC has made the definition of charitable organisations more clear. Non profit organisations (NPOs), as per the revised draft direct tax code, would now be able to carry forward their unused grants. They would be able to carry forward up to 15 per cent of the surplus or 10 per cent of the gross receipts during a financial year. However, this would have to be used within three years. Also, they would be able to maintain their books of accounts on the basis of cash accounting system “since it is easy to follow and easy to administer.” However, the donations to such organisation would not be elgibile for any deduction in the hands of donor as provided by the earlier draft. Partly religious and partly charitable institutions would also be treated as NPOs if they registered under the DTC. However, the income from charitable organisations would be subject to the 15 per cent tax as provided earlier in the first draft DTC.
Taxation on foreign companies:
The revised draft has adopted the middle path regarding the treaty override and general anti-avoidance rules (GAAR). Foreign investors had raised concerns regarding both these provisions and change in criterion for taxing their income as resident if they partly do their work in India for a specific period. The revised DTC said that between treaty and the tax code, the one more beneficial to the tax payer would be applicable, while on