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VIMAL TANDON & CO.CHARTERED ACCOUNTANTS
BUDGET 2012-2013HIGHLIGHTS
INDIRECT TAXES SERVICE TAX
Service tax rate increased from 10% to 12% w.e.f. 01st April, 2012.
Common Tax Code for Excise and Service Tax. Amendment in existing services:
Service Tax on air travel raised. The dual rate structure of maximum service tax of Rupees 150 and Rupees 750 in case of economy class travel is being replaced by an ad valorem rate of twelve per cent. with abatement of sixty per cent. subject to the condition that no credit on inputs and capital goods.
Life insurance service: Where the entire premium is not towards risk cover, the first year’s premium shall be taxed at the rate of three per cent. while subsequent premia shall attract tax at the rate of 1.5 per cent. Availment of full cenvat credit is being allowed.
New Services Taxed:
All Services to be taxed except those under the “NEGATIVE LIST”.
Negative List1. Services by Government or a local authority excluding the following services to the extent
they are not covered elsewhere –• services by the Department of Posts by way of speed post, express parcel post, life insurance
and agency services provided to a person other than Government;• services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an
airport;• transport of goods or passengers; or• support services, other than services covered under clauses (i) to (iii) above, provided to
business entities;
2. Services by the Reserve Bank of India;
3. Services by a foreign diplomatic mission located in India;
4. Services relating to agriculture by way of • agricultural operations directly related to production of any agricultural produce including
cultivation, harvesting, threshing, plant protection or seed testing;• supply of farm labour;• processes carried out at an agricultural farm including tending, pruning, cutting, harvesting,
drying, cleaning, trimming, sun drying, fumigating, curing, sorting, grading, cooling or bulk packaging and such like operations which do not alter the essential characteristics of agricultural produce but make it only marketable for the primary market;
• renting or leasing of agro machinery or vacant land with or without a structure incidental to its use;
• loading, unloading, packing, storage or warehousing of agricultural produce; agricultural extension services;
• services by any Agricultural Produce Marketing Committee or Board or services provided by a commission agent for sale or purchase of agricultural produce;
5. Trading of goods;
6. Any process amounting to manufacture or production of goods;
7. Selling of space or time slots for advertisements other than advertisements broadcast by radio or television;
8. Service by way of access to a road or a bridge on payment of toll charges;
9. Betting, gambling or lottery;
10. Admission to entertainment events or access to amusement facilities;
11. Transmission or distribution of electricity by an electricity transmission or distribution utility;
12. Services by way of -
• pre-school education and education up to higher secondary school or equivalent;• education as a part of a curriculum for obtaining a qualification recognised by any law for
the time being in force;• education as a part of an approved vocational education course;
13. Services by way of renting of residential dwelling for use as residence;
Negative List (Contd…)
14. Services by way of—• extending deposits, loans or advances in so far as the consideration is represented by
way of interest or discount;• inter se sale or purchase of foreign currency amongst banks or authorised dealers of
foreign exchange or amongst banks and such dealers;
15. Service of transportation of passengers, with or without accompanied belongings, by—
• a stage carriage;• railways in a class other than—
first class; or an air-conditioned coach;
• metro, monorail or tramway;• inland waterways;• public transport, other than predominantly for tourism purpose, in a vessel of less than
fifteen tonne net; and• metered cabs, radio taxis or auto rickshaws;
16. Services by way of transportation of goods—• by road except the services of—
a goods transportation agency; or a courier agency;
• by an aircraft or a vessel from a place outside India to the first customs station of landing in India; or
• by inland waterways;17. Funeral, burial, crematorium or mortuary services including transportation of the
deceased.
Negative List (Contd…)
Operational Amendments:
Revision Application Authority and Settlement Commission being introduced in Service Tax for dispute resolution.
A new section 72A is being inserted to introduce provisions relating to special audit in the service tax law on the lines of section 14A and section 14AA of the Central Excise Act, 1944.
The one-year time limit for issuance of notice for specified category of offences prescribed under section 73(1) of the Finance Act, 1994, is being increased to eighteen months.
DIRECT TAXES
Individual
Basic exemption limit for women resident in India made at par with male resident.
Basic exemption limit for men, women and HUF resident in India increased from `1,80,000 to ` 2,00,000.
Income tax slabs for individual (Male/Female)/HUF taxpayers:
Income slab(AY 2011-12)
Income slab(AY 2012-13)
Rates of Income Tax
Upto ` 1,80,000 Upto ` 2,00,000 Nil
` 1,80,001 to ` 5,00,000 ` 2,00,001 to ` 5,00,000 10%
` 5,00,001 to ` 8,00,000 ` 5,00,001 to ` 10,00,000 20%
Above ` 8,00,000 Above ` 10,00,000 30%
Income tax slabs for senior citizens:
Age Group60-80yrs
Age Group80yrs and above
Rates of Income Tax
Upto ` 2,50,000 Upto ` 5,00,000 Nil
` 2,50,001 to ` 5,00,000 10%
` 5,00,001 to ` 10,00,000 ` 5,00,001 to ` 10,00,000 20%
Above ` 10,00,000 Above ` 10,00,000 30%
Domestic Companies Share Premiums in access of the Fair Market Value to be treated as income u/s 56(2) in
case of closely held companies.
Corporate tax rate remains at 30%
Education Cess : 2%
Secondary and Higher Education Cess: 1%
Surcharge : 5% if taxable income exceeds ` 1 Crore ( 10 million)
Taxation of Dividend at 15% as against 30% plus applicable surcharge for Indian company which receives foreign dividend from foreign subsidiary company extended for the Assessment Year 2013-14.
Cascading effect on DDT in case of Multi Layer Subsidiaries removed to give ease to the Corporate Structure.
Section 68 of the Act amended to provide that the nature and source of any sum credited, as share capital, share premium etc., in the books of a closely held company shall be treated as explained only if the source of funds is also explained by the assessee company in the hands of the resident shareholder. However, even in the case of closely held companies, it is proposed that this additional onus of satisfactorily explaining the source in the hands of the shareholder, would not apply if the shareholder is a well regulated entity, i.e. a Venture Capital Fund, Venture Capital Company registered with the Securities Exchange Board of India (SEBI).
Foreign Companies The income tax rates remain unchanged at 40%
Surcharge: 2%.
Education Cess : 2% Secondary and Higher Education Cess: 1%
Firms
The income tax rate for firms remains unchanged at 30%.
Education Cess : 2% Secondary and Higher Education Cess: 1%.
Limited Liability Partnership
The income tax rate for firms remains unchanged at 30%.
Education Cess : 2% Secondary and Higher Education Cess: 1%.
Trusts The definition of charitable purpose u/s 2 (15) includes “the advancement of any
other object of general public utility” to the extent that it does not exceeds the monetary limit in respect of such activities i.e ` 25.00 lacs.
Thus, a charitable trust or institution pursuing advancement of object of general public utility may be a charitable trust in one year and not a charitable trust in another year depending on the aggregate value of receipts from commercial activities.
Therefore Section 10(23C), Section 13 and Section 143 of the Act have been amended to ensure that such organization does not get benefit of tax exemption in the year in which it’s receipts from commercial activities exceed the threshold whether or not the registration or approval granted or notification issued is cancelled, withdrawn or rescinded.
Alternate Minimum Tax It is proposed to extend levy of Alternate Minimum Tax to
all the persons other than companies claimimg profit linked deductions under Chapter VIA or unser section 10AA.
It is further provided that the provisions of AMT under Chapter XII-BA shall not apply to an individual or a Hindu undivided family or an association of persons or a body of individuals (whether incorporated or not) or an artificial juridical person referred to in section 2(31)(vii) if the adjusted total income of such person does not exceed ` 20 lakh.
Deductions and Exemptions Interest from savings bank accounts deductible upto Rs.10,000.
Deduction of upto ` 5,000 for preventive health check-up.
Rajiv Gandhi Equity saving scheme – New Equity saving scheme to provide for Income Tax deduction of 50% for those who invest Rs. 50,000 in equity and whose annual income is less that ` 10 lakhs. The scheme will have a lock in period of 3 years.
Deduction u/s 80 CCF for Investment in notified long-term infrastructure bonds upto ` 20,000 over and above the existing limit of ` 1 lakh on tax savings withdrawn from the Assessment Year 2013-14.
Section 80-IA(4)(iv) has been proposed to be amended to extend the terminal date for further period of one year i.e. upto March 31, 2013.
Capital Gains Exemption is provided to Individual/HUF on sale of residential property if sale consideration is used for subscription in Equity of a New Manufacturing SME Company, in which the assessee more than 50% share capital or more than 50% voting rights, for purchase of Plant & Machinery.
Deduction for life insurance premium as regards insurance policies issued on or after 1st April, 2012 shall be allowed for only so much of the premium payable as does not exceed 10% of the actual capital sum assured.
Deductions and Exemptions (Contd..)
Proposal to extend weighted deduction of 200 per cent for approved R&D expenditure in an inhouse facility for a further period of 5 years beyond March 31, 2012.
Proposal to provide weighted deduction of 150 per cent on expenditure incurred for agri-extension services.
Proposal to extend the sunset date for setting up power sector undertakings by one year for claiming 100 per cent deduction of profits for 10 years.
Proposal to provide weighted deduction at 150 per cent of expenditure incurred on skill development in manufacturing sector.
Investment link deduction of capital expenditure for certain businesses proposed to be provided at the enhanced rate of 150 per cent.
Proposal to amend the provisions of section 56 so as to provide that any sum or property received without consideration or inadequate consideration by an HUF from its members would also be excluded from taxation.
Section 80G and 80GGA amended to specify therein that any payment exceeding a sum of `10,000/- shall only be allowed as a deduction if such sum is paid by any mode other than cash.
TCS on cash purchase of bullion and jewellery exceeding ` 2 Lacs in cash @1% w.e.f. 01st July, 2012.
TCS on cash purchase of immovable property @ 1% which exceeds the following thresh hold limit:-
• ` 50 Lakhs in case of Urban Property.• ` 25 Lakhs in other cases.
Withholding tax rate on interest on ECB reduced from 20% to 5% for 3 years for specified sectors.
TDS on remuneration to a director• Under the existing provisions of the Income-tax Act, a company, being an employer, is
required to deduct tax at the time of payment of salary to its employees including Managing director/whole time director. However, there is no specific provision for deduction of tax on the remuneration paid to a director which is not in the nature of salary.
• It is proposed to amend section 194J to provide that tax is required to be deducted on the remuneration paid to a director, which is not in the nature of salary, at the rate of 10% of such remuneration.
• This amendment will take effect from 1st July, 2012.
Tax Deduction at Source/ Tax Collection at Source
Tax Deduction at Source/ Tax Collection at Source (Contd…)
Fee of `200 per day to be levied for late furnishing of TDS statement from the due date of furnishing of TDS statement to the date of furnishing of TDS statement. However, the total amount of fee shall not exceed the total amount of tax deductible during the period for which the TDS statement is delayed.
In addition to said fee, a penalty ranging from ` 10,000 to ` 1,00,000 shall also be levied for not furnishing TDS statement within the prescribed time.
In order to discourage the deductors to furnish incorrect information in TDS statement, it is proposed to provide that a penalty ranging from ` 10,000 to ` 1,00,000 shall be levied for furnishing incorrect information in the TDS statement.
General Turnover limit for compulsory tax audit u/s 44AB raised from ` 60 lakh to ` 1 crore in the case
of persons carrying on business and from ` 15 lakh to ` 25 lakh in the case of persons carrying on profession.
STT reduced from 0.125% to 0.1%.
Senior citizens not having Income from Business income exempt from advance tax.
General Anti Avoidance Rule being introduced to counter aggressive tax avoidance.
Re-opening of tax assessments upto 16 years in case of overseas assets.
White paper on Black Money to be introduced in the current session of Parliament.
Tax @ 30% on unexplained credit or investment (slab rate benefit not available).
Exemption given to assessees having no other income other than Salary Income upto `5,00,000/- and Saving Bank Interest upto ` 10,000/- extended for the Assessment Year 2013-14
Retrospectively, W.e.f. 1st April, 2011- Compulsory Reporting for Foreign Assets held by Indians through filing ROI, whether Taxable or not.
Proposal to amend section 44AD to clarify that this presumptive scheme is not applicable to
• a person carrying on profession as referred to in sub-section (1) of section 44AA;• persons earning income in the nature of commission or brokerage income; or • a or a person carrying on any agency business.• This amendment will take effect retrospectively from 1st April, 2011 and will,
accordingly, apply in relation to the assessment year 2011-12 and subsequent assessment years.
General
BUDGET HIGHLIGHTS PRESENTATION BY :-
M/s Vimal Tandon & Co.Chartered AccountantsA-107/1, Pal Mohan Plaza, 11/56,D.B. Gupta Road, Karol Bagh,New Delhi - 110005 Telefax – 23551056Tel. 45032501Mob. 9810221653, 9868171653website - vimaltandon.com
charteredaccountantindelhi.come-mail. - [email protected]
