Income Tax Budget Analysis

CA Vidhan Surana, CA Omkar Maloo CA Sunil Maloo

Marginal Increase in Exemption Limit

Category of Assessee Basic Exemption Limit

For Individual (Including HUF & women except Senior Citizens)

2,00,000 (Earlier Rs.1,80,000)

For Resident Senior Citizens (60-80 Years)

2,50,000(NO Change)

For Resident Senior Citizens (Above 80 Years)

5,00,000 (NO Change)

Income Tax Rate: Slabs Range of Income Income Tax Rate

Upto Basic Exemption Limit Nil

From Basic Exemption Limit to Rs. 5,00,000

10%

Rs. 5,00,000 to Rs. 10,00,000(Earlier 5-8 lacs)

20%

Income Above Rs. 10,00,000 30%

Tax rate of unexplained money, credits, investments, expenditures etc. (i.e. addition made u/s 68, 69,69A, 69B, 69C & 69D), irrespective of the slab of income.

30%(Sec.115BBE of the Act)

Corporate Taxation

• No changes in the existing corporate

tax rates

• Rate are same as under:-

– Income Tax Rate : 30%

– MAT Rate : 18.5%

– Cess (Both) : 3%

– Surcharge : 5%(if the total income exceeds Rs. 1 Crore)

Relaxation to Senior Citizens (60 years)

from Payment of Advance TaxIf following conditions fulfilled:- Not having any business income Exempted from payment of Advance Tax Effect:-

– No interest u/s 234B and 234C.– Relief from procedural compliance of advance tax payment.

Budget benefit to Assessee• Only Saving Bank interest upto Rs.10,000/- reduced from taxable income.

• The deduction up to Rs.5000/- is available with respect to the amount actually incurred for Preventive Health Check up. (This benefit is over and above the existing benefits as well as ceiling available to the assessee u/s 80D (Medi-claim Rs.15000) of the Act.)

Benefit to Power Sector• 80IA extended for 1 more year• Proposal to extend the sunset date for setting up power

sector undertakings by one year (i.e. 31/03/2013) for claiming 100 per cent deduction of profits for 10 years. (Refer section 80IA(4) (iv) of the I.T.Act)

• Now, additional Depreciation u/s 32(1)(iia) of the Act at the rate of 20%

Corporate Taxation

Dividend Distribution Tax• Removal of the cascading effect of Dividend

Distribution Tax (DDT)

•  With a view to remove the cascading effect of DDT in multi-tier corporate structure, Section 115O amended to provide that in case any company receives, during the year, any dividend from any subsidiary and such subsidiary has paid DDT as payable on such dividend, then, dividend distributed by the holding company in the same year, to that extent, shall not be subject to Dividend Distribution Tax under section 115-O of the Act

• This amendment will take effect from 1st July, 2012.

Increase in Threshold Limit for TAX AUDIT

• Turnover limit for compulsory tax audit (Sec. 44AB) of account and

presumptive taxation (sec. 44AD) to be

– raised from 60 lakhs to 1 crore for business.

– raised from 15 lakhs to 25 lakhs for Profession.

Presumptive taxation not to apply to specified

Assessee• Section 44AD amended to clarify that this presumptive

scheme is not applicable to (i) a person carrying on profession as referred to in sub-section (1) of section 44AA; (ii) persons earning income in the nature of commission or brokerage income; or(iii) a or a person carrying on any agency business.

Relief from long-term capital gains tax on transfer of residential property if invested in a manufacturing small or medium enterprise

 

• The Government had announced National Manufacturing Policy (NMP) in 2011,

one of the goals of which is to incentivise investment in the Small and Medium

Enterprises (SME) in the manufacturing sector.

• New section 54GB has been inserted so as to provide rollover relief from long

term capital gains tax to an individual or an HUF on sale of a residential property

(house or plot of land) in case of re-investment of sale consideration in the equity

of a new start-up SME company in the manufacturing sector which is utilized by

the company for the purchase of new plant and machinery.

“MAT” for Companies, now

“AMT” for other than Companies

• In order to moderate the outgo on profit linked deductions (Sec. 115JC) the levy of Alternate Minimum Tax (AMT) extended on all persons other than companies, claiming profit linked deductions.

• Earlier applicable to LLPs, now all for other than corporate.

• MAT & AMT tax rate: 18.5% + Surcharge (Where applicable)

Measures to detect the unaccounted money

• Increasing the onus of proof on closely held companies for funds received from shareholders as well as taxing share premium in excess of fair market value. (Sec. 68, F.Y.2012-13). Supreme Court judgment in the case of Lovely Export etc. have no relevance now.

• Taxation of unexplained money, credits, investments, expenditures etc., at the highest rate of 30 per cent irrespective of the slab of income for all the assessee.

• Introduction of compulsory reporting requirement in case of assets held abroad.

• Allowing for reopening of assessment upto 16 years in relation to assets held abroad. (Sec. 149 (1)(c) of the Act)

No cash payment of Donation exceeding

Rs.10000• Currently, there is no provision in either of the aforesaid sections specifying the

mode of payment of money. Sections 80G and 80GGA is amended so as specify

therein that any payment exceeding a sum of ten thousand rupees shall only be

allowed as a deduction if such sum is paid by any mode other than cash.

•

• These amendments will take effect from 1st April, 2013 and will, accordingly, apply

in relation to assessment year 2013-14 and subsequent assessment years.

TDS & TCS Amendments• Tax deduction at source @ 1% on transfer of IMMOVABLE PROPERTY (other than agricultural land) above

a specified threshold. (Sec. 194LAA of the Act, w.e.f 01/10/2012)

(a) fifty lakh rupees in case such property is situated in a specified urban agglomeration; or(b) twenty lakh rupees in case such property is situated in any other area.

• Registration of property by Registrar only after submission of proof of TDS deducted & paid.• Separate specific Challan for payment of TDS by mentioning only PAN of both parties. (No TAN)

• 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 incentive for funding of certain Infrastructure Sectors TDS @ 5% u/s 194LC to provide interest by infrastructure based company (Sec. 115A) to non-resident

TCS Amendment• Tax collection at source @ 1% on purchase in cash of bullion or jewellary in excess of 2 lakh. (Sec.

206C(1D) of the Act, w.e.f 01/07/2012) • Tax collection at source @ 1% on trading in coal, lignite and iron ore. (Sec. 206C(1) of the Act, w.e.f

01/07/2012)

VODAFONE - VerdictNullified by Retrospective Amendment

• Amendment in Section 2(14) and section 9 w.e.f. 01/04/1962.• Property definition widened to include any rights in or in relation to an Indian

company, including rights of management or control or any other rights whatsoever.

• Now doubt removed by clarifying that an asset or a capital asset being any share or interest in a company or entity registered or incorporated outside India shall be deemed to be and shall always be deemed to have been situated in India, if the share or interest derives, directly or indirectly, its value substantially from the assets located in India.

Amendment in section 40(a)(ia) of the Act

• In order to rationalize the provisions of disallowance on account of non-deduction of tax from the payments made to a resident payee, section 40(a)(ia) amended by way of insertion of new proviso below in Clause (a) in sub-section (ia) after the proviso and before the Explanation.

• It is provided that where an assessee makes payment of the nature specified in the said section to a resident payee without deduction of tax and is not deemed to be an assessee in default under section 201(1) on account of payment of taxes by the payee, then, for the purpose of allowing deduction of such sum, it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the resident payee.

• These beneficial provisions are proposed to be applicable only in the case of resident payee.

• These amendments will take effect from 1st April, 2013 and will, accordingly, apply in relation to the assessment year 2013- 14 and subsequent assessment years

Beneficial Amendment in 40(a)(ia)

Share premium in excess of the fair market value to be treated as income

• Section 56(2) amended to include following income under the head “Income from other sources”. • A new clause in section 56(2) inserted, it will apply where a company, not being a company in

which the public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares. In such a case if the consideration received for issue of shares exceeds the face value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares shall be chargeable to income- tax under the head “Income from other sources.

• This amendment will take effect from 1st April, 2013 and will, accordingly, apply in relation to the assessment year 2013- 14 and subsequent assessment years.

Reduction in rate of STT

Security Transaction Tax (STT) reduced to 0.1% from the

existing level of 0.125%.

Above amendment is in relation to the delivery based

Transaction of securities.

DisclaimerThis analysis has been

Prepared keeping in mindthe general interest of readers.

Full care have been taken While doing the analysis, however we disclaim any

liability if any arise.