IMPORTANT AMENDMENTS OF THE FINANCE ACT, /6/2011 Lecture Meeting of BCAS - C.A.Vipul Gandhi

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1 IMPORTANT AMENDMENTS OF THE FINANCE ACT, /6/2011 Lecture Meeting of BCAS - C.A.Vipul Gandhi 1

2 TAX RATES AND SLABS OF INCOME TAX RATES FOR INDIVIDUAL,HUF,AOP & BOI, ARTIFICIAL JUDICIAL PERSON U/S 2(31)(vii) FOR A.Y NO CHANGE THREE SLABS SUBSTATIAL SCALING UP OF INCOME SLABS 1. RS.1,60,001/- TO RS.5,00,000/ % 2. RS.5,00,001/- TO RS.8,00,000/ % 3. ABOVE RS.8,00,000/ % 22/6/2011 2

3 THE TAX SLABS ARE AS UNDER: Income tax Slab Total (taxable) income Individual, HUF, etc. other than those referred to in col, (2) & (3) (1) Rates of income-tax in the case of: Resident Woman below the age of 65 years (2) Resident individual above the age of 65 years (3) A.Y. A.Y. A.Y. A.Y. A.Y. A.Y Upto Rs.1,60,000 NIL NIL NIL NIL NIL NIL Rs.1,60,001 1,90,000 10% 10% NIL NIL NIL NIL Rs.1,90,001 2,40,000 10% 10% 10% 10% NIL NIL Rs.2,40,001 3,00,000 10% 10% 10% 10% 10% 10% Rs.3,00,001 5,00,000 20% 10% 20% 10% 20% 10% Rs.5,00,001-8,00,000 30% 20% 30% 20% 30% 20% Rs.800,001 & above 30% 30% 30% 30% 30% 30% 22/6/2011 3

4 Continued.. THUS THERE IS NO TAX BENEFIT TO ABOVE ASSESSEES HAVING INCOME UPTO RS. 3,00,000/-. BENEFIT TO ABOVE ASSESSEES HAVING INCOME BETWEEN RS.3,00,000/- AND RS.8,00,000/-. ABOVE RS.8,00,000/-. THERE IS NO FURTHER BENEFIT. 22/6/2011 4

5 TAX RATES FOR OTHER ENTITIES NO CHANGE IN THE TAX RATES FOR FIRM, LOCAL AUTHORITY, CO-OP. SOCIETY, DOMESTIC CO. AND FOREIGN COMPANY FOR A.Y SAME AS IN THE A.Y /6/2011 5

6 MINIMUM ALTERNATE TAX (MAT)- SECTION 115JB THE RATE OF MAT INCREASED TO 18% FROM 15% THUS FOR COMPANIES WITH BOOK PROFIT OF RS 1 CRORE AND MORE THE TAX RATE WITH S.C. AND ADDITIONAL S.C. IS 19.93%. 22/6/2011 6

7 SURCHARGE FOR CORPORATE ENTITIES S.C. ON DOMESTIC CO. AND FOREIGN CO. IF TOTAL INCOME EXCEEDS RS.1CRORE. AS IN THE LAST A.Y. SURCHARGE REDUCED TO 7.5% FOR A.Y FROM 10% FOR DOMESTIC COS. FOREIGN CO. S.C. REMAINS UNALTERED AT 2.5%. DUE TO REDUCTION IN SC, EFFECTIVE RATE U/S.115-O (DDT) & U/S. 115-R (MUTUAL FUND) REDUCED. NO SURCHARGE ON OTHER ENTITIES. 22/6/2011 7

8 CONTINUED EDUCATION 2% AND SECONDARY AND HIGHER EDUCATION 1% FOR ALL CATEGORIES REMAINS SAME. 22/6/2011 8

9 SECTION 2(15)- CHARITABLE PURPOSE RETROSPECTIVE AMENDMENT FROM A.Y PRESCRIBING LIMIT OF RS.10 LACS FOR RECEIPTS IN RESPCET OF OBJECT OF ADVANCEMENT OF GENERAL PUBLIC UTILITY 22/6/2011 9

10 CANCELLATION OF REGISTRATION OF A CHARITABLE TRUST- SEC.12AA(3) CANCELLATION OF REGISTRATION OF TRUST - AMENDMENT OF S.12AA(3) TO MAKE IT APPLICABLE TO REGISTRATION U/S 12 A IN ADDITION TO REGISTRATION U/S 12AA. 22/6/

11 SEC. 9(1)(v), (vi) and (vii) Income deemed to accrue or arise in India. Interest, Royalty and fees for technical services paid to a Non-Resident Retrospective Amendment from Deeming fiction will apply whether or not the Non-Resident has a residence, place of business or business connection in India and whether or not the Non-Resident renders services in India. Ishikawajima-Harima Heavy Industry (SC) 288 ITR, Jindal Thermal Power Co. Ltd. 225 CTR 22/6/

12 SEZ UNITS SEC. 10AA Exempted profits = Profits of the business of SEZ Undertaking * Export turnover of the SEZ Undertaking Total turnover of the undertaking Effective from A.Y /6/

13 CONVERSION OF A PRIVATE CO. OR AN UNLISTED PUBLIC CO. INTO A LIMITED LIABILITY PARTNERSHIP The amendments in the Capital Gains chapter - in repect of Sections 47, 47A and 49. Conditions for conversions of companies into LLP 47(xiiib) Conversion is in accordance with section 56/57 of LLP Act All assets and liabilities of company to become that of LLP All shareholders to become partners in LLP with capital contribution and profit sharing ratio in the proportion of shareholding Shareholders not to receive any consideration or benefit, directly/indirectly, in any form except by way of share in profit and capital contribution in LLP Aggregate of profit sharing ratio of the shareholders of company in LLP > 50% for a period of 5 years Sales, turnover or gross receipts in business of company in any of 3 years < Rs.60Lacs. No direct / indirect payment to any partner out of accumulated profits of company for a period of 3 years after conversion date 22/6/

14 The amendments in Business Income chapter Sections 32(1), 35DDA(4A) and 43. Amendment in Section 72A - carry forward and set-off of the accumulated losses and unabsorbed depreciation. Tax credit of MAT of the converted companies u/s. 115JAA will not be allowed to be carried forward by the LLP. 22/6/

15 Weighted Deduction for expenditure on Scientific Research/ Research in Social Science or Statistical Research Section A.Y A.Y Amount paid to Weighted Deduction Amount paid to Weighted Deduction 35(1)(ii) 1)ScientificResearch Association 125% 1) Approved Research Associations 175% 2)ApprovedUniversity, College or Institution for Scientific Research 2) Approved University, College or Institution for Scientific Research 35(1)(iii) Approved University,College or other Institution for Research in social science or statistical research 125% 1) Approved Research Association 2) Approved University, College or Institution for research in social science or statistical research 125% 22/6/

16 Continued 35(2AA) National Laboratory, University or Indian Institute of Technology or specified person for scientific research undertaken under an approved program 125% National Laboratory, University or Indian Institute of Technology or specified person for scientific research undertaken under an approved program 175% 35(2AB) Amount incurred for: 1)Any Revenue or Capital expenditure on scientific research on in-house research and development facility incurred by a company 150% Amount incurred for: 1)Any Revenue or Capital expenditure on scientific research on in-house research and development facility incurred by a company 200% 2) Excludes expenditure on any land or building 2) Excludes expenditure on any land or building 22/6/

17 Amendments to Section 80GGA and 10(21): Section 80GGA: Deduction for donations extended to Approved Research Associations undertaking Scientific Research, Research in social science or statistical research which is at present available for donation made to approved scientific research associations. Section 10(21): Exemption extended to Research Association covered u/s. 35(1)(iii) engaged in research in social science or statistical research in addition to research associations u/s. 35(1)(ii). 22/6/

18 DEDUCTION OF CAPITAL EXPENDITURE ON SPECIFIED BUSINESS SEC. 35AD Sec.35AD provides for deduction of capital expenditure of specified businesses like cold chain facility, warehousing facility, cross-country natural gas, crude or petroleum network. No deduction of expenditure on land, goodwill or financial instruments. W.e.f. A.Y , this deduction is extended to: i) Building and Operating a new hotel anywhere in India of two star category and above ii) Building and Operating anywhere in India a new hospital with atleast 100 beds. iii) Developing and building a notified housing project for Slum Rehabilitation or Redevelopment iv) Operations for all the three should commence on or after v) Profit linked deduction and investment linked deduction explicitly made mutually exclusively. 22/6/

19 RELAXATION IN PROVISIONS RELATING TO DISALLOWANCE OF EXPENDITURE WHERE TAX IS NOT DEDUCTED AT SOURCE- SEC.40(a)(ia). Amendment w.e.f. A.Y by Finance Act, No disallowance of specified expenditure if the tax deducted in previous year is paid before due date of filing of Return of Income u/s 139(1). If tax is deducted and paid in subsequent year or deducted in previous year, but paid after due date of filing of Return, then such expenditure will be allowed in the year of payment of tax. 22/6/

20 AMENDMENT OF SEC. 44AB & 271B. Threshold limit of sales, turnover, gross receipts of business for compulsory audit u/s. 44AB enhanced to Rs.60 lacs from Rs.40 lacs. For Profession, threshold limit of gross receipts enhanced to Rs.15 lacs from Rs.10 lacs. Maximum penalty for non compliance of Sec.44AB enhanced to Rs.1,50,000/- from earlier Rs.1,00,000/-. 22/6/

21 PRESUMPTIVE TAXATION UNDER SECTION 44AD. Finance Act, 2009 w.e.f.a.y Presumption of 8% of turnover or gross receipts as income from business assessee can declare higher profit. Eligible business any business other than business of plying, hiring or leasing of goods carrier u/s 44AE. Eligible assessee individual, H.U.F., Firm excluding LLP resident in India. Deduction u/s 30 to 38 including depreciation deemed to be allowed. Salary and interest to partner allowed. Chapter XVIIC relating to advance tax not applicable. No need to maintain books of accounts. If profit less than 8% and income more than threshold limit than maintenance of books and audit u/s 44AB mandatory. The maximum limit of total turnover or gross receipts increased from Rs.40 lacs to Rs.60 lacs. 22/6/

22 TAXATION OF GIFTS SEC.56(2)(vii) & (viia) Section Earlier Amended 56(2)(vii) Individual or HUF a) Monetary gifts exceeding Rs.50,000/- in aggregate during P.Y. No Change a) i) gift of any immovable property greater than or equal to Rs.50,000/- as per stamp duty valuation without consideration. No Change ii) Gift of any immovable property for inadequate consideration which is less than stamp duty valuation by exceeding Rs.50,000/- Removed 22/6/

23 Continued.. Property means capital asset Amended by Finance Act, 2010 w.e.f and property includes Bullion w.f.1/6/2010. s.56(2)(viia) Firm or a closely held company - W.e.f , receives shares of a closely held company without consideration or inadequate consideration and difference between such consideration and FMV is > Rs.50,000/- Note: This clause will not apply where such shares are received on account of business reorganization, amalgamation or demerger as per Sec.47(via), (vic), (vicb), (vid) and (vii). 22/6/

24 DEDUCTION FOR INVESTMENT IN INFRASTRUCTURE BONDS AND CONTRIBUTION TO CENTRAL GOVERNMENT HEALTH SCHEME-SEC. 80CCF AND SEC.80D Section 80CCF: A newly inserted section which comes into force from A.Y which allows a deduction of Rs.20,000/- to individual and HUF for investment in notified long term infrastructural Bonds. It is in addition to limit of Rs.1,00,000/- as specified in section 80C, 80CCC and 80CCD. Section 80D: It refers to a deduction in respect of health insurance premium paid to an approved insurance company A deduction of Rs.15,000/- (Rs.20,000/- for senior citizen) is available to Individuals & HUF in respect of himself, his spouse, dependant children and member of HUF. Further deduction of Rs.15000/ is allowed for dependent parents. As per the amendment, this deduction will be available in case of contribution to the Central Government health scheme within the overall limit of Rs.15,000/- and Rs.20,000/- (for senior citizen) 22/6/

25 AMENDMENT OF S. 80 IB(10) Projects approved after to be completed within 5 years from the end of the financial year in which the project is approved by the Local Authority. For projects approved after but before , commercial area shall be 3% of the built-up area of the housing project or 5,000 sq.ft. whichever is higher as against 5% of the built-up area or 2,000 sq.ft. whichever is less. Effective from A.Y Instruction No.4/2009 dt.30/6/2009- Deduction allowed under % completion method Notification No.67/2010 dt notifying Mumbai SRA projects as qualifying for deduction. 22/6/

26 INCREASE IN THE THRESHOLD LIMIT FOR TDS. Section of I.T. Act Nature of Income / payment Sec.194B Winning from lottery or cross-word puzzle or card game and other game Sec. 194BB Winning from horse races Sec. 194C Payment to contractors A.Y Threshold limit Rs.5,000/- Threshold limit Rs.2,500/- Threshold limit of any sum credited or paid is Rs.20,000/- (for single transaction ) A.Y w. e. f Threshold limit enhanced to Rs.10,000/- Threshold limit enhanced to Rs.5,000/- Threshold limit enhanced to Rs.30,000/- (for single transaction) Threshold limit of aggregate of all sums credited or paid during the financial year is Rs.50,000/- Threshold limit enhanced to Rs.75,000/- 22/6/

27 Continued Sec. 194D Insurance commission Sec. 194H Commission or Brokerage Sec.194I Rent Sec. 194J 1)Fees for professional services or technical services or 2)Royalty or 3)Any sum referred to in sec.28(va) Threshold limit Rs.5,000/- Threshold limit Rs.2,500/- Threshold limit Rs.1,20,000/- Threshold limit Rs.20,000/- Threshold limit enhanced to Rs.20,000/- Threshold limit enhanced to Rs.5,000/- Threshold limit enhanced to Rs.1,80,000/- Threshold limit enhanced to Rs.30,000/- TDS Certificate to be furnished by deductor to deductee u/s.203(3) TCS Certificate to be furnished by person collecting the tax to the buyer or licensee or lessee u/s. 206C(5). 22/6/

28 THANK YOU!!! 22/6/2011 Lecture Meeting of BCAS - C.A.Vipul Gandhi 28

FINANCE BILL He has proposed to revise the tax slabs upwards as under:

FINANCE BILL He has proposed to revise the tax slabs upwards as under: FINANCE BILL - 2010 The 2 nd budget of the 2 nd UPA Government for the year 2010 2011 was presented by the finance minister on 26 th February 2010. The finance minister has attempted to balance his direct