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Page 2 WWW.ITRVAULT.IN PERSONAL TAXATION Tax Rates No change in rates except for individuals basic exemption limit raised from Rs. 1.80 / 1.90 Lacs to Rs. 2 lacs for both males and females. Also 20% slab increased from Rs. 8 Lacs to Rs. 10 Lacs Deductions Eligibility condition for deduction in respect of premium paid on LIC Policies reduced from 20% to 10% of actual sum assured (at any time during the term of the policy) u/s 80C Corresponding amendment made in exemption of sum received on maturity u/s 10(10D) Deductions for donations made u/s 80G & 80GGA exceeding Rs. 10000/- to be allowed only if made otherwise than by cash Additional Rs. 20000/- deduction u/s 80CCF not available for next year i.e. AY 2013-14 Rajiv Gandhi Equity Scheme for investment in equity of 50000/- giving 50% deduction for persons having income less than Rs. 10 Lacs announced in FM speech is not provided for in the Income Tax proposals. Saving Bank Interest Section 80TTA inserted for individual & HUF to give deduction upto Rs. 10000/- being interest from saving bank a/c
UNION BUDGET 2012 Page 3 PERSONAL TAXATION CONTD.. Time deposits (FDR interest) are not covered Deduction to firm / AOP not allowed if saving bank a/c maintained in name of individuals / HUF Preventive Health Check up Preventive health check-up also covered upto Rs 5000/- in cash u/s 80D This is within the existing limit of Rs. 15000/- (Rs. 20000/- for senior citizens) + additional Rs. 15000/- for parents. This preventive health check-up fee can be paid in cash too. Relief for senior citizens Finance Act 2011 reduced the age limit for availing senior citizens benefits from 65-60. However, in certain provisions it still contained age limit as 65 years. Age limit in sections 80D & 80DDB reduced to 60 from AY 2013-14 Age limit in S. 197A (Form 15H) reduced to 60 from 01.07.2012 No advance tax liability would be there if a senior citizen does not have income from business or profession, hence no interest u/s 234B & 234C.
Page 4 WWW.ITRVAULT.IN PERSONAL TAXATION CONTD.. Proposals for HUF Gift received from members by HUF exempt with retrospective effect from 1.10.2009 Exemption u/s 54B on sale of agriculture land extended to HUF if used for agriculture by it. Earlier it was only for individuals WIDENING OF TAX BASE Alternative Minimum Tax (AMT) on all assesses MAT was already there on Companies and AMT on LLP AMT means that where the regular income tax payable is less than AMT payable, then adjusted total income (ATI) would be deemed to be total income (TI) for such previous year and tax would be payable @18.5%. ATI = TI + deduction U/C VIA + deduction u/s 10AA AMT credit would be allowable for 10 years to be set off against regular tax However, in an individual or HUF or AOP or BOI or AJP is having adjusted total income less than Rs. 20 lacs then AMT would not be applicable to it.
UNION BUDGET 2012 Page 5 WIDENING OF TAX BASE CONTD.. TDS on transfer of immovable properties TDS applicable on all properties except agriculture land 1% TDS to be deducted by buyer u/s. 194LAA on sale consideration. However, TDS will not be deducted if the sale consideration / stamp value is less than Rs. 50 Lacs for Urban areas and Rs. 20 Lacs for other areas Registrar shall not to register the property unless TDS deducted and challan produced before him. The buyer need not take any TAN or file any TDS statement. Applicable from 1.10.2012 TDS to be deducted on payments to directors on other than salary, such as director fee @ 10% w.e.f. 01.07.2012 u/s 194J To curb flow of unaccounted money seller of bullion or jewellery to collect 1% TCS if sale exceeds Rs. 2 lacs in cash w.e.f. 01.07.2012. Applicable even if buyer is manufacturer, trader or purchase is of personal use.
Page 6 WWW.ITRVAULT.IN TAX INCENTIVES AND RELIEFS Investment based deductions S. 35AD allows 100% deduction on all expenditure other than on land, goodwill & financial instrument for certain specified business. Currently 8 specified businesses 3 more added from 1.4.2012 : Inland container depot or container freight station; Bee-keeping & pd n of honey & beewax; and warehousing of sugar Also 150% deduction is now allowed for 5 Specified businesses if they commence operations on or after 1.4.2012. These are: Cold chain facility; Warehousing of agriculture produce Hospital with at least 100 beds Affordable housing project Production of fertilizer In case of specified hotel a clarificatory amendment made that deduction is allowed even if the hotel is given on operating lease. This is applicable retrospectively from AY 2011-12
UNION BUDGET 2012 Page 7 TAX INCENTIVES AND RELIEFS CONTD.. Relief from Capital Gain from house property if invested in SME This is applicable to individual or HUF from sale of residential property (house or plot of land) subject to following conditions: Net consideration is to be invested in new company being a small or medium enterprise in manufacturing to be incorporated from 1 st April to due date of filing of return of assessee The assessee should have at least more than 50% voting rights in the said company and the said company has to invest the said consideration within 1 year in acquiring new plant & machinery Applicable from AY 2013-14 onwards to transfer of property upto 31.3.2017 only If company does not purchase plant & machinery by due date of filing of return by assessee then has to deposit amount in a capital gain scheme a/c Exemption shall be withdrawn if shares or plant is sold by assessee within 5 years from date of acquisition
Page 8 WWW.ITRVAULT.IN TAX INCENTIVES AND RELIEFS CONTD.. Tax Audit Limit and 44AD Tax audit limit u/s 44AB raised for business assesses from 60 lacs to 1 Cr and for professionals from Rs. 15 Lacs to Rs. 25 lacs. Corresponding change made in section 44AD for business assessee s for presumptive taxation. Clarificatory amendment made treating profession, commission Income & Agency business not to be covered u/s 44AD w.e.f. AY 2011-12 Weighted Deductions Expenditure (other than on land or building) on skill development project by a company to get weighted deduction of 150%. The guidelines are to be prescribed by Board. Expenditure on agriculture extension project by any assessee to get weighted deduction of 150%. The guidelines are to be prescribed by Board. Weighted deduction of 200% on expenditure u/s 35(2AB) for in-house R & D by a company was expiring on 31.3.2012. It has been extended by 5 years to 31.3.2017
UNION BUDGET 2012 Page 9 TAX INCENTIVES AND RELIEFS CONTD.. Additional depreciation benefit of 20% on new plant & machinery has been extended to Power generation & distribution assessee from AY 2013-14 Income of Foreign companies received in Indian currency from sale of crude oil is exempt from tax from AY 2012-13 Cascading effect of dividend distribution tax (DDT) in multi-tier corporate structure removed from 1.7.2012 by amending section 115O Lower tax of 15% on dividends received from a foreign company in which the Indian company has 26% or more shareholding extended to another year AY 2013-14 Lower withholding tax on ECB for three years @ 5% if Indian company engaged in dam, aircraft, fertilizers, port including inland port, road, toll road, bridge, power, shipyard or affordable housing project Sunset clause for tax holiday for power sector u/s 80 IA which was expiring on 31.3.2012 extended to another year. Now it can be set up within 31.3.2013 to claim deduction Sunset clause for following not extended for undertaking in J & K u/s 80IB; Refining in mineral oil u/s 80IB; Undertaking in HP or Uttranchal u/s 80IC. Their last date of setting up is 31.03.2012
Page 10 WWW.ITRVAULT.IN PREVENTION OF GENERATION & CIRCULATION OF UNACCOUNTED MONEY Cash Credits Special provision inserted for share application money received by a company. Now apart from identity, creditworthiness and genuineness of transaction, even source of the subscriber is to be proved by the assessee. However, if subscription is for a company in which public is substantially interested or the subscription is through a venture capital fund or venture capital company, then this verification is not required. Further a new provision section 115BBE inserted to contain that if income is assessed u/ ss 68, 69, 69A, 69B, 69C or 69D, it would be taxed 30%. No basic exemption would be allowed. Also no deduction or allowance would be made from the same. It would be applicable from AY 2013-14. Share Premium For closely held companies, share premium received in excess of fair market value (FMV) to be treated as income u/s 56. If received through a venture capital fund or venture capital company, then not applicable.
UNION BUDGET 2012 Page 11 PREVENTION OF GENERATION & CIRCULATION OF UNACCOUNTED MONEY CONTD.. Income would be consideration less FMV of the shares. FMV would be as per method prescribed or a value based on assets etc, whichever is higher It would mandatory for all residents to file their ITR from AY 2012-13 onwards if they are having any assets located outside India (including financial interest in any entity); or they are a signing authority in any account located outside India. They have to file their ITR even if they have no taxable income. Also in such cases the time to reassess their income u/s 147 would be 16 years. Currently there is no penalty in case of income found during search operations if source is specified and tax @ 30% and interest paid. From 1.7.2012 penalty would be levied @ 10% - if income is surrendered during search; @ 20% - if income surrendered in ITR; or @ 30% - 90% if AO assesses such income during his assessment
Page 12 WWW.ITRVAULT.IN RATIONALIZATION OF TDS / TCS If an assessee is not deemed to be in default then there would no disallowance of an expense u/s 40(a) (ia) for non-deduction / non-deposit of TDS As assessee would not be deemed to be in default in case of TDS / TCS compliance if the payee files his ITR u/s 139; takes such income in computation; pays his due taxes; and furnishes a CA certificate to this effect. However, interest is to be charged from date of deductibility / collectability to date of filing of ITR by payee Penalty for late filing / non filing / inaccurate particulars in TDS / TCS statements Late filing fee increased from Rs. 100/- pd to Rs. 200/- pd subject to maximum amount of tax Also a new penalty of Rs. 10000/- to Rs. 1 Lac in case of late filing / non filing / inaccurate particulars in TDS / TCS statements. However there would be no penalty if statement filed within 1 yr from due date after paying tax and with interest and late fee. Also no penalty if reasonable cause proved. This is applicable from 1.7.2012 Threshold u/s 194LA for compulsory acquisition of immovable property increased from Rs. 1L to Rs. 2 L
UNION BUDGET 2012 Page 13 RATIONALIZATION OF TDS / TCS CONTD.. Threshold u/s 193 for interest on debentures increased from Rs. 2500/- to Rs. 5000/- Intimation for TDS processing u/s 200A to be treated as notice of demand and now can be rectified and is appealable In case of Central Government or State Government person responsible for paying TDS would be DDO or any other person responsible for making payment Time limit for passing order u/s 201 by AO extended from 4 yrs to 6 yrs INTERNATIONAL TAXATION Sections2,9,195 amended with retrospective effect from 1962 to nullify supreme court s Vodafone case Also validation clause inserted to operate notwithstanding anything contained in any judgment, decree or order of any court or Tribunal or any Authority. S. 149 amended to extend period of issue notice to agent of non-resident from 2 yrs to 6 years Tax rate for non-resident, non- citizen entertainer / sportsperson increased from 10% to 20%. Also same change made in withholding tax rates. S. 90 / 90A any meaning assigned through notification to a term used in an agreement but not defined in Act or agreement shall be effective from date of agreement coming into force.
Page 14 WWW.ITRVAULT.IN INTERNATIONAL TAXATION CONTD.. Tax Residency certificate made necessary condition to avail benefits u/s 90 / 90A from AY 2013-14 Time Limit for completion of assessment or reassessment where information is sought from foreign tax authorities under a DTAA u/s 90 / 90A extended from 6 months to one year Fee for filing applications to AAR increased from Rs. 2500/- to Rs. 10000/- TRANSFER PRICING Advance Pricing Agreement (APA) introduced for international transactions TPO can now examine international transactions even not reported by the assessee. TP provisions now applicable to specified domestic transactions exceeding Rs. 5 Cr Clarificatory amendment made that +/ - 5% tolerance is not statutory deduction w.e.f. 2002-03. Also the tolerance limit from AY 2013-14 would be 3% TP provisions applies to non- corporate assessees also, hence due date of filing TP Report extended to 30 th November for them too. Also Tax Audit Report would also now have to be filed by 30 th November Definition of International Transaction & specified domestic transaction introduced
UNION BUDGET 2012 Page 15 TRANSFER PRICING CONTD.. Penalty for non maintaining records / non reporting / incorrect information made now 2%. Earlier it was Rs 1 Lac. Non reporting of international transaction would be deemed escapement and case can be re-opened u/s 147 Amendment made that department too can go in appeal to ITAT against order of DRP Clarification made through an explanation that DRP has powers to enhance variations Time limit for completion of assessment in search case referred to DRP would be u/s 144C and not 153B GENERAL ANTI-AVOIDANCE RULE (GAAR) Concept of GAAR introduced reflecting substance over form and consequently lifting of corporate veil. Certain arrangements would be treated as Impermissible avoidance arrangements. For this any of the 4 tests would apply: It creates rights & obligations which are not normally created if at arms length It results in misuse or abuse of tax laws It lacks commercial substance It is carried out in a manner, which is normally not employed for bonafide purpose
Page 16 WWW.ITRVAULT.IN MISCELLANEOUS PROVISIONS Time limit for completion of assessment increased again by 3 months for all types of assessments. Now last date of assessment would be 31 st March instead of 31 st December. In case of charitable institutions carrying business activities, where the exception of section 2(15) is invoked, assessment for that particular year can be done making the income taxable without withdrawing exemption registration u/s 12AA or 10(23C) Minimum Alternative Tax (MAT) u/s 115JB now applicable on electric, banking or electric company when they have to prepare their financial statements as per their regulatory authority. MAT to be increased by transfer of revaluation reserve if made directly to general reserve on sale of revalued asset and not routed through P & L A/c A person needs to pay advance tax even if he receives any income without TDS though TDS was deductible on that income. If he does not deposit advance tax, interest u/s 234B & 234C would be applicable. In case of conversion of sole proprietor / firm to company cost of asset shall be cost to previous owner u/s 49 Reference can be made to Valuation Officer if AO feels value taken by assessee as on 1.4.81 is higher than FMV
UNION BUDGET 2012 Page 17 MISCELLANEOUS PROVISIONS CONTD.. No requirement to issue shares when shareholder itself is the amalgamated Co. Also no requirement to issue shares where resulting company itself is shareholder of demerged Co. Venture capital Fund / Company shall have same meaning as per SEBI Laws. S. 50 D introduced to state FMV to be full consideration in case where sale value is not determinable. No requirement of processing an ITR u/s 143(1) if the case is selected for scrutiny u/s 143(2) Central Government can notify case or class of cases where in search cases compulsory reopening of past 6 yrs is not required Dividend would now be exempt even if company which was required to pay dividend distribution tax has not paid so Clarificatory amendment made that interest u/s 234D can be charged in any proceedings completed on or after 1.6.2003 irrespective of AY to which it pertains Application before settlement commission can be filed by the person who has substantial interest on the date of search Authorisation or requisition for search even if made on various persons collectively, the assessment would be made individually on each person and they would not be treated as AOP.
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