01 March 2011

Vimal Punamiya: FAVOURABLE POINTS OF BUDGET 2011 – 12 ON DIRECT TAXATION

FAVOURABLE POINTS OF BUDGET 2011 – 12 ON DIRECT TAXATION

1.      The Basic Exemption Limit for Individual (Male) have been increased from Rs. 1,60,000/- to Rs. 1,80,000/-.

 

2.      To be eligible for benefits of Senior Citizen as per Income Tax Act have been decreased from 65 years to 60 years.

 

3.      The Basic Exemption Limit for Senior Citizen have been increased from Rs. 2,40,000/- to Rs. 2,50,000/-.

 

4.      A new category have been introduced declaring Very Senior Citizens wherein, individual of 80 years and above will be taxed as follows:-

Upto Rs. 5,00,000                              NIL

Rs. 5,00,001 to Rs. 8,00,000             20%

Rs. 8,00,001 and above                    30%

 

5.      The Surcharge in the case of Domestic Company have been decreased from 7.5% to 5% and in the case of other than Domestic Company it have been decreased from 2.5% to 2%.

 

6.      U/S 2(15) of the Income Tax Act, which defines Charitable Purpose where the advancement of any other object of general public utility is not a charitable purpose, if the income exceeds Rs. 10,00,000/- or more in previous years have now been increased to Rs. 25,00,000/-.

 

7.      U/S 10, the benefits of Specific Perquisites were earlier enjoyed by Chief Election Commissioner, Election Commissioner and the Judges of Supreme Court. Now the similar benefits have been extended to serving as well as retired Chairman and Members of Union Public Service Commission.

This Amendment is with retrospective effect from 01.04.2007 and will accordingly apply in relation to A.Y. 2008 – 09.

 

8.      New clause is inserted in section 10 wherein, Income Tax is exempted to any body, authority, board, trust and commission which is set up by a Central, State and Provisional Act or constituted by Central Government or State Government for the benefit of general public and which is not engaged in any commercial activities and is notified by Central Government in this behalf.

This amendment will be applicable w.e.f. 1st June, 2011.

 

9.      U/S 35(2AA) of the Income Tax Act, weighted deduction / contribution made for approved, scientific research programme have been increased from 175% to 200% w.e.f 1st April, 2012.

 

10.   a) U/S 35AD, two new specified business have been introduced i.e.

i)                   developing and building a housing project under a scheme for affordable housing framed by the Central Government or a  State Government, as the case may be, and notified by the Board in this behalf in accordance with the guidelines as may be prescribed; and

ii)                 production of fertilizer in India.

             b) The date of commencement for the above two business would be 1st April,   
                  2011.

c) The word 'NEW' have been removed from the definition of 'specified business' in
      the case of Hotels and Hospitals u/s 35AD(8)( c) for the purpose of Section 73A  
      wherein the loss of an  Assessee on account of a "specified business" claiming
      deduction u/s 35AD would be allowed to be set off against the profit of another "
      specified business" under section 73, whether or not the latter is eligible for
      deduction u/s 35AD.     

11.  It is, therefore propose to amend section 36 so as to provide that any sum paid by the assessee as an employer by way of contribution towards a pension scheme, as referred to in section 80CCD (2) on account t of an employee to the extent it does not exceed 10 percent of the salary of the employee in the previous year, shall be allowed as deduction in computing the income under the head "Profits and Gains of business or profession".

 

12.  Exemption u/s 80CCF i.e. Long term infrastructure bond upto Rs. 20,000/- have been extended upto A.Y. 2012 – 13.

 

13.  The termination date for exemption u/s 80 IA (4)(iv) have been extended upto 31st March,2012.

 

14.  Section 139 have been amended in case of corporate assessee who undertake international transactions and file a report in form 3CEB, the due date for filing the return have been extended from 30th September to 30th November.

 

15.  New section 115BBD have been introduced wherein the total income of an Indian Company includes any income by way of dividend received from Foreign Subsidiary Company then such dividend shall be taxable @ 15% + Surcharge and Education cess on the gross amount instead of 30% as earlier. No expenditure is allowed on such income.

 

16.  U/S 139 (1) in case of a salaried tax payer who does not have any other source of Income and where the entire tax liability is discharged by the employer in the form of TDS and the complete detail of such salaried tax payer is reported by the employer in his TDS statement, then such tax payer is not required to file his return of income w.e.f. 1st June 2011.

 

17.  Section 254C (1) have been amended wherein, a tax payer who is the subject matter of a search would be allowed to file an application for settlement if additional income tax payable on the income disclosed in the application exceeds fifty lakhs rupees. Entities related to such a tax payer, who are also the subject matter of search, would now be allowed to file an application for settlement, if additional income tax payable in their application exceeds ten lakh rupees.

 

18.  A new sub – section (6B) have been inserted in section 245D wherein a Settlement Commission may, at any time within a period of 6 months from the date of his order can change his order by rectifying any mistake apparent from the record only after informing and giving opportunity to be heard to the Commissioner and applicant. W.E.F. 1st June, 2011

 

19.  Section 282B of Income Tax Act regarding Document Identification Number have been omitted

 

20.  The time limit have been extended from 31st December, 2010 to 32st March, 2012 to enable Employees Provident Fund Organization (EPFO) to process the applications made by establishments seeking exemptions under section 17 of the EPF and MP Act.

UNFAVOURABLE POINTS OF BUDGET 2011 – 12 ON DIRECT TAXATION

1.      There is no increment in the basic exemption limit for women.

 

2.      In the case of developer of a SEZ and or unit located in SEZ, which were enjoying the benefits of exemption from MAT, have now been brought within the purview of MAT and therefore liable to pay tax @ 18.5% on book profit w.e.f. 1st April, 2012.

 

3.      Exemption benefits of Dividend Distribution Tax have been discontinued in the case of developers in SEZ for dividend distributed declared or paid after 1st June, 2011.

 

4.      Sec 80CCE have been amended so as to provide that the contribution made by the Central Government or any other employer to a pension scheme u/s 80CCD (2) shall be excluded from the limit of one lakh rupees provided u/s 80CCE.

 

5.      a) U/S 92C (2), the earlier variation between actual price and arm length price does not exceed 5% then the actual price shall be treated as Arm Length Price. Now instead of variation of 5%, the allowable variation will be such percentage as notified by Central Government.

b) U/S 92CA, the power of the transfer pricing office (TPO) have been extended to determine the Arm Length price in respect of other international transaction i.e. transaction not referred by the AO, which were noticed by him subsequently in the course of proceedings before him.

c) U/S 92CA (7), the power of TPO have been extended to enable the TPO to exercise the power of Survey conferred upon an Income Tax Authority u/s 133A of the Act. W.e.f. 1st June, 2011.

 

6.      The rate of tax u/s 115JB (i.e. MAT) have been increased from 18% to 18.5%.

 

7.      Just like MAT in case of Company, LLP is now liable to pay tax @ 18.5% as Alternate Minimum Tax on adjusted total income.

 

8.      Section 115R(2)has been amended to provide that the Mutual fund is liable to pay additional income tax on such distributed income at the rate of –

a)     25 percent, if the recipient is an individual or HUF in case of distribution by a money market mutual fund or a liquid fund;

b)      30 percent, if the recipient is any other person in case of distribution by a money market mutual fund or a liquid fund;

c)      12.5%, if the recipient is an individual or HUF in case of distribution by a debt fund other than a money market mutual fund or a liquid fund; and

d)     30%, if the recipient is any other person in case of distribution by a debt fund other than a money market mutual fund or a liquid fund; w.e.f. 1st June, 2011.

 

9.      U/S 153 of the Income Tax Act, the time taken in obtaining the information from the tax authority in jurisdiction situated outside India under an agreement referred to in Section 90 & 90A shall be excluded from the total time limit for completion of Assessment and Re – Assessment w.e.f 1st June, 2011.

 

10.  Section 285 have been amended where the non-resident were not require to file the return for their liaison office, are now  mandatory require for filing of annual information within 60 days from the end of F.Y. by the non – resident as regard their liaison office in India. W.e.f 1st June, 2011.

 

11.  Section 80 – IB (a) have been amended for deduction available for commercial production of mineral oil will not be available for block license under contract awarded after 31st March, 2011 under the new exploration licensing policy announced by the Government of India.

 

12.  a) Section 10 is been amended to exempt income from any infrastructure debt fund only when it is notified by the Central Government as per prescribed guidelines.

b) Section 115A has been amended to tax the gross interest income of non – resident @ 5% from such notified infrastructure debt fund.

c) New Section 194LB has been inserted to deduct tax at source @ 5% on interest income from such notified Infrastructure Debt Fund paid to the Non – Resident.

This amendment will be applicable w.e.f. 1st June, 2011.

 

13.  New section 92A have been inserted to deal with transactions undertaken with persons located in such country or area. The section provides as follows:-

a.       An enabling power to the central government to notify any country or territory outside India, having regard to the lack of effective exchange of information by it with India as a notified jurisdictional area.

b.      That if an assessee enters into an transaction, where one of the parties to the transaction is the person located in a notified jurisdictional area, then all the parties to the transaction shall be deemed to be associated enterprises and the transaction shall be deemed to be an international transactions and accordingly, transfer pricing regulation shall apply to such transactions.

c.       That no deduction in respect of any payment made to any financial institute shall be allowed unless the assessee furnishes an authorization , in the prescribed form, authorizing the Board or any other Income Tax Authority acting on its behalf, to seek relevant information from the said financial institution.

d.      That no deduction in respect of any expenditure or allowance (including depreciation) arising from the transaction with the person located in a notified jurisdictional area shall be allowed under any provision of the Act unless the assessee maintains such other documents and furnishes the information as may be prescribed.

e.       That if any sum is received from a person located in a notified jurisdictional area, then, the onus is on the assessee to satisfactorily explain the source of such money in the hands of such person or in the hands of the beneficial owner, and in case of his failure to do so the amount shall be deemed to be the income of the assessee.

f.        That any payment made to a person located in the notified jurisdictional area shall be liable to deduction of tax at a higher of the rates specified in the relevant provision of the Act or rates or Rate in force or a rate of 30 percent.

The amendment is w.e.f 01st June, 2011.

 

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