17 March 2012
BUDGET 2012: Highlights by Talati & Talati
FAVOURABLE POINTS OF BUDGET 2012 – 13 ON DIRECT TAXATION
1. The Basic Exemption Limit for Individual (Male) have been increased from Rs. 1,80,000/- to Rs. 2,00,000/- giving tax relief of Rs. 2000/-.
2. The Basic Exemption Limit for Individual (Female) have been increased from Rs. 1,90,000/- to Rs. 2,00,000/- giving tax relief of Rs.1000/-.
3. The upper limit of 20 percent slab proposed to be raised from 8 lakhs to 10 lakhs. Therefore the new slab rates for General category is-
Upto Rs. 2,00,000 NIL
Rs. 2,00,001 to Rs. 5,00,000 10%
Rs. 5,00,001 to Rs.10,00,000 20%
Rs. 10,00,001 and above 30%
4. An Individual tax payers or an HUF are allowed a deduction upto Rs.10,000 for interest on deposit from savings Bank accounts ( other than time deposits) with Banking Co., Co-operative soc. Engage in business of banking or Post office, u/s 80TTA.
5. Under section 115A the taxable rate have been reduced from 20% to 5 % (plus surcharge and cess) if interest is paid by a specified company to a non resident in respect of borrowing made in foreign currency from sources outside India between 1st July, 2012 and 1st July, 2015, under an agreement and accordingly TDS will be deducted @ 5% under new sec 194LC.
6. 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, thereby removing the cascading effect of DDT
7. New clause (48) in section 10 of the Income-tax Act to provide for exemption in respect of any income of a foreign company received in India in Indian currency on account of sale of crude oil to any person in India subject to the following conditions:
(i) The receipt of money is under an agreement or an arrangement which is either entered into by the Central Government or approved by it.
(ii) The foreign company, and the arrangement or agreement has been notified by the Central Government having regard to the national interest in this behalf.
(iii) The receipt of the money is the only activity carried out by the foreign company in India.
8. The benefit u/s 32(1)(iia) i.e. initial depreciation @20% has been extended to the assessee engaged in the business of generation of distribution of power in case of new machinery or plan (other than ship and aircraft) acquired and installed in previous year.
9. New provision has been inserted wherein weighted deduction of 150% of the expenditure incurred on the agricultural extension project has been allowed.
10. U/s 35(2AB) the benefit of weighted deduction have been extended for the further period of 5 years i.e. upto 31st March,2017.
11. New provision has been inserted wherein weighted deduction of 150% of the expenditure (not been expenditure in the nature of cost of any land or building) incurred on the skill development project .
12. The Tax Audit limit u/s 44AB have been increased from 60 lakhs to 1 crore in case of person carrying on business and from 15 lakhs to Rs. 25 Lakhs in case of person carrying on profession( w.e.f 1/4/2013).
13. U/s 44AD, for the purpose of presumptive taxation the threshold limit of the total turnover of the gross receipt has been exceed from 60 Lakhs to 1 crore (w.e.f 1/4/2013).
14. Senior Citizen are not required to pay Advance tax if there total income does not include any income from Business & profession ( w.e.f. 1/4/2012).
15. Under Section 2 of Wealth Tax Act the threshold limit of gross salary has been increased from five lakh rupees to ten lakh rupees for the purpose of levying wealth-tax on residential house allotted by a company to an employee or an officer or a whole time director.
16. A new section 546B has been inserted to provide relief from Lon 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 (Small & Medium Enterprise) company in the manufacturing sector which is utilized by the company for the purchase of new plant and machinery subject to the conditions.
17. STT has been reduced from 0.125% to 0.1%(w.e.f 1/7/2012).
18. (a) U/s 35AD deduction have been increased from 100% to 150% in respect of specified business commencing the operation on or after 1/4/2012.
(b) Three new business are been included as a specified business namely-
(i) setting up and operating an inland container depot or a container freight station notified or approved under the Customs Act, 1962 (52 of 1962);
(ii) bee-keeping and production of honey and beeswax; and
(iii) setting up and operating a warehousing facility for storage of sugar.
(c ) If the owner of the Hotel transfers the operation of the hotel to another person he will be eligible for such benefit as deemed to be carrying of the specified business as business of building and operating hotel.
19. Under Sec 80-IA(4)(iv) the terminal date have been extended to a further period of 1 year i.e. upto 31/03/2013.
20. U/s 80D, 80DDB & 197A the age for availing the benefit of senior citizen have been reduced from 65 years to 60 years.
21. U/s 80D any payment (does not exceed Rs. 5000/-) made by an assessee on account of preventive health check-up of self, spouse, dependent children or parents is eligible for deduction within the overall limit prescribed in the section.
22. (a) Non payment/ Short Payment of the TDS by the resident payer u/s 201(1) would not be treated as assessee in default in respect of such tax if resident payee-
(i) has furnished his return of income under section 139;
(ii) has taken into account such sum for computing income in such return
of income; and
(iii) has paid the tax due on the income declared by him in such return of
and the payer furnishes a certificate to this effect from an accountant in such form as may be prescribed.
(b) the interest u/s 201(1A)(i) shall be payable by the resident payer defaulter from the date on which such tax was deductible to the date of furnishing of return on income by such resident payee (w.e.f 1/7/2012).
23. As stated above in sec 201(1) similar changes have been made in sec 206C.(w.e.f 1/7/2012).
24. Under section 40(a)(ia) where an assessee makes payment 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.
25. Under section 200A intimation generated after processing of TDS statement shall be
(i) subject to rectification under section 154;
(ii) appealable under section 246A; and
(iii) deemed as notice of demand under section 156.
These amendments will take effect from 1st July, 2012.
26. Under sec 194LA the threshold limit for Non deduction of TDS has been increased from 1 lakh to 2 lakh.
27. U/s 193 threshold limit for Non deduction of TDS has been increased from Rs.2500 to Rs.5000 in case of payment of interest of any debentures ( whether listed or not).
28. Under section 234D would be applicable to any proceeding which is completed on or after 1st June, 2003, irrespective of the assessment year to which it pertains. (w.e.f. retrospectively from the 1st day of June, 2003).
29. Section 153A & 153C has been amended whereby a Central Government will notify the cases or class of cases in which case the compulsory re-opening of past six years is not required .
30. Under 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.( w.e.f retrospectively from the 1st day of October, 2009).
31. Section 47(vii) now excludes the requirement of issue of shares to the shareholder where such shareholder itself is the amalgamated company (eg: holding- subsidiary co.) However, the amalgamated company will continue to be required to issue shares to the other shareholders of the amalgamating company.(w.e.f. 1st day of April, 2013).
32. Similar amended is made in case of demerger.
33. HUF has been included u/s 54B for the purpose of capital gain relief on the sale of agricultural land (w.e.f. 1/4/2013 apply for A.Y 2013-14).
34. Under sec 49 (1) in case of conversion of sole proprietorship or firm into a company which is not regarded as a transfer, the cost of acquisition of asset in the hands of the company would be the same as that in the hand of the sole proprietary concern or the firm, as the case may be.
35. RBI is not liable to pay Wealth Tax on his net Wealth as per sec 45.
36. Proposal to introduce General Anti Avoidance Rule to counter aggressive tax avoidance scheme.
37. (a) DRP shall have a power to consider any matter arising out of the assessment proceedings relating to the draft assessment order. This power to consider any issue would be irrespective of the fact whether such matter was raised by the eligible assessee or not.
(b) If an assessee files an objection against the Assessment Order to DRP than the time limit would be as per sec 144C and not as per sec 153 or 153B and also the assessee can file an appeal directly before the ITAT against the A.O order.
38. Sec 139 has been amended to provide that in case of all assesses who are required to obtain and file Transfer Pricing report as per Section 92E of the Act, the due date would be 30th November of the assessment year.
39. Section 92B of the Act, is been amended to provide for the explanation to clarify meaning of international transaction- ‘international transaction’ shall include a transaction of business restructuring or reorganization, entered into by an enterprise with an associated enterprise, irrespective of the fact that it has bearing on the profit, income, losses or assets or such enterprises at the time of the transaction or at any future date.
40.Under Section 92C provides and 3% upper ceiling limit that variation between the ALP so determined and the transaction price is within the upper ceiling limit (of transaction price), no adjustment shall be made to the transaction price.
41. The time limit for completion of assessment or reassessment where information is sought under a DTAA is been extended from six months to one year.
42. A new sections 92CC and 92CD in the Act to provide a framework for advance pricing agreement under the Act.
UNFAVOURABLE POINTS OF BUDGET 2012 – 13 ON DIRECT TAXATION
1. There is no increment in the basic exemption limit for Senior Citizen.
2. There is no change in the corporate rate taxes.
3. Alternate Minimum tax (AMT) has made applicable to all the persons (other than individual, HUF, AOP, BOI, Artificial juridical person whose adjusted total income does not exceeds 20 Lakhs) other than company who has claimed the deduction under any section (other than sec 80P) included in chapter VIA under the heading ‘C’ i.e. ‘Deduction in respect of certain income” eg: 10A, 10AA, 10B, 10BA .
4. (a) TDS is required to be deducted at the rate of 1% in case of transfer of immovable property other than Agricultural land if the consideration paid or payable for the transfer of property exceeds Rs.50lakhs in case of property situated in Urban area and Rs.20 lakhs in case of property situated in other areas (w.e.f 1st October, 2012).
(b) Consideration to be considered for the purpose of deduction of TDS is the Stamp Duty value or the Actual consideration of the property whichever is higher.
(c ) The transfer of property would be registered only after furnishing of the TDS proof to the registering Officer appointed under Indian Registration Act.
5. Under section 194J TDS is required to be deducted @10% on the remuneration paid to the director, which is not in a nature of salary (w.e.f 1st July,2012).
6. Every buyer of the jewellery or bullion is required to pay @1% of the consideration as a TCS (irrespective of its nature of consumption) if the consideration is paid in cash and if it exceeds Rs. 2 lakh ( w.e.f 1st July,2012).
7. The rate u/s 115VG for the daily tonnage income of the shipping company have been increased.
8. Under section 68,69,69A,69B,69C & 69D all the assessee shall be taxed at the rate of flat 30% without giving any basic exemption limit, expenditure or any allowances (w.e.f. 1st April 2013).
9. Under section 139 every resident assessee having any asset, ( including financial interest in any entity) located outside India or signing Authority in any account outside India is required to file the return compulsory even if he has a taxable income or not (retrospective effect from 1/04/2012).
10. Under section 149, the time limit for issuing the notice for re-opening the case have been increased from 6 to 16 years ,where the income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment.
11. Instead of section 271AAA a new section 271AAB has been inserted and applicable from 1/7/2012 wherein –
a. Penalty @10% will be levied if the undisclosed income is admitted in the course of search.
b. Penalty @20% is levied if undisclosed income is not admitted in the course of search but disclosed in return of income filed after search.
c. Penalty ranging from 30% to 90% is leived if the case is not covered under (a) & (b).
12. New section 56(2) has been inserted in case of a company not been a company in which public are substantially interested wherein the Share premium received by the company on issue of shares in excess of the fair market value to be treated as income under the head ‘income from other sources’(w.e.f 1/04/2013).
13. (a) Fees for delay in filing the TDS statement after the due date have been increased to Rs.100 per day to Rs. 200 per day.
(b) Penalty ranging from Rs. 10000 to Rs.1,00,000 shall also be levied for not furnishing TDS statement within the prescribed time i.e. within 1 year from the due date of furnishing the statement ( no penalty w.e.f 1/7/2012 if a reasonable cause for failure is proved).
(c ) If incorrect information is furnished in TDS statement penalty shall be levied ranging from Rs.10,000 to Rs.1,00,000.
14. Under section 201 the time limits to pass the order for the assessee in default of non deduction or short deduction of Tax have been increased from 4 years to 6 years.
15. u/s 80G & 80GGA any payment exceeding Rs.10000 in cash is made, no deduction for the same is allowed as Donation made.
16. The Due date of furnishing audit report in case of international transactions is now 30the September of the assessment year only (w.e.f 1/4/2012).
17. Under Sec 80C(3) the 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 instead of 20% as given before.
18. Under sec 10(10D) the threshold of premium payable to 10% of the actual capital sum assured from 20% of the actual capital sum assured. Accordingly, it is proposed to amend section 10(10D) so as to provide that the exemption for insurance policies issued on or after 1st April, 2012 would only be available for policies where the premium payable for any of the years during the term of the policy does not exceed 10% of the actual capital sum assured.
19. A new section 292CC wherein authorization under sec 132 or requisition u/s 132A can be made in name of more than 1 person and the assessment or reassessement shall be made separately in name of each of the person mentioned in such authorization or requisition.
20. Under Sce 245Q filing fees for an application for Advance ruling has been increased from 2500 to Rs. 10000 or such fees as may be prescribed whichever is higher.
21. Under sce 245C the definition of related person have changed wherein a person shall be deemed to have a substantial interest in a business or profession if such person is a beneficial owner of not less than 20% of shares or of 20% share in profits on the date of search.
22. Once notice u/s 143(2) is issued i.e. scrutiny of the return, processing of the return will not be necessary by the assessing officer.
23. New sec 50D has been introduced wherein if the actual consideration on the transfer of the asset is not determinable than the fair market value of asset shall be considered as the full value of the asset.
24. Section 55A has been amended to enable the Assessing Officer to make a reference to the Valuation Officer where in his opinion the value declared by the assessee is at variance from the fair market value. Therefore, in case where the Assessing Officer is of the opinion that the value taken by the assessee as on 1.4.1981 is higher than the fair market value of the asset as on that date, the Assessing Officer would be enabled to make a reference to the Valuation Officer for determining the fair market value of the property.(w.e.f. 1st day of July, 2012).
25. Presumptive Taxation is not applicable to Professional person carrying on the business-
(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.
26. Section 115JB is amended that the book profit for the purpose of section 115JB shall be increased by the amount standing in the revaluation reserve relating to the revalued asset which has been retired or disposed, if the same is not credited to the profit and loss account.
27. It is proposed to amend the aforesaid sections, i.e., 153 and 153B so as to provide that the time limits for completion of assessments and reassessments shall respectively be increased by three months.
28. Under Sec 10(23C) any Charitable organization will not get the benefit of tax exemption in the year in which the receipt from commercial activities exceeds the threshold limit i.e. Rs.25 lakhs, whether or not the registration or approval granted or notification issued is cancelled, withdrawn or rescinded.
29. Under sec 253 & 254 A.O can also file an appeal directly before the ITAT against the order passed in pursuance of direction given by the DRP.
30. Section 271AA is ammended to provide levy of a penalty at the rate of 2% of the value of the international transaction, if the taxpayer.-
(i) fails to maintain prescribed documents or information or;
(ii) fails to report any international transaction which is required to be reported, or;
(iii) maintains or furnishes any incorrect information or documents.
This penalty would be in addition to penalties in section 271BA and 271G.
31. Section 147 of the Act, to provide that in all cases where it is found that an international transaction has not been reported either by non-filing of report or otherwise by not including such transaction in the report mentioned in section 92E then such non-reporting would be considered as a case of deemed escapement of income and such a case can be reopened under section 147 of the Act.
32. Under sec 92CA transfer pricing office have a power to determine arm length price of an international transaction noticed by him in the course of proceedings before him, even if the said transaction was not referred to him by the Assessing Officer, provided that such international transaction was not reported by the taxpayer as per the requirement cast upon him under section 92E of the Act.
33. Section 115BBA has been amended to provide that income arising to a non-citizen, non-resident entertainer (such as theatre, radio or television artists and musicians) from performance in India shall be taxable at the Flat rate of 20% of gross receipts instead of rate ranges from 10 to 30%.Further in case of non –citizen, non resident sportsmen and non residence sports association the tax rate has been increased from 10 to 20% of gross receipts.
34. Section 149, has been amended to extend time limit for issue of notice in case of a person who is treated as agent of a non-resident, the time limit presently prescribed of two years be extended to six years.
35. Amend section 195(1) to clarify that obligation to comply with sub-section (1) and to make deduction there under applies and shall be deemed to have always applied and extends and shall be deemed to have always extended to all persons, resident or non-resident, whether or not the non-resident has:-
(a) a residence or place of business or business connection in India; or
(b) any other presence in any manner whatsoever in India.
These amendments will take effect retrospectively from 1st April, 1962 and will accordingly apply in relation to the assessment year 1962-63 and subsequent assessment years.
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