Budget 2011 12-highlights

Budget 2011-12 Highlights
Chennai Office : Chathura Apartments, Flat no. A3, 2nd floor, 6/10 Dr. Nair Road, T. Nagar, Near Vani Mahal, Chennai-600017
Phone: +91 9380070471
Kolkata Office : Add: c/o Kreeti Technologies, #330 SDF Building, Block-GP, Sector V, Salt Lake City, Kolkata- 700091
Phone: +91 33 40083385
Neha Singhi & Company -Neha Singhi Baid -Arihant Bhansali -Sweta Agarwal

Contents
Economic Survey
New Legislations underway
Forex Outlook
Direct Tax proposals
Indirect Tax proposals
Summary
Budget 2011-12 Highlights Neha Singhi & Company

Economic survey
Economy regained the pre-crisis growth momentum
Gross Domestic Product expected to grow at 8.6% for the FY 2010-11, and individual sector contribution is expected as
Economy Growth in the next fiscal year expected to be 9%
Gross fiscal deficit stands at 5.1% of GDP (6.3% last year)
Revenue deficit stands at 3.4% of GDP (5.1% last year)

New Legislations underway..
Direct Tax Code under finalisation in current year and expected to be effective from 1 st April 2012,
NSDL to be the IT backbone for implementation of GST; pilot portal in eleven states by June 2011
Companies Bill to be introduced in the current session
New Bill to amend provisions of Indian Stamp Act 1899

Forex Outlook
FDI to be further liberalized
Foreign Investors permitted to invest in SEBI registered Mutual Funds (meeting KYC norms)
FII investment limits in Infrastructure corporate bonds enhanced by US$ 20 billion, further FIIs allowed to invest in unlisted bonds with min lock in 3 years

DIRECT TAX PROPOSALS

BASIC EXEMPTION ENHANCED
Tax rates remain same
The basic exemption for individuals has been raised from Rs1.6 lacs to Rs1.8 lacs.
Senior Citizen from 2.4 lacs to 2.5 lacs.
Age threshold relaxed from 65 to 60 years for senior citizens
VERY Senior Citizens aged above 80 years basic exemption 5 lacs.

Surcharge Rates
Reduction in surcharge to 5% from 7.5% for the following
Domestic companies (surcharge to continue to apply only if total income exceeds INR 10 million)
Dividend distribution by domestic companies
Income distribution by mutual funds
Surcharge for foreign companies reduced to 2% from 2.5% (surcharge to continue to apply only if total income exceeds INR 10 million)

..Other provisions
Dividend declared, distributed or paid by a subsidiary foreign company to be taxed at 15% on a gross basis
Subsidiary foreign company defined to mean a foreign company where more than half in nominal value of equity capital is held by an Indian parent

MAT & AMT LLP
Corporate MAT rate increased to 18.5% from 18% on book profits
Levy of Alternate Minimum Tax @18.5% on LLP if regular income tax of LLP is less than AMT
Adjusted total income shall be total income as increased by: Chapter VI-A deductions in respect of certain income and Deduction claimed in respect of profits of SEZ units
AMT credit is available for 10 years and education cess is applicable @3% on income tax

SEZ: No more Exempt
Levy of MAT on SEZ developers and units from AY 2012-13 and onwards
DDT exemption available to SEZ developers is withdrawn for dividends declared, distributed or paid on or after 1 st June 2011

Mutual Funds
Distribution by equity oriented fund continues to be exempt from dividend distribution tax (DDT)
Income distribution on or after 1 June 2011 by a mutual fund other than an equity oriented mutual fund to persons other than an individual or Hindu Undivided Family would be taxable at 30%

… cont
A comparison of the tax on mutual fund distributions by non-equity oriented funds is tabulated below:
Budget 2011-12 Highlights Neha Singhi & Company Present Proposed Base rate Surcharge Cess Total Base rate Surcharge* Cess Total Money Market/Liquid funds Individual/HUF 25 7.5 3 27.68 25 5 3 27.04 Others 25 7.5 3 27.68 30# 5 3 32.45 Other Mutual Funds Individual/HUF 12.5 7.5 3 13.84 12.5 5 3 13.52 Others 20 7.5 3 22.15 30# 5 3 32.45

Exemptions
Promotion of Research & Development: u/s 35 (2AA) of ITA Weighted deduction enhanced from 175% to 200% for any sum paid to National Laboratory or university or IIT engaged in approved scientific research programme
New Pension Scheme: Contribution by the employer towards a notified pension scheme will be excluded from the overall limit of 100,000 provided for deduction for individuals.
Subject to the condition-Not exceeding 10% of the salary of the employee

Deductions..
Investment linked deduction extended to:
housing projects under a scheme for affordable housing
production of fertilizer in India
Tax holiday for power sector extended to 31 March 2012.
No deduction available for commercial production of mineral oil for specified blocks licensed under a contract awarded after 31 March 2011.

Transfer Pricing
Currently 5% variation is allowed between the actual price of the transaction and the arm’s length price notified by the CG.
More Effective 01 June 2011, the Transfer Pricing Officer can determine the arm’s length price of any international transaction that comes to his notice, in addition to those referred by the Assessing Officer.

… cont
Effective from 01 June 2011, the power of survey given to TPO to conduct on-the-spot enquiry and verification u/s 133A of the Act.
Effective from 01 June 2011, TP provisions will apply to transactions with parties located in notified jurisdictional areas. The benefit of variation between actual and arm’s length price will not apply to such transactions.

INDIRECT TAX PROPOSALS

Service Tax
Service Tax stays at same level 10%
New Taxable Services added
Services provided by air conditioned restaurants with licenses to serve liquor
Services provided by hotels, guest houses, etc. with respect to providing accommodation

Exemptions introduced...
25% abatement under Transport of Goods Through Coastal and Inland Shipping.
Exemption to value of air freight, if included in assessable value of goods for customs duties under Transport of Goods by Air Services.
Transport of Goods by Road, rail or air where origin and destination is outside India.
Business exhibition services for exhibitions held outside India.

Scope of life insurance service has been expanded from the existing “risk coverage in life insurance” to all types of services including services in relation to the management of investments.
Health services including services of centrally air conditioned clinics, visiting doctors, diagnostic services provided with aid of medical equipment.
Club or Association services provided to non- members.
Services scope Budget 2011- 12 Highlights Neha Singhi & Company

... cont
Business Support services to include operational or administrative assistance
Legal consultancy services, except services by individual to individual
Representation service included
Arbitration services by arbitral tribunal included
Commercial coaching services in relation to unrecognised courses

Raise of service tax in air…..
Domestic air travel rises to Rs 50
International air travel rises to Rs 250
Business class air travel attracts a full 10% service tax

Other Changes
Changes in composition rates
-Life Insurance Services - increase in rate from 1% to 1.5%
-Purchase and sale of foreign currency by foreign exchange broker - reduction in rate from 0.25% to 0.1%

… cont
Relaxation of provisions for adjustment of excess service tax paid
-Credit allowed of excess payment if amounts refunded or credit note issued for value of service along with service tax
-Restriction for self-adjustment of excess service tax paid increased from INR 0.1 million to INR 0.2 million

Point of Taxation Rules, 2011
Earlier service tax was based on receipt basis however w.e.f. 1 April 2011
Determination of point of taxation based on provision of service, date of billing or receipt of payment, whichever is earlier
Based on when service is provided or to be provided

… cont
If billing or receipt of payment prior to provision of service – service is deemed to be provided on date of invoice or receipt whichever is earlier
Advances taxable on date of receipt of advance
Import of services taxable on date of receipt of invoice or date of payment whichever is earlier.

Central Excise Act
Standard rate of excise duly held at 10%
Base rate on excise raised from 4% to 5% as prepared foodstuffs, paper and articles of paper, as textile intermediaries and textile goods, medical equipment, medicaments, etc.
Cement excise duties will be shifted to valorem basis from specific duty now.
Excise on LED cut to 5%

Budget 2011-12 Highlights Neha Singhi & Company EXEMPTED FROM EXCISE DUTY Goods required for Mega and Ultra Mega power projects Basic food and fuel AC, Cold chain equipments Colour, unexposed cinematographic films in jumbo rolls of 400 feet and 1000 feet Excise duty on packaged IT software not covered under MRP Valuation payable only on value of media

Effective from date of enactment of Finance Bill…..
Sugar and textile items omitted from Additional Duties of Excise (GSI) Act, 1957 – states can now levy VAT.
Affixing brand name, repacking from bulk to retail packs of textile articles, drugs, clothing amounts to manufacture.
Interest rate increased to 18%
Consequential changes for introduction of Legal Metrology Act, 2009 replacing SWMA

... Excise Duty cont
Excise Duty introduced on branded jewelery and branded articles of precious metals at 1%
10% excise duty on branded readymade garments (earlier optional) now mandatory at 10% (computed on 60% of MRP)

… cont
Excise duty reduced from 10% to 5% in parts of specified machinery.
1% excise duty on 130 new items, with no Cenvat credit

Customs Act
Peak rate of custom duty at 10% remains unchanged.
Provide Rs 2000 crore for warehousing facilities.
Basic custom duty on agricultural machinery reduced to 4.5% to 5%.
Ship owners now allowed to import duty free parts.
Crude palm used in sports exempted from customs duty.

....cont
Duty reduced on hybrid & electric cars along with batteries imported for such vehicles.
No import duty on ship parts positive for SCI.
Iron ore export duty raised to 20 percent.
Stainless steel scrap exempt from basic customs duty.
Export duty on iron ore pellets withdrawn.

....cont
SAD exemption for all DTA clearances by SEZ where VAT/sales tax not exempt (earlier exemption limited only to manufactured goods).
Customs duty on packaged IT software not covered under MRP valuation payable only on value of media on which such software is imported

....cont
Education cess and secondary and higher education cess imposed on import of aircrafts .
Reduce customs duty on micro irrigation equipment
Basic customs duty on Pet Coke and Gypsum to be reduced to 2.5%.
Reduce customs duty on micro irrigation equipment.
Customs duty reduced on yarn to 5% from 7.5%.

Effective from date of enactment of Finance Bill…..
New section inserted to create first charge on property of defaulter for recovery of customs dues.
“ Self -assessment” proposed - selective audit by proper officer introduced.
Time limit for claiming refunds/demand with interest enhanced from six months to one year
Retrospective amendment - export revenue used for EPCG also permitted for satisfaction of export obligations under SFI Scheme and Focus Market Scheme

....cont
CBEC granted powers to issue
-Instructions on prohibition, restriction or procedure relating to import or export
-Regulations for specifying manner of conducting audit at the office of customs authorities or premises of importer

Conclusion
Levy of MAT and DDT on SEZs is a blow to budding IT industry
Service Tax on hotel and restaurants where VAT is applicable would lead to heavy tax burden on consumers..... also where consumers are required to pay luxury tax
Centre stepping on State list

… cont
Excise duty on branded jewel would lead to unorganized market
Impact assessment required before making tax changes
Point of taxation for service tax on accrual basis, leading to serious cash crunch for small sized professionals and service providers who receive payment much later after fees accrues or bill is raised

.... cont
Impact assessment required before making tax changes
Point of taxation for service tax on accrual basis, leading to serious cash crunch for small sized professionals and service providers who receive payment much later after fees accrues or bill is raised

Budget 2011 12-highlights

by nehasinghi12 on Mar 08, 2011

Accessibility

Categories

Upload Details

Usage Rights

1 Embed 98

Statistics

Budget 2011 12-highlights — Presentation Transcript