Budget 2011-12 Highlights <ul><li>Chennai Office : Chathura Apartments, Flat no. A3, 2nd floor, 6/10 Dr. Nair Road, T. Nag...
Contents <ul><li>Economic Survey </li></ul><ul><li>New Legislations underway </li></ul><ul><li>Forex Outlook </li></ul><ul...
Economic survey <ul><li>Economy regained the pre-crisis growth momentum </li></ul><ul><li>Gross Domestic Product expected ...
New Legislations underway.. <ul><li>Direct Tax Code under finalisation in current year and expected to be effective from 1...
Forex Outlook <ul><li>FDI to be further liberalized </li></ul><ul><li>Foreign Investors permitted to invest in SEBI regist...
<ul><li>DIRECT TAX PROPOSALS </li></ul>Budget 2011-12 Highlights Neha Singhi & Company
BASIC EXEMPTION ENHANCED <ul><li>Tax rates remain same </li></ul><ul><li>The basic exemption for individuals has been rais...
Surcharge Rates <ul><li>Reduction in surcharge to 5% from 7.5% for the following </li></ul><ul><ul><ul><li>Domestic compan...
..Other provisions <ul><li>Dividend declared, distributed or paid by a subsidiary foreign company to be taxed at 15% on a ...
MAT & AMT LLP <ul><li>Corporate MAT rate increased to 18.5% from 18% on book profits </li></ul><ul><li>Levy of Alternate M...
SEZ: No more Exempt <ul><li>Levy of MAT on SEZ developers and units from AY 2012-13 and onwards </li></ul><ul><li>DDT exem...
Mutual Funds <ul><li>Distribution by equity oriented fund continues to be exempt from dividend distribution tax (DDT) </li...
… cont <ul><li>A comparison of the tax on mutual fund distributions by non-equity oriented funds is tabulated below: </li>...
Exemptions <ul><li>Promotion of Research & Development: u/s 35 (2AA) of ITA Weighted deduction enhanced from 175% to 200% ...
Deductions.. <ul><li>Investment linked deduction extended to: </li></ul><ul><ul><li>housing projects under a scheme for af...
Transfer Pricing <ul><li>Currently 5% variation is allowed between the actual price of the transaction and the arm’s lengt...
… cont <ul><li>Effective from 01 June 2011, the power of survey given to TPO to conduct on-the-spot enquiry and verificati...
<ul><li>INDIRECT TAX PROPOSALS </li></ul>Budget 2011-12 Highlights Neha Singhi & Company
Service Tax <ul><li>Service Tax stays at same level 10% </li></ul><ul><li>New Taxable Services added </li></ul><ul><ul><li...
Exemptions introduced... <ul><ul><li>25% abatement under Transport of Goods Through Coastal and Inland Shipping. </li></ul...
<ul><ul><li>Scope of life insurance service has been expanded from the existing “risk coverage in life insurance” to all t...
... cont <ul><li>Business Support services to include operational or administrative assistance </li></ul><ul><li>Legal con...
Raise of service tax in air….. <ul><li>Domestic air travel rises to Rs 50 </li></ul><ul><li>International air travel rises...
Other Changes <ul><li>Changes in composition rates </li></ul><ul><ul><li>-Life Insurance Services - increase in rate from ...
… cont <ul><li>Relaxation of provisions for adjustment of  excess service tax paid </li></ul><ul><ul><li>-Credit allowed o...
Point of Taxation Rules, 2011 <ul><li>Earlier service tax was based on receipt basis however w.e.f. 1 April 2011 </li></ul...
… cont <ul><li>If billing or receipt of payment prior to provision of service – service is deemed to be provided on date o...
Central Excise Act <ul><ul><li>Standard rate of excise duly held at 10% </li></ul></ul><ul><ul><li>Base rate on excise rai...
Budget 2011-12 Highlights Neha Singhi & Company EXEMPTED FROM EXCISE DUTY Goods required for Mega and Ultra Mega power pro...
Effective from date of enactment of  Finance Bill….. <ul><ul><li>Sugar and textile items omitted from Additional Duties of...
... Excise Duty cont <ul><li>Excise Duty introduced on branded jewelery and branded articles of precious metals at 1% </li...
… cont <ul><li>Excise duty reduced from 10% to 5% in parts of specified machinery. </li></ul><ul><li>1% excise duty on 130...
Customs  Act <ul><li>Peak rate of custom duty at 10% remains unchanged. </li></ul><ul><li>Provide Rs 2000 crore for wareho...
....cont <ul><li>Duty reduced on hybrid & electric cars along with batteries imported for such vehicles. </li></ul><ul><li...
....cont <ul><ul><li>SAD exemption for all DTA clearances by SEZ where VAT/sales tax not exempt (earlier exemption limited...
....cont <ul><li>Education cess and secondary and higher education cess imposed on import of aircrafts . </li></ul><ul><li...
Effective from date of enactment of Finance Bill….. <ul><ul><li>New section inserted to create first charge on property of...
....cont <ul><li>CBEC granted powers to issue </li></ul><ul><ul><li>-Instructions on prohibition, restriction or procedure...
Conclusion <ul><li>Levy of MAT and DDT on SEZs is a blow to budding IT industry </li></ul><ul><li>Service Tax on hotel and...
… cont <ul><li>Excise duty on branded jewel would lead to unorganized market </li></ul><ul><li>Impact assessment required ...
.... cont <ul><li>Impact assessment required before making tax changes </li></ul><ul><li>Point of taxation for service tax...
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Budget 2011 12-highlights

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Budget 2011 12-highlights

  1. 1. Budget 2011-12 Highlights <ul><li>Chennai Office : Chathura Apartments, Flat no. A3, 2nd floor, 6/10 Dr. Nair Road, T. Nagar, Near Vani Mahal, Chennai-600017 </li></ul><ul><li>Phone: +91 9380070471 </li></ul><ul><li>Kolkata Office : Add: c/o Kreeti Technologies, #330 SDF Building, Block-GP, Sector V, Salt Lake City, Kolkata- 700091 </li></ul><ul><li>Phone: +91 33 40083385 </li></ul>Neha Singhi & Company -Neha Singhi Baid -Arihant Bhansali -Sweta Agarwal
  2. 2. Contents <ul><li>Economic Survey </li></ul><ul><li>New Legislations underway </li></ul><ul><li>Forex Outlook </li></ul><ul><li>Direct Tax proposals </li></ul><ul><li>Indirect Tax proposals </li></ul><ul><li>Summary </li></ul>Budget 2011-12 Highlights Neha Singhi & Company
  3. 3. Economic survey <ul><li>Economy regained the pre-crisis growth momentum </li></ul><ul><li>Gross Domestic Product expected to grow at 8.6% for the FY 2010-11, and individual sector contribution is expected as </li></ul><ul><li>Economy Growth in the next fiscal year expected to be 9% </li></ul><ul><li>Gross fiscal deficit stands at 5.1% of GDP (6.3% last year) </li></ul><ul><li>Revenue deficit stands at 3.4% of GDP (5.1% last year) </li></ul>Budget 2011-12 Highlights Neha Singhi & Company
  4. 4. New Legislations underway.. <ul><li>Direct Tax Code under finalisation in current year and expected to be effective from 1 st April 2012, </li></ul><ul><li>NSDL to be the IT backbone for implementation of GST; pilot portal in eleven states by June 2011 </li></ul><ul><li>Companies Bill to be introduced in the current session </li></ul><ul><li>New Bill to amend provisions of Indian Stamp Act 1899 </li></ul>Budget 2011-12 Highlights Neha Singhi & Company
  5. 5. Forex Outlook <ul><li>FDI to be further liberalized </li></ul><ul><li>Foreign Investors permitted to invest in SEBI registered Mutual Funds (meeting KYC norms) </li></ul><ul><li>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 </li></ul>Budget 2011-12 Highlights Neha Singhi & Company
  6. 6. <ul><li>DIRECT TAX PROPOSALS </li></ul>Budget 2011-12 Highlights Neha Singhi & Company
  7. 7. BASIC EXEMPTION ENHANCED <ul><li>Tax rates remain same </li></ul><ul><li>The basic exemption for individuals has been raised from Rs1.6 lacs to Rs1.8 lacs. </li></ul><ul><li>Senior Citizen from 2.4 lacs to 2.5 lacs. </li></ul><ul><ul><li>Age threshold relaxed from 65 to 60 years for senior citizens </li></ul></ul><ul><li>VERY Senior Citizens aged above 80 years basic exemption 5 lacs. </li></ul>Budget 2011-12 Highlights Neha Singhi & Company
  8. 8. Surcharge Rates <ul><li>Reduction in surcharge to 5% from 7.5% for the following </li></ul><ul><ul><ul><li>Domestic companies (surcharge to continue to apply only if total income exceeds INR 10 million) </li></ul></ul></ul><ul><ul><ul><li>Dividend distribution by domestic companies </li></ul></ul></ul><ul><ul><ul><li>Income distribution by mutual funds </li></ul></ul></ul><ul><li>Surcharge for foreign companies reduced to 2% from 2.5% (surcharge to continue to apply only if total income exceeds INR 10 million) </li></ul>Budget 2011-12 Highlights Neha Singhi & Company
  9. 9. ..Other provisions <ul><li>Dividend declared, distributed or paid by a subsidiary foreign company to be taxed at 15% on a gross basis </li></ul><ul><ul><li>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 </li></ul></ul>Budget 2011-12 Highlights Neha Singhi & Company
  10. 10. MAT & AMT LLP <ul><li>Corporate MAT rate increased to 18.5% from 18% on book profits </li></ul><ul><li>Levy of Alternate Minimum Tax @18.5% on LLP if regular income tax of LLP is less than AMT </li></ul><ul><ul><ul><li>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 </li></ul></ul></ul><ul><ul><ul><li>AMT credit is available for 10 years and education cess is applicable @3% on income tax </li></ul></ul></ul>Budget 2011-12 Highlights Neha Singhi & Company
  11. 11. SEZ: No more Exempt <ul><li>Levy of MAT on SEZ developers and units from AY 2012-13 and onwards </li></ul><ul><li>DDT exemption available to SEZ developers is withdrawn for dividends declared, distributed or paid on or after 1 st June 2011 </li></ul>Budget 2011-12 Highlights Neha Singhi & Company
  12. 12. Mutual Funds <ul><li>Distribution by equity oriented fund continues to be exempt from dividend distribution tax (DDT) </li></ul><ul><li>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% </li></ul>Budget 2011-12 Highlights Neha Singhi & Company
  13. 13. … cont <ul><li>A comparison of the tax on mutual fund distributions by non-equity oriented funds is tabulated below: </li></ul>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
  14. 14. Exemptions <ul><li>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 </li></ul><ul><li>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. </li></ul><ul><ul><li>Subject to the condition-Not exceeding 10% of the salary of the employee </li></ul></ul>Budget 2011-12 Highlights Neha Singhi & Company
  15. 15. Deductions.. <ul><li>Investment linked deduction extended to: </li></ul><ul><ul><li>housing projects under a scheme for affordable housing </li></ul></ul><ul><ul><li>production of fertilizer in India </li></ul></ul><ul><li>Tax holiday for power sector extended to 31 March 2012. </li></ul><ul><li>No deduction available for commercial production of mineral oil for specified blocks licensed under a contract awarded after 31 March 2011. </li></ul>Budget 2011-12 Highlights Neha Singhi & Company
  16. 16. Transfer Pricing <ul><li>Currently 5% variation is allowed between the actual price of the transaction and the arm’s length price notified by the CG. </li></ul><ul><li>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. </li></ul>Budget 2011-12 Highlights Neha Singhi & Company
  17. 17. … cont <ul><li>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. </li></ul><ul><li>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. </li></ul>Budget 2011-12 Highlights Neha Singhi & Company
  18. 18. <ul><li>INDIRECT TAX PROPOSALS </li></ul>Budget 2011-12 Highlights Neha Singhi & Company
  19. 19. Service Tax <ul><li>Service Tax stays at same level 10% </li></ul><ul><li>New Taxable Services added </li></ul><ul><ul><li>Services provided by air conditioned restaurants with licenses to serve liquor </li></ul></ul><ul><ul><li>Services provided by hotels, guest houses, etc. with respect to providing accommodation </li></ul></ul>Budget 2011-12 Highlights Neha Singhi & Company
  20. 20. Exemptions introduced... <ul><ul><li>25% abatement under Transport of Goods Through Coastal and Inland Shipping. </li></ul></ul><ul><ul><li>Exemption to value of air freight, if included in assessable value of goods for customs duties under Transport of Goods by Air Services. </li></ul></ul><ul><ul><li>Transport of Goods by Road, rail or air where origin and destination is outside India. </li></ul></ul><ul><ul><li>Business exhibition services for exhibitions held outside India. </li></ul></ul>Budget 2011-12 Highlights Neha Singhi & Company
  21. 21. <ul><ul><li>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. </li></ul></ul><ul><ul><li>Health services including services of centrally air conditioned clinics, visiting doctors, diagnostic services provided with aid of medical equipment. </li></ul></ul><ul><ul><li>Club or Association services provided to non- members. </li></ul></ul>Services scope Budget 2011- 12 Highlights Neha Singhi & Company
  22. 22. ... cont <ul><li>Business Support services to include operational or administrative assistance </li></ul><ul><li>Legal consultancy services, except services by individual to individual </li></ul><ul><ul><li>Representation service included </li></ul></ul><ul><ul><li>Arbitration services by arbitral tribunal included </li></ul></ul><ul><li>Commercial coaching services in relation to unrecognised courses </li></ul>Budget 2011-12 Highlights Neha Singhi & Company
  23. 23. Raise of service tax in air….. <ul><li>Domestic air travel rises to Rs 50 </li></ul><ul><li>International air travel rises to Rs 250 </li></ul><ul><li>Business class air travel attracts a full 10% service tax </li></ul>Budget 2011-12 Highlights Neha Singhi & Company
  24. 24. Other Changes <ul><li>Changes in composition rates </li></ul><ul><ul><li>-Life Insurance Services - increase in rate from 1% to 1.5% </li></ul></ul><ul><ul><ul><ul><li>-Purchase and sale of foreign currency by foreign exchange broker - reduction in rate from 0.25% to 0.1% </li></ul></ul></ul></ul>Budget 2011-12 Highlights Neha Singhi & Company
  25. 25. … cont <ul><li>Relaxation of provisions for adjustment of excess service tax paid </li></ul><ul><ul><li>-Credit allowed of excess payment if amounts refunded or credit note issued for value of service along with service tax </li></ul></ul><ul><ul><li>-Restriction for self-adjustment of excess service tax paid increased from INR 0.1 million to INR 0.2 million </li></ul></ul>Budget 2011-12 Highlights Neha Singhi & Company
  26. 26. Point of Taxation Rules, 2011 <ul><li>Earlier service tax was based on receipt basis however w.e.f. 1 April 2011 </li></ul><ul><li>Determination of point of taxation based on provision of service, date of billing or receipt of payment, whichever is earlier </li></ul><ul><li>Based on when service is provided or to be provided </li></ul>Budget 2011-12 Highlights Neha Singhi & Company
  27. 27. … cont <ul><li>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 </li></ul><ul><li>Advances taxable on date of receipt of advance </li></ul><ul><li>Import of services taxable on date of receipt of invoice or date of payment whichever is earlier. </li></ul>Budget 2011-12 Highlights Neha Singhi & Company
  28. 28. Central Excise Act <ul><ul><li>Standard rate of excise duly held at 10% </li></ul></ul><ul><ul><li>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. </li></ul></ul><ul><ul><li>Cement excise duties will be shifted to valorem basis from specific duty now. </li></ul></ul><ul><ul><li>Excise on LED cut to 5% </li></ul></ul>Budget 2011-12 Highlights Neha Singhi & Company
  29. 29. 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
  30. 30. Effective from date of enactment of Finance Bill….. <ul><ul><li>Sugar and textile items omitted from Additional Duties of Excise (GSI) Act, 1957 – states can now levy VAT. </li></ul></ul><ul><ul><li>Affixing brand name, repacking from bulk to retail packs of textile articles, drugs, clothing amounts to manufacture. </li></ul></ul><ul><ul><li>Interest rate increased to 18% </li></ul></ul><ul><ul><li>Consequential changes for introduction of Legal Metrology Act, 2009 replacing SWMA </li></ul></ul>Budget 2011-12 Highlights Neha Singhi & Company
  31. 31. ... Excise Duty cont <ul><li>Excise Duty introduced on branded jewelery and branded articles of precious metals at 1% </li></ul><ul><li>10% excise duty on branded readymade garments (earlier optional) now mandatory at 10% (computed on 60% of MRP) </li></ul>Budget 2011-12 Highlights Neha Singhi & Company
  32. 32. … cont <ul><li>Excise duty reduced from 10% to 5% in parts of specified machinery. </li></ul><ul><li>1% excise duty on 130 new items, with no Cenvat credit </li></ul>Budget 2011-12 Highlights Neha Singhi & Company
  33. 33. Customs Act <ul><li>Peak rate of custom duty at 10% remains unchanged. </li></ul><ul><li>Provide Rs 2000 crore for warehousing facilities. </li></ul><ul><li>Basic custom duty on agricultural machinery reduced to 4.5% to 5%. </li></ul><ul><li>Ship owners now allowed to import duty free parts. </li></ul><ul><li>Crude palm used in sports exempted from customs duty. </li></ul>Budget 2011-12 Highlights Neha Singhi & Company
  34. 34. ....cont <ul><li>Duty reduced on hybrid & electric cars along with batteries imported for such vehicles. </li></ul><ul><li>No import duty on ship parts positive for SCI. </li></ul><ul><li>Iron ore export duty raised to 20 percent. </li></ul><ul><li>Stainless steel scrap exempt from basic customs duty. </li></ul><ul><li>Export duty on iron ore pellets withdrawn. </li></ul>Budget 2011-12 Highlights Neha Singhi & Company
  35. 35. ....cont <ul><ul><li>SAD exemption for all DTA clearances by SEZ where VAT/sales tax not exempt (earlier exemption limited only to manufactured goods). </li></ul></ul><ul><ul><li>Customs duty on packaged IT software not covered under MRP valuation payable only on value of media on which such software is imported </li></ul></ul>Budget 2011-12 Highlights Neha Singhi & Company
  36. 36. ....cont <ul><li>Education cess and secondary and higher education cess imposed on import of aircrafts . </li></ul><ul><li>Reduce customs duty on micro irrigation equipment </li></ul><ul><li>Basic customs duty on Pet Coke and Gypsum to be reduced to 2.5%. </li></ul><ul><li>Reduce customs duty on micro irrigation equipment. </li></ul><ul><li>Customs duty reduced on yarn to 5% from 7.5%. </li></ul>Budget 2011-12 Highlights Neha Singhi & Company
  37. 37. Effective from date of enactment of Finance Bill….. <ul><ul><li>New section inserted to create first charge on property of defaulter for recovery of customs dues. </li></ul></ul><ul><ul><li>“ Self -assessment” proposed - selective audit by proper officer introduced. </li></ul></ul><ul><ul><li>Time limit for claiming refunds/demand with interest enhanced from six months to one year </li></ul></ul><ul><ul><li>Retrospective amendment - export revenue used for EPCG also permitted for satisfaction of export obligations under SFI Scheme and Focus Market Scheme </li></ul></ul>Budget 2011-12 Highlights Neha Singhi & Company
  38. 38. ....cont <ul><li>CBEC granted powers to issue </li></ul><ul><ul><li>-Instructions on prohibition, restriction or procedure relating to import or export </li></ul></ul><ul><ul><li>-Regulations for specifying manner of conducting audit at the office of customs authorities or premises of importer </li></ul></ul>Budget 2011-12 Highlights Neha Singhi & Company
  39. 39. Conclusion <ul><li>Levy of MAT and DDT on SEZs is a blow to budding IT industry </li></ul><ul><li>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 </li></ul><ul><li>Centre stepping on State list </li></ul>Budget 2011-12 Highlights Neha Singhi & Company
  40. 40. … cont <ul><li>Excise duty on branded jewel would lead to unorganized market </li></ul><ul><li>Impact assessment required before making tax changes </li></ul><ul><li>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 </li></ul>Budget 2011-12 Highlights Neha Singhi & Company
  41. 41. .... cont <ul><li>Impact assessment required before making tax changes </li></ul><ul><li>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 </li></ul>Budget 2011-12 Highlights Neha Singhi & Company

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