India budget 2012_nutshell


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India budget 2012_nutshell

  1. 1. India Budget 2012In A NutshellINDIA BUDGET 2012 - IN A NUTSHELL1.0 DIRECT TAXES „ Exemption limit for the general category of Individual taxpayers proposed to be enhanced from Rs. 1,80,000 to Rs. 2,00,000 thereby providing tax relief of Rs.2,000. „ Upper limit of 20% tax slab proposed to be raised from Rs.8,00,000 to Rs.10,00,000. „ No change in corporate tax rates. „ Deduction upto Rs.10,000 on interest from savings bank accounts to individual tax payers. „ Deduction upto Rs.5,000 for preventive health check ups. „ Senior citizens not having income from business to be exempt from payment of advance tax. „ Vodafone Effect: Finance Minister proposes major amendments with retrospective effect in section 2(14) to clarify that ‘property’ includes right to control and manage an Indian Company. Further, inserted Explanation to section 9 to clarify that ‘through’ would mean and include ‘by means of, in consequence of, by reason of.’ „ Double Taxation Avoidance Agreement (‘DTAA’) benefits not to be available to non-residents unless tax residency certificates in prescribed form is furnished. „ Advance Pricing Agreement (‘APA’) proposed to be introduced which can be valid for maximum 5 years. „ Transfer Pricing provisions have been extended to domestic transactions exceeding Rs.5,00,00,000 between related resident parties for computation of income under certain sections such as 40A, 80-IA, 10AA, 80A, etc. „ Assessing Officer (‘AO’) is empowered to file appeal before the Income Tax Appellate Tribunal (‘ITAT’) against an order passed in pursuance of directions of the Dispute Resolution Panel (‘DRP’). „ The rate of withholding tax on interest payment on External Commercial Borrowings (‘ECBs’) to be reduced from 20% to 5% for 3 years, for certain specified sectors. „ To continue allowing repatriation of dividends from foreign subsidiaries of Indian companies at a lower tax rate of 15% upto 31 March 2013. „ Deduction in respect of subscription to long-term infrastructure bonds as provided under section 80CCF shall not be available from 1 April 2012. „ Investment linked deduction of capital expenditure for certain businesses to be provided at the enhanced rate of 150%. „ Weighted deduction of 150% provided for expenditure incurred for agri-extension services. Page 1 of 4
  2. 2. „ Weighted deduction of 150% provided for expenditure incurred on skill development in manufacturing sector.„ New sectors to be added for the purposes of investment linked deduction.„ Income tax deduction allowed to retail investors for investing in equities under Rajiv Gandhi Equity Saving Scheme.„ Weighted deduction of 200% for R&D expenditure in an in-house facility extended for a further period of 5 years beyond 31 March 2012.„ The sunset date for setting up power sector undertakings extended by 1 year i.e. upto 31 March 2013, for claiming 100% deduction of profits for 10 years.„ Turnover limit for compulsory tax audit of account and presumptive taxation of Small and Medium Enterprises (‘SMEs’) to be raised from Rs.60,00,000 to Rs.1,00,00,000.„ Securities Transaction Tax (‘STT’) on cash delivery transactions reduced by 20% to 0.1% from 0.125%.„ Exemption from Capital Gains tax on sale of residential property, if sale consideration is used for subscription in equity of a manufacturing SMEs for purchase of new plant and machinery.„ To extend the levy of Alternate Minimum Tax (‘AMT’) @18.50% to all persons, other than companies, claiming profit linked deductions.„ To introduce General Anti Avoidance Rule to counter aggressive tax avoidance.„ A number of measures proposed to deter the generation and use of unaccounted money.„ To increase the time limit for issue of notice for reopening an assessment to 16 years, where the income in relation to any asset (including financial interest in any entity) located outside India, which is chargeable to tax, has escaped assessment.„ The aggregate consideration received by a Company for issue of shares in excess of fair market value of the shares, shall be chargeable to tax as ‘Income from Other Sources’ in the hands of the Company, subject to certain conditions.„ TDS @1%introduced on transfer of immovable properties (other than agriculture land) if consideration exceeds Rs. 50,00,000 in case property is situated in a specified urban agglomeration or Rs. 20,00,000 in case property is situated in any other area.„ TCS @1% introduced on cash sale of Bullion and Jewellery when the sale value exceeds Rs. 200,000„ Dividend Distribution Tax (‘DDT’) provisions amended to remove the cascading effect of the DDT. Page 2 of 4
  3. 3. 2.0 INDIRECT TAXES2.1 Goods and Services Tax (‘GST’) The drafting of model GST legislation in concert with States is under progress. The GST network shall be set up as a National Information Utility and is expected to become operational by August 2012.2.2 Service Tax „ The rate of Service Tax has been increased from 10% to 12%. Thus, the tax shall be levied @ 12.36% [tax @ 10% plus Education Cess @ 2% and Secondary and Higher Education cess @ 1%]. Consequently, changes are also being made in specific and compounding rates of tax for certain specified services. „ It is proposed to tax all services except those in the negative list comprising of 17 heads. Consequently, certain exemptions and abatements from service tax are proposed in certain sectors. „ Steps are being taken to harmonise Central and Service Tax Regulations, one of them being a common simplified registration form and 1 page common return for Central Excise and Service Tax. Similarly, a study team shall examine the possibility of common tax code for Central Excise and Service Tax. „ Provisions related to Revision Application Authority and Settlement Commission are proposed to be introduced in Service Tax for dispute resolution. „ The Place of Provision of Services Rules for determining the location of service shall be put in public domain for stakeholders’ comments. „ A new scheme is announced for simplification of Service Tax refunds.2.3 Excise Duty „ The standard rate of excise duty raised from 10% to 12%, merit rate raised from 5% to 6% and the lower merit raised rate from 1% to 2% with few exemptions. „ Excise duty of 1% levied on unbranded precious metal jewellery. It is indicated that the operations would be simplified and measures would be taken to minimise impact on small artisans and goldsmiths. Branded silver jewellery has been exempted from excise duty. Excise Duty on gold jewellery sold from Export Oriented Unit’s into Domestic Tariff Area is being increased from 5% to 10%. „ Excise duty on large cars proposed to be enhanced. Chassis for building of commercial vehicle bodies shall be charged excise duty at an ad valorem rate instead of mixed rate.2.4 Customs „ No change proposed in the peak rate of customs duty of 10% on non-agricultural goods. „ The method of computation of Education Cess and Secondary and Higher Education Cess on imported goods is being simplified. Currently, these cesses are first charged on the Countervailing Duty (‘CVD’) portion of customs duty and thereafter on the aggregate of customs duties (excluding special CVD). The portion of cesses leviable on the CVD portion of customs duty is being exempted so as to avoid computation of such cesses twice. „ It is proposed to increase Basic Customs Duty (BCD) on imports of gold and other precious metals. BCD of 2% is being imposed on cut and polished coloured gemstones. „ Concession from BCD and special CVD being extended to certain items imported of manufacture for hybrid or electric vehicles and battery packs for such vehicles. Basic customs duty proposed to be enhanced for certain categories of completely built units of large cars/MUVs/SUVs. „ Full exemption from import duty proposed on certain categories of specified equipment needed for road construction, tunnel boring machines and parts required for their assembly. „ The duty-free allowance under the Baggage Rules is being increased from Rs. 25,000 to Rs. 35,000 for adult passengers of Indian origin and from Rs. 10,000 to Rs. 15,000 for children upto 10 years of age. Page 3 of 4
  4. 4. 3.0 OTHERS „ ECB to be allowed to part finance Rupee debt of existing power projects. „ ECB is proposed to be permitted for working capital requirement of airline industry for a period 1 year, subject to a total ceiling of US$ 1 billion. „ The proposal to allow foreign airlines to participate upto 49% in the equity of an air transport undertaking is under active consideration of the Government. „ White Paper on Black Money to be laid in the current session of Parliament „ No progress on FDI in aviation „ Efforts are being made to arrive at a broad based consensus in consultation with the State Governments in respect of decision to allow FDI in multi-brand retail upto 51%. „ Various proposals to address the shortage of housing for low income groups in major cities and towns including allowing ECB for low cost housing projects. Page 4 of 4
  5. 5. For further information please contact:RSM Astute Consulting Private Limited13th Floor, Bakhtawar,229, Nariman Point,Mumbai - 400 021.T: (91-22) 6696 0644 / 6121 4444F: (91-22) 2287 5771 / 2820 5685E: emails@astuteconsulting.comwww.astuteconsulting.comOffices: Mumbai, New Delhi - NCR, Chennai, Kolkata, Bengaluru,Surat, Ahmedabad, Hyderabad and Gandhidham.RSM Astute Consulting Private Limited is an independent member firm of RSM international, anaffiliation of independent accounting and consulting firms. RSM International is the name given to anetwork of independent accounting and consulting firms each of which practices in its own right. RSMInternational does not exist in any jurisdiction as a separate legal entity.This publication is general in nature. In this publication, we have endeavoured to analyze briefly,certain significant aspects of the Union Budget 2012, presented by the Honourable Finance Minister ofIndia, Shri. Pranab Mukherjee on 16 March 2012. The effective dates of budget proposals would vary. It may be noted that nothing contained in this publication should be regarded as our opinion and factsof each case will need to be analyzed to ascertain applicability or otherwise of the said publication andappropriate professional advice should be sought for applicability of legal provisions based on specificfacts. We are not responsible for any liability arising from any statements or errors contained in thispublication.16 March 2012© RSM Astute Consulting, 2012