M/S SANJAY SATPAL & ASSOCIATES CHARTERED ACCOUTANTS

F-11,Green Park Extension NEW DELHI. # 011-46580000-019 Email: sanjaysatpal@[Link]

SANJAY GUPTA [Link] (H), FCA PARDEEP JHA [Link] (H), FCA

BUDGET 2013 - 2014

I)
A)

IMPORTANT AMENDMENTS EFFECTING INCOME TAX

Changes in exemption limit and slab rates in respect of individual and HUF has been made as stated below :1a) Slab rates for individual / HUF / AOP / BOP and female below 60 years are revised as follows:i) ii) iii) iv)

TAX RATES 1)

Upto Rs 2,00,000/Above Rs 2,00,000/- and upto Rs 5,00,000/Above Rs 5,00,000/- and upto Rs 10,00,000/Above Rs 10,00,000/-

NIL 10% 20% 30%

1 b)

Slab rates for senior citizen (sixty years or more but less than eighty years) are revised as follows :i) ii) ii) iv) Up to Rs 2,50,000/Above Rs 2,50,000/- and up to Rs 5,00,000/Above Rs 5,00,000/- and up to Rs 10,00,000/Above Rs 10,00,000/NIL 10% 20% 30%

1c)

Slab rates for senior citizen (eighty years or more) are revised as follows:i)

Up to Rs 5,00,000/NIL Above Rs 5,00,000/- and up to Rs 10,00,000/20%

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ii)

iii)

Above Rs 10,00,000/30%

2) 3)

There is no change in corporate Income Tax Rates. Salaried tax payers (who are subject to TDS) with salary income upto Rs 5 Lacs and Interest from saving bank account upto Rs 10,000 will be exempted from filing of income-tax return.

B)

Alternate Minimum Tax (AMT) Section 115JC (Effective from 1st April, 2013)
1) 2) The provision of Alternate Minimum Tax at the rate of 18.5% has been extended to cover all the person i.e. Firm, Individual, HUF, AOP, BOI etc. As such if the regular income Tax payable by Firm, Individual, HUF, AOP, BOI etc is less than 18.5%( of the adjusted total income) then Alternate Minimum Tax @ 18.5% on adjusted total income is payable . However the provision of Alternate Minimum Tax is not applicable if the adjusted total income of Firm, Individual, HUF, AOP, BOI or artificial judicial person does not exceed Rs 20Lacs. (Effective from 1st July, 2012)

3)

C)

Security Transaction Tax (STT)

Securities Transaction Tax (STT) has been reduced on delivery based equity transactions by 20% from 0.125% to 0.1%.

D)

Definition of transfer Section 2(47)

(Effective after 1st April, 1962)

Definition of transfer for taxability under capital gain has been widened to cover disposing of or parting with an asset or any interest therein or creating any interest in any asset in any manner directly or indirectly, absolutely or conditionally, voluntarily or involuntarily by way of an agreement whether entered into in India or outside India. E)

Exemption to senior citizen from payment of advance tax

1st April, 2012)

(Effective

from

Senior citizens are no longer required to pay advance tax, if they are not running any business / profession However, they will need to pay their taxes before filing the Income tax return.

F)

Assessment of charitable organization in case Commercial receipts exceed the specified limit section 10(23C)
(Effective from 1st April, 2009)

If a charitable Trust is Carrying on any activity in the nature of trade, commerce or business or any activity of rendering any service in relation to any trade, commerce or business for a cess or fees or any other consideration and the aggregate value of such commercial activities exceeds Rs. 25,00,000/- then the tax exemption granted earlier will be withdrawn for that year.

G)

Eligibility conditions for life insurance policies

(Effective from 1st April, 2013)

Tax benefits (deduction for premium or exemption for maturity proceeds) will not be available to new life insurance policies having annual premiums of more than 10% of sum assured (this does not take into account the loyalty bonus component). H)

Transfer pricing regulation to apply to certain domestic transactions section 40A (Effective from 1st April, 2013)
Currently, only international transactions are covered under transfer pricing. It has been proposed to include domestic transactions aggregating Rs 5 crore in a year between related parties under transfer pricing

I)

Disallowance of business expenditure on account of non deduction of tax on payments section 40(a) (ia)
(Effective from 1st April, 2013)

Where as assessee makes payment of expenditure without deduction of tax, and the person to whom the payment have been made has furnished the Income Tax return and paid the taxes on the said payment, then it will be deemed that the assessee has deducted the tax and paid tax on such sum on the date of furnishing of return of income. As such deduction of these expenditure shall be allowed accordingly.
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J)

Turnover or gross receipt for audit of accounts section 44AB (Tax Audit)
(Effective from 1st April, 2013) Monetary limit for compulsory tax audit has been increased as follows:1) 2) For Business :For professionals From Rs. 60 Lacs to :-

Rs 1 crore

From Rs. 15 Lacs to Rs 25 Lacs

K)

Provision for small trader (Section 44AD)

1)

(Effective from 1st April, 2013)

In case of small trader a sum equal to 8% of the total turnover / gross receipt is deemed to be the profits and gains of business subject to the condition that total turnover or gross receipt doesnt exceed Rs 1 Crore.

2)

Further this section shall not apply to a) A person carrying on profession as referred in section 44AA(1) b) A person earning income in the nature of commission or brokerage or c) A person carrying on any agency business

L)

Fair market value shall be the full value of consideration new section 50D
(Effective from 1st April, 2013) At the time of transfer of capital asset if the consideration of the capital asset is not ascertainable or cannot be determined, then the fair market value of capital asset will be deemed to be sale consideration.

M)

Exemption of long term capital gain on transfer of residential property new section 54GB
(Effective from 1st April, 2013)

In case of Individual and HUF Long term Capital gain on transfer of residential property (House or Plot) will not be chargeable to Income tax if the following conditions are satisfied 1) 2) The net consideration is utilized for subscription in the equity shares of an eligible company before the due date of filing the return of income The eligible company has within one year from the date of subscription in equity shares utilized the amount for purchase new plant and machinery excluding office appliances, computer and computer software and vehicle The eligible company for this purpose is
a)

Company incorporated in India during the period from 1st April to the date on which capital gain arise Company is engaged in the business of manufacture of article or thing In the company the Individual or HUF claiming exemption has more than 50% holding The company is a SMEs under the Micro, Small and Medium Enterprises Act

b) c) d)

N)

Share premium in case of closely held companies in excess of fair market value to be treated as income Section 56 (2)
(Effective from 1st April, 2013)

Amount received for share capital by closely held companies from any person being a resident in excess of Fair Market value of shares will be taxable. However this amendment would not be applicable if the shareholder is a well regulated entity i.e. venture capital found, Venture Capital Company registered with SEBI. O) CASH CREDIT SECTION 68 (Effective from 1st April, 2013) Section 68 has been amended to tax the Credits in the nature of share capital, share premium, etc, in the hands closely held private companies unless source of income in the hand of shareholder is also satisfactorily explained However this amendment would not be applicable if the shareholder is a well regulated entity i.e. venture capital found, Venture Capital Company registered with SEBI.

This amendment casts burden on private companies receiving funds to satisfy the tax authorities of the source of the funds of the investor

P)

Prohibition of cash donations section 80G & 80GGA

April, 2013)

(Effective from 1st

Deduction in respect of donation shall not be allowed if the amount of donation exceeding Rs 10,000/- has been paid in cash

Q)

Dividend Distribution Tax Section 115 O

1) Dividends received from foreign subsidiaries will continue to be taxed at reduced effective rate of 16.22%. (Effecting from 1st April, 2013) 2) Cascading effect of Dividend distribution tax on multi-tier structure has been rationalized, as such this will avoid multiple levy of Dividend distribution tax for corporate groups with multi-layer structure. Therefore if a company receives any dividend from any subsidiary and such subsidiary has paid dividend distribution tax, then dividend distributed by this company, to that extent, shall not be subject to dividend distribution tax (Effective from 1st July, 2012)

R)

Deduction in respect of interest on deposit in saving account deduction U/S 80TTA

(Effective from 1st April, 2013)

A deduction upto Rs. 10,000 from interest on deposits (not being time deposit ) will be allowable to Individual and HUF while computing the taxable income

S)

SECTION 80CCF
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Additional deduction for infrastructure bonds of Rs 20,000 will not be available after Assessment year 2012 13.

T)

Extension of tax holiday for power sector section 80IA

1st April, 2013)

(Effective

from

Tax holiday under this section has been extended by one more year for power sector undertaking set up on or before 31st March 2013 U)

Deduction for expenditure on preventive health checkup deduction U/S 80D

(Effective from 1st April, 2013)

Within the overall limit of Rs 15,000 for Medi claim insurance premium of Rs 5,000 is also available to cover expenses for preventive health check-ups for self and family members

V)

Meaning of International transaction Section 92B

The meaning of international transaction has been widened to curb avoidance of tax.

W)

Insertion of new section 92CC and 92CD

New section has been inserted in respect of advance pricing agreement for determining the arms length price or specifying the manner in which arms length price is to be determined in case of international transaction

X)

General Anti Avoidance Rule (GAAR) New Chapter XA

1st April, 2013)

(Effective

from

General Anti avoidance Rule (GAAR) has been introduced to counter aggressive Tax planning which are in the form of tax avoidance scheme. As such an agreement entered into by the assessee with the main purpose to obtain the tax benefit may be declared to be an impermissible avoidance agreement if it contains the followings :-

1)

If the agreement creates rights and obligations, which are not normally created between parties dealing at arms length.

2) 3) 4)

If it results in misuse or abuse of provisions of tax laws. If it lacks commercial substance or is deemed to lack commercial substance. If it is carried out in a manner which is normally not employed for bonafide purposes. (Effective from 1st April, 2013)

Y)

New Section 144BA

The assessing officer during the course of assessment or re assessment proceeding may make a reference to the commissioner if having regard to material available it is necessary to declare an arrangement as an impermissible and to determine the consequence.

Z)

New Section 115BBE

(Effective from 1st April, 2013)

Unexplained income (referred to in section 68, 69,69A,69B,69C and 69D) Shall be taxable at the flat rate of 30% and no deduction in respect of expenditure or allowance shall be allowed in respect of these income.

AA)

Reassessment of Income in relation to any asset located outside India Time limit for issue of notice Section 149
1st April, 2013) Time limit for issue of notice in case where income has escaped assessment in relation to asset located outside India has been extended to sixteen years. Further in case of agent of nonresident time limit for issue of notice has extended to six years. (Effective from

AB)

Amendment in section 153A & 153C

8

The central government may make rules to specify the class or classes of cases in which the assessing officer shall not be required to issue notice for assessment for six assessment years except in cases where assessment has been abated.

AC)

Section 156
Intimation issued u/s 143(1) and 200A(1) shall be deemed to be notice of demand

AD)

Compulsory filing of Income Tax Return Section 139

April, 2012)

(Effective from 1st

In case of resident person who, during the previous year, has any asset (Including financial interest in any entity) located outside India or is a signing authority in any account outside India filing of return is compulsory, whether that person has taxable Income or not.

AE)

Deduction of Tax in case of sale of Immovable property / Cash purchase of jewellery etc. New Section 194LAA
1) Buyer of any land (other than agriculture land) or any building or part of a building with value exceeding Rs 50,00,000 for urban areas (Rs 20,00,000 for rural areas) will need to deduct tax at source @ 1% of the sale value or the value adopted for stamp duty payment whichever is higher (Effective from 1st October, 2012) 2) Additional tax of 1% will be collected at source from the buyer on cash purchases of jewellery, bullion, etc. if value exceeds Rs 2,00,000 (Effective from 1st July, 2012)

AE)

Deduction of TDS on Remuneration other than salary to Director of Company Section 194 J
1) (Effective from 1st July, 2012)

Tax is required to be deducted, on the remuneration paid to the director other than salary, at the rate of 10% of such remuneration.

AF

Penalty on undisclosed income found during search section 271AAB

(Effective from 1st July, 2012) In case search has been initiated after 1st July 2012 the assessee shall pay by way of penalty as below :1) 2) 3) If undisclosed income is admitted during the course of search, The penalty shall be @ 10% subject to fulfillment of certain conditions. If undisclosed income is not admitted during the course of search but disclosed in the return of Income filed after the search, the penalty shall be @ 20% In all other cases not covered above, the penalty shall be ranging from 30% to 90%.

II)
A) B)

IMPORTANT AMENDMENTS EFFECTING SERVICE TAX

Service tax rate to increase from 10.3% to 12.36% All services except those in the negative list will chargeable to service tax. The negative list shall comprise of the following services:i) ii) iii) iv) v) vi) vii) viii) ix) x) xi)
xii)

Services by government or local authority Services by the RBI Services by a foreign diplomatic mission located in India Services relating to agriculture Trading of goods Any process amounting to manufacture or production of goods Selling of space or time slots for advertisements other than advertisements broadcast by radio or television Service by way of access to a road or a bridge on payment of toll charges Betting, gambling or lottery Admission to entertainment events or access to amusement facilities Transmission or distribution of electricity by an electricity transmission or distribution utility Services by way of
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a)

Pre-school education and education up to higher secondary school or equivalent

b)

Education as a part of a curriculum for obtaining a qualification recognised by any law for the time being in force

c) xiii)
xiv)

Education as a part of an approved vocational education course

Services by way of renting of residential dwelling for use as residence Services by way of a) b) Extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount Inter se sale or purchase of foreign currency amongst banks or authorised dealers of foreign exchange or amongst banks and such dealers

xv) xvi)

Service of transportation of passengers, with or without accompanied belongings, by Services by way of transportation of goods a) By road except the services of i) ii) b) c) A goods transportation agency; or A courier agency;

By an aircraft or a vessel from a place outside India to the first customs station of landing in India; or By inland waterways;

xvii)

Funeral, burial, crematorium or mortuary services including transportation of the deceased Sd/(SANJAY GUPTA) [Link] (HONS), FCA

NEW DELHI DATED: 16.03.2012

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