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The Finance Bill – 2013. Agenda. INCOME TAX Proposals Amendments New Provisions Impact WEALTH TAX Proposals. Section 87A - Tax Rebate for Resident Individuals. New. Section 87A - Tax Rebate for Resident Individuals. - PowerPoint PPT Presentation
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CA. GOPAL KRISHNA RAJUFCA, AICWA, ACS, PGDOR, PGDFM, DISA, M.Phil
Partner: M/s. K. Gopal Rao & Co., Chartered Accountants, Chennai
The Finance Bill – 2013
The Finance Bill, 2013 – Budget Proposals – Direct Taxes 2 CA. GOPAL KRISHNA RAJU
Agenda
INCOME TAX Proposals
1. Amendments
2. New Provisions
3. Impact
WEALTH TAX Proposals
The Finance Bill, 2013 – Budget Proposals – Direct Taxes 3 CA. GOPAL KRISHNA RAJU
Section 87A - Tax Rebate for Resident Individuals
Rebate u/s. 87A(I am back in new form)
Max RebateRs: 2000
Applicable Slab isbelow 5 Lakh
New
The Finance Bill, 2013 – Budget Proposals – Direct Taxes 4 CA. GOPAL KRISHNA RAJU
Section 87A - Tax Rebate for Resident Individuals
• Applicability: A tax relief of Rs.2,000/- to the individual tax
payers whose total income does not exceed Rs.5 Lakhs in a
year.
• Consequently any individual having income up to Rs.2,20,000
will not be required to pay any tax and every individual having
total income Rs.2,20,000 to Rs.5,00,000 shall get a tax relief
of Rs.2,000
• FM’s Statistics: On account of this relief, 1.80 crore tax payers
are expected to benefit to the value of Rs.3,600 crore.
The Finance Bill, 2013 – Budget Proposals – Direct Taxes 5 CA. GOPAL KRISHNA RAJU
Change in Surcharge – Super Rich to pay extra
To Whom? Income Surcharge
Individuals, HUF, Firms, LLPs,
Co-operative Societies &
Local Authorities
More than 1 Crore 10% (New)
Domestic Company More than 10 Crore 10% (New)
Domestic Company More than 1 Crore to 10
Crore
5% (Existing)
Foreign Company More than 10 Crore 5% (New)
Foreign Company More than 1 Crore to 10
Crore
2% (Existing)
The Finance Bill, 2013 – Budget Proposals – Direct Taxes 6 CA. GOPAL KRISHNA RAJU
Section 80EE - Deduction in respect of interest on loan taken for residential House Property
New
Interest on Residential HouseProperty
Additionaldeduction upto
Rs:100,000
4 conditions tobe satisfied
Let-out or Self-Occupied
(is immaterial)
The Finance Bill, 2013 – Budget Proposals – Direct Taxes 7 CA. GOPAL KRISHNA RAJU
Section 80EE - Interest on Housing Loan
• Applicability: A new section 80EE is inserted in the IT Act, 1961 to provide an
additional deduction upto Rs. 1 lakh in respect of interest on loan taken for
residential house property to individuals.
• The deduction shall be subject to the following conditions:-
1. The loan is sanctioned by the financial institution during the period beginning
on 1st April,2013 and ending on 31st March,2014.
2. The amount of loan sanctioned for acquisition of the residential house
property does not exceed Rs.25 lakhs.
3. The value of the residential house property does not exceed Rs.40 Lakhs.
4. The assesses does not own any residential house property on the date of
sanction of the loan.
• The above deduction is over and above the deduction of Rs.1.50 lakhs allowed for
self occupied properties under Section 24 of the Income-tax Act.
• If the limit is not exhausted, the balance may be claimed in AY 2015-16. (Carried
forward of unexhausted claim)
New
The Finance Bill, 2013 – Budget Proposals – Direct Taxes 8 CA. GOPAL KRISHNA RAJU
Section 32AC – Investment in New Plant & Machinery
• As per new Section 32AC an investment allowance
@ 15% to manufacturing company that invests
more than Rs.100 crore in Plant and Machinery
during the period from 1st April,2013 to 31st
March,2015.
• There is a restriction to transfer the Plant and
Machinery for a period of 5 years.
New
Section 32AC - Investment in New Plant & Machinery
The Finance Bill, 2013 – Budget Proposals – Direct Taxes 9 CA. GOPAL KRISHNA RAJU
Conditions Applicable only to a company
Cost of New Assets > Rs: 100 crore
New Assets does not include used machinery, office equipments/appliances,
vehicle and 100% depreciated assets in previous years
Deduction for Two years
Deduction = 15% of Actual Cost of assets installed between (1.4.2013 to
31.3.2015)
Available even if the company is amalgamated or demerged within 5 years
If sold/transferred (other than amalgamation or demerger) within 5 years
allowance will be withdrawn and taxed.
New Assets means any plant or machinery (other than ship or aircraft)
Investment Allowance: “I am Back – this time only for 2 years”
The Finance Bill, 2013 – Budget Proposals – Direct Taxes 10 CA. GOPAL KRISHNA RAJU
Section 142(2A) - Special Audit
• When: Special audit can be directed if the nature and complexity
of accounts, volume of accounts, doubts about the
correctness of the accounts, multiplicity of transactions in
accounts or specialized nature of activity of the assessee with
the previous approval of Chief Commissioner or Commissioner.
• Applicable: This amendment will take effect from 1st June, 2013.
Amendment
The Finance Bill, 2013 – Budget Proposals – Direct Taxes 11 CA. GOPAL KRISHNA RAJU
• Past: The existing provisions contained in sub-section (2A)
of section 142 of the Income-tax Act, inter alia, provide
that if at any stage of the proceeding, the Assessing
Officer having regard to the nature and complexity of
the accounts of the assessee and the interests of the
revenue, is of the opinion that it is necessary so to do, he
may, with the approval of the Chief Commissioner or
Commissioner, direct the assessee to get his accounts
audited by an accountant and to furnish a report of such
audit.
• Restricted Access: The expression “nature and
complexity of the accounts” has been interpreted in a very
restrictive manner by various courts.
The Finance Bill, 2013 – Budget Proposals – Direct Taxes 12 CA. GOPAL KRISHNA RAJU
• Change: It is, therefore, proposed to amend the aforesaid sub-
section so as to provide that if at any stage of the proceedings
before him, the Assessing Officer, having regard to the nature and
complexity of the accounts, volume of the accounts, doubts about the correctness of
the accounts, multiplicity of transactions in the accounts or specialized nature of
business activity of the assessee, and the interests of the revenue, is of
the opinion that it is necessary so to do, he may, with the previous
approval of the Chief Commissioner or the Commissioner, direct the
assessee to get his accounts audited by an accountant and to
furnish a report of such audit.
• May Overrule the case reported in (2012) 6 TaxCorp (DT)
52339 (DELHI) held, Irregularities can be examined and verified by
the Assessing Officer and for this purpose, special audit is not
required. Amendment
The Finance Bill, 2013 – Budget Proposals – Direct Taxes 13 CA. GOPAL KRISHNA RAJU
139(9): Defective Return
• Fact: A large number of assesses are filing their return of income
without payment of self assessment tax under section 140A.
• A Return of income filed without payment of self assessment tax
including interest to be treated as defective return.
• Effective: This amendment will take effect from 1st June, 2013.
Amendment
The Finance Bill, 2013 – Budget Proposals – Direct Taxes 14 CA. GOPAL KRISHNA RAJU
Section 90 & 90A: Tax Residency Certificate
• Tax Residency Certificate is a necessary for
claiming benefits under DTAA but not a
sufficient condition for claiming benefits under the
agreements referred to in Section 90 and 90A.
Amendment
The Finance Bill, 2013 – Budget Proposals – Direct Taxes 15 CA. GOPAL KRISHNA RAJU
• Backdrop: Section 90 of the Income Tax Act empowers
the Central Government to enter into an agreement
with the Government of any foreign country or specified
territory outside India for the purpose of –
granting relief in respect of avoidance of double taxation,
exchange of information and
recovery of taxes.
The Finance Bill, 2013 – Budget Proposals – Direct Taxes 16 CA. GOPAL KRISHNA RAJU
• Further section 90A of the Income-tax Act empowers the Central
Government to adopt any agreement between specified associations for
above mentioned purposes.
• In exercise of this power, the Central Government has entered into
various Double Taxation Avoidance Agreements (DTAAs) with different
countries and has adopted agreements between specified associations
for relief of double taxation.
• The scheme of interplay between DTAA and domestic legislation ensures
that a taxpayer, who is resident of one of the contracting country
to the DTAA, is entitled to claim applicability of beneficial
provisions either of DTAA or of the domestic law.
• Sub-section (4) of sections 90 and 90A of the Income-tax Act inserted by
Finance Act, 2012 makes submission of Tax Residency Certificate
containing prescribed particulars, as a condition for availing benefits of
the agreements referred to in these sections.
The Finance Bill, 2013 – Budget Proposals – Direct Taxes 17 CA. GOPAL KRISHNA RAJU
• Proposal: It is proposed to amend sections 90 and 90A in order to
provide that submission of a tax residency certificate is a necessary
but not a sufficient condition for claiming benefits under the
agreements referred to in sections 90 and 90A. This position was
earlier mentioned in the memorandum explaining the provisions in
Finance Bill, 2012, in the context of insertion of sub-section (4) in
sections 90 & 90A.
• These amendments will take effect from 1st April, 2016 and
will, accordingly, apply in relation to the assessment year
2016-17 and subsequent assessment years.
• May Overrule the case reported in (2003) TaxCorp (INTL)
1732 (SC) held that FIIs based in Mauritius are entitled to
exemption from capital gains tax; CBDT Circular dated April 13,
2000 upheld legal and valid
The Finance Bill, 2013 – Budget Proposals – Direct Taxes 18 CA. GOPAL KRISHNA RAJU
Section 56(2) – Gift of Immovable Property
• Where any immovable property is received for a consideration which is
less than the stamp duty value of the property by an amount
exceeding Rs.50,000, the stamp duty value of such property as
exceeds such consideration, shall be chargeable to take in the hands
of the individual or HUF as income from other sources.
• This amended section is applicable from the Assessment Year 2014-15.
Amendment
The Finance Bill, 2013 – Budget Proposals – Direct Taxes 19 CA. GOPAL KRISHNA RAJU
Section 56(2) – Gift of Immovable Property
Amendment
Situation Taxable Income Without consideration the stamp duty value of which exceeds Rs:
50,000, the stamp duty value of such
property;
For consideration > Rs:
50,000 but < stamp duty
value
the stamp duty value of such property as
exceeds such consideration:
The date of the agreement
and the date of registration
are not the same,
the stamp duty value on the date of the agreement
may be taken
The Finance Bill, 2013 – Budget Proposals – Direct Taxes 20 CA. GOPAL KRISHNA RAJU
• Present: The existing provisions of 56(2)(vii) sub clause (b)
of the Income-tax Act, inter alia, provide that where any
immovable property is received by an individual or HUF
without consideration, the stamp duty value of which
exceeds Rs: 50,000, the stamp duty value of such property
would be charged to tax in the hands of the individual or
HUF as income from other sources.
• Catch me if you can: The existing provision does not
cover a situation where the immovable property has been
received by an individual or HUF for inadequate
consideration.
The Finance Bill, 2013 – Budget Proposals – Direct Taxes 21 CA. GOPAL KRISHNA RAJU
• Proposal: It is proposed to amend the provisions of 56(2)(vii)
so as to provide that where any immovable property is
received for a consideration which is less than the stamp duty
value of the property by an amount exceeding Rs: 50,000, the
stamp duty value of such property as exceeds such
consideration, shall be chargeable to tax in the hands of
the individual or HUF as income from other sources.
The Finance Bill, 2013 – Budget Proposals – Direct Taxes 22 CA. GOPAL KRISHNA RAJU
• Differing Dates: Considering the fact that there may be a
time gap between the date of agreement and the date of
registration, it is proposed to provide that where the date
of the agreement fixing the amount of consideration
for the transfer of the immovable property and the
date of registration are not the same, the stamp duty
value may be taken as on the date of the agreement,
instead of that on the date of registration.
• Caution: This exception shall, however, apply only in a
case where the amount of consideration, or a part
thereof, has been paid by any mode other than cash on or
before the date of the agreement fixing the amount of
consideration for the transfer of such immovable property.
The Finance Bill, 2013 – Budget Proposals – Direct Taxes 23 CA. GOPAL KRISHNA RAJU
• This amendment will take effect from 1st April, 2014 and
will, accordingly, apply in relation to the assessment year
2014-15 and subsequent assessment years.
• May Overrule the case reported in (2012) 6 TaxCorp (DT)
53279 (DELHI) , Section 50C enabling the revenue to treat the
value declared by an assessee for payment of stamp duty, ipso
facto, cannot be a legitimate ground for concluding that there
was undervaluation, in the acquisition of immovable property.
The Finance Bill, 2013 – Budget Proposals – Direct Taxes 24 CA. GOPAL KRISHNA RAJU
Section 43CA – Special provision for full value of consideration for transfer of assets other than capital assets in certain cases
New
The Finance Bill, 2013 – Budget Proposals – Direct Taxes 25 CA. GOPAL KRISHNA RAJU
Section 43CA
• Background: The provisions of Section 50C do not apply to transfer
of immovable property, held by the transferor as stock-in-trade.
• Younger Brother of Section 50C: A new Section 43CA is inserted
in the Act, that where the consideration for transfer of an asset
(other than capital asset), being land or building or both, is less than
the stamp duty value, the value so adopted or assessed or
assessable shall be deemed to be full value of consideration for the
purposes of computing income under the head “Profits and Gains of
Business or Profession”.
• Stamp duty value may be taken as on the date of agreement of
transfer and not as on the date of registration of such transfer
where consideration is received by any mode other than cash.
New
The Finance Bill, 2013 – Budget Proposals – Direct Taxes 26 CA. GOPAL KRISHNA RAJU
Section 43CA New
Situation Taxable Income
For consideration paid <
stamp duty value
the stamp duty value of such property
as exceeds such consideration paid;
The date of the
agreement and the date
of registration are not
the same,
the stamp duty value on the date of the
agreement may be taken
The Finance Bill, 2013 – Budget Proposals – Direct Taxes 27 CA. GOPAL KRISHNA RAJU
• These amendments will take effect from 1st April, 2014
and will, accordingly, apply in relation to the assessment
year 2014-15 and subsequent assessment years.
• May Overrule the case reported in (2012) 6 TaxCorp (DT)
51567 (ALLAHABAD) held that section 50C has no application
as it was a case of transfer of plots which was stock in trade.
Since, an income earned from such transaction is liable to be
taxed as income from business activity.
The Finance Bill, 2013 – Budget Proposals – Direct Taxes 28 CA. GOPAL KRISHNA RAJU
Computation of income under the head “PGBP” for transfer of immovable property in certain cases
• Currently, when a capital asset, being immovable property,
is transferred for a consideration which is less than the
value adopted, assessed or assessable by any authority of a
State Government for the purpose of payment of stamp
duty in respect of such transfer, then such value (stamp
duty value) is taken as full value of consideration under
Section 50C of the Income-tax Act. These provisions do
not apply to transfer of immovable property, held by
the transferor as stock-in-trade.
The Finance Bill, 2013 – Budget Proposals – Direct Taxes 29 CA. GOPAL KRISHNA RAJU
• It is proposed to provide by inserting a new section 43CA that where
the consideration for the transfer of an asset (other than capital
asset), being land or building or both, is less than the stamp duty
value, the value so adopted or assessed or assessable shall be
deemed to be the full value of the consideration for the purposes of
computing income under the head “Profits and gains of business of
profession”.
• It is also proposed to provide that where the date of an agreement
fixing the value of consideration for the transfer of the asset and the
date of registration of the transfer of the asset are not same, the
stamp duty value may be taken as on the date of the agreement for
transfer and not as on the date of registration for such transfer.
However, this exception shall apply only in those cases where amount
of consideration or a part thereof for the transfer has been received
by any mode other than cash on or before the date of the agreement.
The Finance Bill, 2013 – Budget Proposals – Direct Taxes 30 CA. GOPAL KRISHNA RAJU
Application of Seized Assets Section 132 B
• Seized assets may be adjusted against any existing liability
under the Income-tax Act.
• It is clarified that the existing Liability does not
include advance tax payable in accordance with Act.
• It is applicable from 1st June, 2013.
Amendment
The Finance Bill, 2013 – Budget Proposals – Direct Taxes 31 CA. GOPAL KRISHNA RAJU
• Background: The existing provisions contained in section 132B of the
Income-tax Act, inter alia, provide that seized assets may be adjusted
against any existing liability under the Income-tax Act, Wealth-
tax Act, the Expenditure-tax Act, the Gift-tax Act and the
Interest-tax Act and the amount of liability determined on completion of
assessments pursuant to search, including penalty levied or interest
payable and in respect of which such person is in default or deemed to be
in default.
• Adverse Decisions: Various courts have taken a view that the
term “existing liability” includes advance tax liability of the assessee,
which is not in consonance with the intention of the legislature. The
legislative intent behind this provision is to ensure the recovery of
outstanding tax/interest/penalty and also to provide for recovery of
taxes/interest/penalty, which may arise subsequent to the assessment
pursuant to search.
The Finance Bill, 2013 – Budget Proposals – Direct Taxes 32 CA. GOPAL KRISHNA RAJU
• Accordingly, it is proposed to amend the aforesaid section so as to
clarify that the existing liability does not include advance tax payable
in accordance with the provisions of Part C of Chapter XVII of the Act.
• This amendment will take effect from 1st June, 2013.
• May Overrule an Bombay High court ruling in the case of Shri
Jyotindra B. Mody, Whether the ITAT was justified in holding that the
seized cash amounting to Rs. 18,00,000 and the amount of Rs.1.98
Crores deposited by the Assessee on 31st January, 2007 could be
adjusted against the Advance Tax liability while computing the
interest under sections 234B and 234C of the Income Tax Act,
1961? Held, yes
The Finance Bill, 2013 – Budget Proposals – Direct Taxes 33 CA. GOPAL KRISHNA RAJU
Deduction under Section 80GGB & Section 80GGC
• No deduction shall be allowed under section 80GGB
(Political party donations) and Section 80GGC in respect of
any sum contributed by way of CASH.
• This amendment will take effect from the assessment year
2014-15.
Amendment
The Finance Bill, 2013 – Budget Proposals – Direct Taxes 34 CA. GOPAL KRISHNA RAJU
Section 179: Tax due includes penalty, interest or any other sum payable under the act
• Proposed Amendment in Clarification of the phrase “tax due” for the
purposes of recovery in certain cases
• Backdrop: Section 179 of the Income-tax Act provides that where the tax due
from a private company cannot be recovered from such company, then the
director (who was the director of such company during the previous year to which non-recovery relates)
shall be jointly and severally liable for payment of such tax unless he proves
that the non-recovery of tax cannot be attributed to any gross neglect,
misfeasance or breach of duty on his part.
• This provision is intended to recover outstanding demand under the Act of a
private company from the directors of such company in certain cases.
However, some courts have interpreted the phrase ‘tax due’ used in section
179 to hold that it does not include penalty, interest and other sum payable
under the Act.Amendm
ent
The Finance Bill, 2013 – Budget Proposals – Direct Taxes 35 CA. GOPAL KRISHNA RAJU
• Change: In view of the above, it is proposed to clarify that for the purposes of
this section, the expression “tax due” includes penalty, interest or any other
sum payable under the Act. Amendments on the similar lines for clarifying the
expression ‘tax due’ is proposed to be made to the provisions of section 167C.
• These amendments will take effect from 1st June, 2013.
• May Overrule the case reported in (2012) 6 TaxCorp (DT) 53191
(DELHI) the Court is of the opinion that the structure and construct of the Act
has consciously used different words to create constructive liability on third
parties, in the case of default in payment of taxes by an assessee. The
treatment of the same subject matter by using different terms - in some
instances expansive and in others, restrictive, mean that the Court has to adopt
a circumspect approach and limit itself to the words used in the given case (in
the present case, "tax due" under Section 179) and not "travel outside them on
a voyage of discovery" (Magor & St. Mellons RDC v. Newport Corporation 1951
(2) All ER 839). Therefore, the petitioner cannot be made liable for anything
more than the tax (defined under Section 2(43)). The respondent is
consequently directed to determine the liability of the Petitioner, in the light of
the finding.
The Finance Bill, 2013 – Budget Proposals – Direct Taxes 36 CA. GOPAL KRISHNA RAJU
Amendment
The Finance Bill, 2013 – Budget Proposals – Direct Taxes 37 CA. GOPAL KRISHNA RAJU
Section 10(10D) - Keyman Insurance Policy - KIP
• Keyman Insurance Policy which has been assigned to any
person during its term with or without consideration shall
continue to be treated as a keyman insurance policy.
• No benefit of exemption under section 10(10D) shall
be claimed on such policies.
Amendment
The Finance Bill, 2013 – Budget Proposals – Direct Taxes 38 CA. GOPAL KRISHNA RAJU
• Existing provisions: of section 10(10D), inter alia, exempt any sum
received under a life insurance policy other than a KIP. Explanation 1
to the said clause (10D) defines a KIP to mean a life insurance policy
taken by a person on the life of another person who is or was the
employee of the first-mentioned person or is or was connected in
any manner whatsoever with the business of the first-mentioned
person.
• By-pass: It has been noticed that the policies taken as KIP are being
assigned to the keyman before its maturity. The keyman pays the
remaining premium on the policy and claims the sum received under
the policy as exempt on the ground that the policy is no longer a
keyman insurance policy. Thus, the exemption under section 10(10D)
is being claimed for policies which were originally keyman insurance
policies but during the term these were assigned to some other
person. The Courts have also noticed this loophole in law.
The Finance Bill, 2013 – Budget Proposals – Direct Taxes 39 CA. GOPAL KRISHNA RAJU
• With a view to plug the loophole and check such practices to
avoid payment of taxes, it is proposed to amend the
provisions of clause (10D) of section 10 to provide that a
keyman insurance policy which has been assigned to
any person during its term, with or without
consideration, shall continue to be treated as a
keyman insurance policy.
• The above amendment will take effect from 1st April,
2014 and will, accordingly, apply in relation to
assessment year 2014-15 and subsequent assessments
years.
The Finance Bill, 2013 – Budget Proposals – Direct Taxes 40 CA. GOPAL KRISHNA RAJU
• May Overrule the case reported in (2012) 6 TaxCorp (DT) 51593 (DELHI)
Held that, The insurance company has itself clarified that on assignment, it
does not remain a keyman policy and gets converted into an ordinary policy.
It is not open to the Revenue to still allege that the policy in question
is keyman policy and when it matures, the advantage drawn there from is
taxable; no doubt, the parties here, viz., the company as well as the
individual taken huge benefit of these provisions, but it cannot be treated as
the case of tax evasion. It is a case of arranging the affairs in such a manner
as to avail the state exemption as provided in Section 10(10D); law is clear.
Every assessee has right to plan its affairs in such a manner which may result
in payment of least tax possible, albeit, in conformity with the provisions of
Act. It is also permissible to the assessee to take advantage of the gaping
holes in the provisions of the Act. The job of the Court is to simply look at the
provisions of the Act and to see whether these provisions allow the assessee
to arrange their affairs to ensure lesser payment of tax. If that is permissible,
no further scrutiny is required and this would not amount to tax evasion.
The Finance Bill, 2013 – Budget Proposals – Direct Taxes 41 CA. GOPAL KRISHNA RAJU
Section 115QA – Tax on distributed income to shareholders
• Proposed Amendment: Additional Income-tax on
distributed income by company for buy-back of unlisted
shares
• Present: Existing provisions of Section 2(22)(e) provide the
definition of dividends for the purposes of the Income-tax Act.
Section 115-O provides for levy of Dividend Distribution Tax (DDT)
on the company at the time when company distributes, declares or
pays any dividend to its shareholders. Consequent to the levy of
DDT the amount of dividend received by the shareholders is not
included in the total income of the shareholder.
New
The Finance Bill, 2013 – Budget Proposals – Direct Taxes 42 CA. GOPAL KRISHNA RAJU
• Capital Gains: The consideration received by a shareholder
on buy-back of shares by the company is not treated as
dividend but is taxable as capital gains under section 46A of
the Act.
• Scenario illustrated: A company, having distributable
reserves, has two options to distribute the same to its
shareholders either by declaration and payment of dividends to
the shareholders, or by way of purchase of its own shares (i.e.
buy back of shares) at a consideration fixed by it. In the first
case, the payment by company is subject to DDT and income
in the hands of shareholders is exempt. In the second case the
income is taxed in the hands of shareholder as capital gains.
The Finance Bill, 2013 – Budget Proposals – Direct Taxes 43 CA. GOPAL KRISHNA RAJU
• Loss to Revenue: Unlisted Companies, as part of tax avoidance scheme, are
resorting to buy back of shares instead of payment of dividends in order to avoid
payment of tax by way of DDT particularly where the capital gains arising to the
shareholders are either not chargeable to tax or are taxable at a lower rate.
• New section 115QA: In order to curb such practice it is proposed to amend the
Act, by insertion of new Chapter XII-DA, to provide that the consideration paid by
the company for purchase of its own unlisted shares which is in excess of the sum
received by the company at the time of issue of such shares (distributed income)
will be charged to tax and the company would be liable to pay additional income-
tax @ 20% of the distributed income paid to the shareholder. The additional
income-tax payable by the company shall be the final tax on similar lines as
dividend distribution tax. The income arising to the shareholders in respect of
such buy back by the company would be exempt where the company is liable to
pay the additional income-tax on the buy-back of shares – Section 10(34A)
The Finance Bill, 2013 – Budget Proposals – Direct Taxes 44 CA. GOPAL KRISHNA RAJU
• These amendments will take effect from 1stJune,
2013.
• May Overrule the case reported in (2012) TaxCorp
(INTL) 4300 (AAR) Held that the capital gains arising out
of the proposed buyback of shares is not taxable in India in
view of paragraph 4 of Article 13 of the DTAA between India
and Mauritius.
The Finance Bill, 2013 – Budget Proposals – Direct Taxes 45 CA. GOPAL KRISHNA RAJU
Wealth-Tax Returns
• Wealth-tax return can be electronically filed similar to e-IT
Returns.
• This facility shall come into force from 1st June, 2013.
Amendment
The Finance Bill, 2013 – Budget Proposals – Direct Taxes 46 CA. GOPAL KRISHNA RAJU
Section 115TA: Income distributed by Securitisation Trust
• 10(23DA): Securitisation Trust exempted from income tax
• Financial institutions to securitize their assets through
special purpose vehicles.
• Tax shall be levied only at the time of distribution of income
by the Securitisation Trust at the rate of 30% in the case of
companies and @ 25% in the case of an individual or HUF.
• No further tax will be levied on the income received by the
investors from the Securitisation Trust – Section 10(35A)
New
The Finance Bill, 2013 – Budget Proposals – Direct Taxes 47 CA. GOPAL KRISHNA RAJU
• 10(23DA): In case of securitisation vehicles which are set up as a trust and the activities of which are
regulated by either SEBI or RBI, the income from the activity of securitisation of such trusts will be
exempt from taxation.
• 115TA: The securitisation trust will be liable to pay additional income-tax on income distributed to its
investors on the line of distribution tax levied in the case of mutual funds. The additional income-tax
shall be levied @ 25% in case of distribution being made to investors who are individual and HUF and
@ 30% in other cases. No additional income tax shall be payable if the income distributed by the
securitisation trust is received by a person who is exempt from tax under the Act.
• 10(35A): Consequent to the levy of distribution tax, the distributed income received by the investor will
be exempt from tax.
• 115TB: The securitisation trust will be liable to pay interest at the rate of 1% for every month or part of
the month on the amount of additional income-tax not paid within the specified time .
• The person responsible for payment of income or the securitisation trust will be deemed to be an
assessee in default in respect of amount of tax payable by him or it in case the additional income-tax
is not paid to the credit of Central Government.
The Finance Bill, 2013 – Budget Proposals – Direct Taxes 48 CA. GOPAL KRISHNA RAJU
Eligible Limit- U/s 10(10D) & 80C
• Eligibility limit for claiming deduction u/s 80 C and claiming
exemption u/s 10(10D) in the case of certain disability or ailment
increased from 10% to 15% on actual capital sum assured.
• This relaxation shall be available in respect of insurance policies
issued on or after 1st April, 2013.
Amendment
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Additional Tax on Buy back of Shares
• The consideration paid by the company for purchase of its own unlisted shares (buy back of shares) which is in excess of the sum received by the company at the time of issue of such shares (distributed income) will be charged to tax and the company would be liable to pay additional income-tax @20% of the distributed income paid to the shareholders.
• The additional income-tax payable by the company shall be the final tax on similar lines as distributed dividend tax.
• The income arising to the shareholders in respect of such buy back by the Company would be exempt where the company is liable to pay the additional income tax on the buy back of shares.
• This amendment shall come into force from 1st June, 2013.
New
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TDS on transfer of Immovable Properties
• A new section 194-IA is inserted to provide that every
transferee (buyer), at the time of making payment or crediting
of any sum as consideration for transfer of immovable property
(other than agricultural land) to a resident transferor (resident
buyer), shall deduct tax, @1% of such sum.
• No deduction of tax shall be made where the total amount of
consideration for the transfer of an immovable property is less
than Rs. 50 Lakhs.
New
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80 CCG: Rajiv Gandhi Equity Savings Scheme
• The first time investors will now be allowed to invest in
mutual funds as well as listed shares.
• This investment can be done not in one year alone, but in
three successive years.
• The income limit is also being proposed to be raised from
Rs.10 lakhs to Rs.12 lakhs.
New
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Dividend from Foreign Subsidiary Companies
• The concessional rate of tax @ 15% as per Section 115BBD
on dividend received by an Indian Company from its foreign
subsidiary company shall be continued for one more year
(2013-14)
• The Indian Company shall not be liable to pay Dividend
Distribution Tax (Section 115-O) on the distribution to its
shareholders of that portion of the income received from its
foreign subsidiary.
New
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Dividend from Foreign Subsidiary Companies
• The concessional rate of tax @ 15% as per Section 115BBD
on dividend received by an Indian Company from its foreign
subsidiary company shall be continued for one more year
(2013-14)
• The Indian Company shall not be liable to pay Dividend
Distribution Tax (Section 115-O) on the distribution to its
shareholders of that portion of the income received from its
foreign subsidiary.
New
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Dividend from Foreign Subsidiary Companies
• The concessional rate of tax @ 15% as per Section 115BBD
on dividend received by an Indian Company from its foreign
subsidiary company shall be continued for one more year
(2013-14)
• The Indian Company shall not be liable to pay Dividend
Distribution Tax (Section 115-O) on the distribution to its
shareholders of that portion of the income received from its
foreign subsidiary.
New
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Deduction u/s 80JJAA
• As per Section 80JJAA deduction for additional wages is
allowed in certain cases.
New
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• Existing provisions: contained in section 80JJAA of the
Income-tax Act provide for a deduction of an amount equal to
thirty per cent of additional wages paid to the new regular
workmen employed in any previous year by an Indian
company in its industrial undertaking engaged in
manufacture or production of article or thing.
• The deduction is available for 3 assessment years including
the assessment year relevant to the previous year in which
such employment is provided.
• Caution: No deduction under this section is allowed if the
industrial undertaking is formed by splitting up or
reconstruction of an existing undertaking or amalgamation
with another industrial undertaking.
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• Abuse: The tax incentive under section 80JJAA was intended
for employment of blue collared employees in the
manufacturing sector whereas in practice, it is being claimed
for other employees in other sectors also.
• It is, therefore, proposed to amend the provisions of section
80JJAA so as to provide that the deduction shall be available to
an Indian Company deriving profits from manufacture of goods
in its factory.
• The deduction shall be of an amount equal to 30% of
additional wages paid to the new regular workmen
employed by the assessee in such factory, in the previous
year, for three assessment years including the
assessment year relevant to the previous year in which such
employment is provided.
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• It is also proposed to provide that the deduction under this section
shall not be available if the factory is hived off or transferred from
another existing entity or acquired by the assessee company as a
result of amalgamation with another company.
• Effect: This amendment will take effect from 1st April, 2014
and will, accordingly, apply in relation to assessment year
2014-15 and subsequent assessment years.
• May overrule the case reported in (2008) 115 TTJ 976
(BANGALORE)
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In any area within the distance, measured aerially
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In any area within the distance, measured aerially
In any area within the distance not more
than
Population is more than
2 KMS 10K but not exceeding 1 Lakh
6 KMS 1 Lakh but not exceeding 10
Lakh
8 KMS 10 Lakh
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New Exemptions
New Exemption Sections
10(23ED) 10(35A)10(34A)10(23DA) 10(49)
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New Exemption Sections
10(23ED) 10(35A)10(34A)10(23DA) 10(49)
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New Exemptions
Section What type of Income?
10(23DA
)
Income of a Securitization Trust
10(23ED
)
Contributions received from a depository of such Investor
Protection Fund
10(34A) Income arising on account of Buy-back of shares as referred in
115QA
10(35A) Distributed income received from a Securitization Trust
10(49) Income of NFHCL – National Financial Holdings Company Limited
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Commodities Transaction Tax (CTT)
• A new CTT shall be levied on non-agricultural commodities
future contracts at the rate of 0.01% of the price of goods.
• CTT shall be paid by the seller.
• The trading in commodity derivatives will not be considered
as “speculative transaction”.
• CTT shall be allowed as deduction as per section 36 of the IT
Act.
New
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Disclaimer
• These are my personal views and cannot be construed to be the views of the SIRC of ICAI
or my firm M/s. K. GOPAL RAO & Co., CAs
• No representation or warranties are made by the SIRC or its branches with regard to this
presentation
• These views do not and shall not be considered as professional advice
• This presentation should not be reproduced in part or in whole, in any manner or form,
without my written permission
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