Taxpert budget 2013 final

Analysis of Budget 2013 Taxpert Professionals Private Limited

INTRODUCTION

Taxpert Professionals Private Limited | www.taxpertpro.com

1

The Hon’ble Finance Minister Shri. P. Chidambaram on 28.02.2013 presented the Union Budget 2013 and mentioned that slowdown in Indian economy has to be seen in the context of slowing global economic growth. He admitted that the country’s present situation and growth is indeed challenging but India has potential growth rate of 8 % and getting back to this is possible as has been proven in the past.

The central theme now is “higher growth leading to inclusive and sustainable development” with emphasis on women, children, minorities, backward classes and disabled persons. Impetus has also been given to create opportunities for youth for skill development. Health, Education, Rural, Manufacturing, Infrastructure and affordable housing have been kept on the priority list. Capital Markets initiatives like strengthening SEBI for Investor protection and fine tuning FDI/ FII norms has also been touched upon.

The Fiscal deficit for the current year has been contained at 5.2 % of GDP and for the year 2013-14 is estimated at 4.8 %. By 2016-17, fiscal deficit is targeted to be brought down to 3 % . On the other hand, it is food inflation that is worrying, and he said that all possible steps will be taken to augment the supply side to meet the growing demand for food items. The Finance Minister has showed greater worry towards current account deficit (CAD) and has admitted that FDI, FII or External Commercial Borrowing (ECB) are the only ways to finance it.

http://www.taxpertpro.com

DIRECT TAXES


2

INCOME TAX: 1. Personal Taxation:

The proposals in the Finance Bill 2013 have not carried out any change in the slab rates of Income Tax.

The slab rates of income-tax in the case of Individual, Hindu Undivided Family, Association of Persons and Body of Individuals, or every artificial juridical person would continue to be as follows: -

Income Slabs Rates of Income Tax Upto Rs.2,00,000

Nil

Rs.2,00,001 to Rs.5,00,000 10% of amount by which income exceeds Rs.2,00,000

Rs. 5,00,001 to Rs.10,00,000 Rs.30,000+20% of amount by which income exceeds Rs.5,00,000

Above Rs.10,00,000 Rs.1,30,000+30% of amount by which income exceeds Rs.10,00,000

>> The Basic Exemption Limit for Senior Citizens (Age of more than 60 years and upto 80 years), would continue to be Rs.2,50,000.

>> The Basic Exemption Limit for Very Senior Citizens (Age of more than 80 years), would continue to be Rs.5,00,000.

>> Education Cess would continue to be levied @ 3%.

Proposed Amendments:

>> Surcharge @ 10% will be levied, in case the Income exceeds Rs. 1 Crore. This surcharge is proposed to be levied only for one year.

>> Tax Rebate of Rs.2,000 is allowed under Section 87 for the Individuals in the Lowest Tax Bracket, having income upto Rs.5,00,000. This amendment will be effective from 1st April, 2014 and will apply for Assessment Year 2014-15 and subsequent assessment years.


3

>> Additional Deduction upto Rs.1,00,000/- under Section 80EE shall be allowed towards the Interest paid on Housing Loan, for the Individuals who are First Home Buyers.

This deduction is subject to the condition that the loan should be sanctioned during the Financial Year 2013-14 and the amount of loan sanctioned should not exceed Rs. 25 Lacs. Further, the value of residential house property purchased does not exceed Rs.40 Lacs.

>> Donations made to National Children Fund shall be elig ible for 100% deduction under section 80G.

>> Permissible Premium Rate increased from 10% to 15% of the sum assured by relaxing the elig ibility conditions of LIC policies for persons suffering from disability.

>> Contributions made to the schemes of Central and State Governments similar to Central Government Health Scheme, would be elig ible for deduction under Section 80D.

2. Corporate Taxation:

The Rate of Income Tax for Firms, Local Authority and Domestic Companies would continue to be 30% of the Total Income.

>> Existing surcharge @ 5% for Domestic Companies and 2% for Companies other than Domestic Companies, shall continue to be levied, in case the Total Income exceeds Rs. 1 Crore does not exceed Rs. 10 Crores.

Proposed Amendments:

>> Surcharge @ 10% shall be levied in case the Total Income of the Domestic Company exceeds Rs. 10 Crores. This Additional Surcharge is proposed to be levied only for One Year, i.e. Financial Year 2013-14

>> For Foreign Companies, Surcharge @ 5% in case the Total Income exceeds Rs. 10 Crores. This Additional Surcharge is also proposed to be in force only for one year.

>> Education Cess @ 3% shall continue to be levied.

>> In case of Dividend Distribution Tax and Tax on Distributed Income, Surcharge increased from 5% to 10%.


4

>> Investment Allowance @ 15% shall be allowed under section 32AC, to manufacturing companies that invest more than Rs.100 Crore in Plant and Machinery during the period 1.4.2013 to 31.3.2015.

>> Elig ible date for projects in the Power Sector to avail benefit under Section 80IA extended from 31.3.2013 to 31.3.2014.

>> Concessional rate of tax of 15% on dividend received by Indian Company from its foreign subsidiary proposed to continue for one more year.

3. Amendments for Withholding Tax (TDS): a) TDS on Transfer of Immovable Property: It is proposed that TDS @ 1% (Under Section 194-IA) would be deducted by the Transferee, while paying the Consideration for the Transfer of Immovable Property, other than Agricultural Land. This would be applicable only when the consideration exceeds Rs. 50 Lacs.

This amendment will be effective from 1st June, 2013.

b) Tax on Distributed Income by Company for buy-back of unlisted shares:

It is proposed to levy the final withholding tax @ 20% on the profits distributed by unlisted companies, to the shareholders through buyback of shares. This shall be effective from 1.6.2013.

c) Concessional TDS Rate for Interest on rupee denominated long-term infrastructure bonds:

Concessional Rate of TDS of 5% will be allowed under Section 194LC for the non-resident in respect of the Income arising on subscription to rupee denominated long-term infrastructure bonds. This amendment is to be effective from 1st June, 2013.

d) Tax on Royalty and Fees for Technical Services to Non-Residents:

Rate of Tax under Section 115A for Royalty and Fees for Technical Services paid to Non-Residents is proposed to be increased from 10% to 25%.

This amendment will be effective from 1st April, 2014 and will apply for Assessment Year 2014-15 and subsequent assessment years.

4. Other Amendments:


5

a) Taxation of Securitisation Trusts-

Securitisation Trust to be exempt from Income Tax. Tax to be levied at specified rates only at the time of distribution of Income for Companies, Individual or HUF etc. No further tax on income received by investors from the Trust.

b) Criteria for Defective Return:

It is proposed to amend the Explanation to Section 139 (9) that the Return of Income shall be regarded as Defective, unless the tax together with interest if any, payable as per Section 140A (Self Assessment Tax) has been paid on or before the date of furnishing the Return.


c) Amendment in the Definition of Capital Asset:

Certain categories of properties including Agricultural Land have been excluded from the Definition of Capital Asset under Section 2(14). It is proposed to amend sub-clause (iii) of Section 2(14) as below:

The Land situated in any area within the distance measured aerially (shortest aerial distance) :

i) Not being more than 2 Kilometers from the local limits of any municipality or Cantonment Board and which has a population of more than 10,000 but does not exceed 1,00,000. ii) Not being more than 6 Kilometers from the local limits of any municipality or Cantonment Board and which has a population of more than 1,00,000 but does not exceed 10,00,000. iii) Not being more than 8 Kilometers from the local limits of any municipality or Cantonment Board and which has a population of more than 10,00,000. Shall form part of capital asset.

Section 2(1A) relating to the definition of Agricultural Income shall also be amended on similar lines.

This amendment will be effective from 1st April, 2014 and will apply for Assessment Year 2014-15 and subsequent assessment years.

d) Commodities Transaction Tax:

A new tax called “Commodities Transaction Tax” is proposed to be levied on taxable commodities transactions entered in a recognized association.


6

Taxable Commodities Transaction means a transaction of sale of commodity derivatives in respect of commodities, other than agricultural commodities, traded in recognized associations.

The tax is proposed to be levied as per the below mentioned rates:

Sr.No. Taxable Commodities

Transaction Rate Payable by

1. Sale of Commodity Derivative 0.01% Seller

This tax is proposed to be levied from the date on which Chapter VII of the Finance Bill, 2013 comes into force by way of notification in the Official Gazette by the Central Government.

e) Revision of Securities Transaction Tax (STT):

The Securities Transaction Tax (STT) is proposed to be revised as below, with effect from 1st June, 2013:

Nature of Taxable Securities Transaction

Payable by

Existing Rate (%)

Proposed Rates (%)

Delivery based Purchase of units of an Equity Oriented Fund entered into recognised stock exchange

Purchaser 0.1 Nil

Delivery based Sale of units of an Equity Oriented Fund entered into recognised stock exchange

Seller 0.1 0.001

Sale of futures in securities Seller 0.017 0.01 Sale of an Equity Oriented Fund to the Mutual Fund

Seller 0.25 0.001


7

WEALTH TAX:

1. Provisions for facilitating electronic filing of Annexure-less Return of Net Wealth:

Section 14 of the Wealth Tax Act provides for furnishing of Return of Net Wealth as on the valuation date in the prescribed form. Currently, certain documents and reports are required to be furnished along with the Return of Net Wealth.

It is proposed to insert Section 14A and 14B in the Wealth Tax Act, to provide for the provisions relating to Electronic Filing of Annexure-less Return of Net Wealth. This will be in similar lines of the Section 139C and 139D of the Income Tax Act.


2. Amendment of the Definition of Urban Land: The Definition of Urban Land under the Wealth Tax Act is proposed to be amended in the similar way as for the amendment of the definition of Capital Asset under section 2(14)(iii) of the Income Tax Act.

INDIRECT TAXES


8

CENTRAL EXCISE:

The standard rate of Central Excise Duty has been kept unchanged at 12% ad valorem. Product wise Analysis: Sr. No.

Item Name Current Basic Excise Rate

Proposed Basic Excise Rate

1. SUVs 27% 30% 2. Truck Chassis 14% 13% 3. Mobile Phones

(Retail Sale Price exceeding Rs 2000/-)

1% 6%

4. Cigarettes (length exceeding 65 mm)

30% 48%

5. Marble tiles and slabs Rs 30 per sq.mtr Rs 60 per sq.mtr

Complete exemption from excise duty has been provided for the following products: Tapioca sago (sabudana) and tapioca starch manufactured and consumed actively in the manufacture of tapioca sago. Henna powder or paste, not mixed with any other ingredient

27% 14%

1%

30% 30% 30%

13%

6%

48% 60%

0%20%40%60%80%

ItemName

SUVs TruckChassis

MobilePhones

(RetailSale PriceexceedingRs 2000/-)

Cigarettes (lengthexceeding

65 mm)

Marbletiles and

slabs

1 2 3 4 5

Current Basic Excise Rate Proposed Basic Excise Rate


9

Ships and other vessels. Consequently, there will be no CVD on these ships and vessels when imported Handmade carpets and carpets and other textile floor coverings of coiror jute, whether or not handmade Intermediate goods manufactured and consumed captively by exempted units under Area Based Exemption Scheme in Himachal Pradesh and Uttarakhand.

Other Proposed Amendments:

Excise duty of 4% is being levied on silver manufactured from zinc/lead smelting. Compounded levy on stainless steel "Patta Patti" is being increased from Rs 30,000 per machine per month to Rs 40,000 per machine per month. It is being clarified that the item "trimmed or untrimmed sheets or circles of copper intended for use in the manufacture of handicrafts or utensils" presently leviable to excise duty at Rs. 3500 per MT includes copper and copper alloys including brass. 'Zero excise duty route', as existed prior to Budget 2011-12, is being restored in respect of branded readymade garments and made ups. In the case of cotton there will be zero duty at the fibre stage and, in the case of spun yarn of manmade fibres, there will be a duty of 12% at the fibre stage. The 'Zero excise duty route' will be in addition to the CENVAT route now available. Branded Ayurvedic medicaments and medicaments of Unani, Siddha, Homeopathic or bio-chemic system are being brought under MRP based assessment with abatement of 35% from MRP.

CUSTOMS: The peak rate of the Customs is retained at 10%. Further the rate of CVD is also retained. The effective Customs Rate shall be 28.85%. Product Wise Analysis: Increase Sr. No.

Item Name

Existing Basic Custom Duty Rate

Proposed Basic Custom Duty Rate


10

1. new passenger cars and other motor vehiclesCIF >US$ 40,000

75% 100%

2. motor cycle with engine capacity >800cc

60% 75%

3. yachts and motor boats 10% 25% 4. raw silk 5% 15% 5. Set Top Boxes for TV 5% 10%

Product Wise Analysis: Decrease Sr. No.

Item Name

Existing Basic Custom Duty Rate

Proposed Basic Custom Duty Rate

1. Dehulled oat grain 30% 15% 2. hazel nuts 30% 10% 3. de-oiled rice bran oil cake 10% Nil

4. stainless steel wire cloth stripe 10% 5%

5. pre-forms of precious and semi-precious stones

10% 2%

6. bituminous coal 5% 2%

0%

20%

40%

60%

80%

100%

120%

ItemName

motorcyclewith

enginecapacity>800cc

yachtsand

motorboats

raw silk Set TopBoxesfor TV

1 2 3 4 5

Current Basic ExciseRate

Proposed Basic ExciseRate


11

7. textile machinery & parts 7.5% 5%

Other Proposed Amendments: a) Full exemption from export duty is being provided to galvanized steel sheets falling nder

certain sub-headings, retrospectively w.e.f. 01.03.2011. b) Baggage Rules are being amended to,- i. raise the duty free allowance in respect of jewellery for an Indian passenger who has

been residing abroad for over one year or a person who is transferring his residence to India from Rs.10,000 to Rs.50,000 in case of a gentleman passenger and from Rs.20,000 to Rs.1,00,000 in case of a lady passenger.

ii. raise the duty free allowance for crew member of vessel/aircraft from Rs.600 to Rs.1500.

SERVICE TAX:

1. Rate of Service Tax: The Service Tax rate has been retained to 12 %. The effective rate shall be 12.36% (inclusive of Education Cess at the rate of 2% and Secondary and Higher Education Cess at the rate of 1%). 2. Inclusion of Services in the Negative List:

0%5%

10%15%20%25%30%35%

Item

Nam

e

dehu

lled

oat g

rain

haze

l nut

s

de-o

iled

rice

bran

oil…

stai

nles

s ste

el w

ire…

pre-

form

s of p

reci

ous…

bitu

min

ous c

oal

text

ile m

achi

nery

&…

1 2 3 4 5 6 7

Current Basic Excise Rate30% 30% 10%

Proposed Basic ExciseRate 15% 10% 0%

Current Basic Excise Rate

Proposed Basic ExciseRate


12

The following services have been included in the Negative List of Services: a) Vocational Courses offered by institutions affiliated to the State Council of Vocational Training b) Testing Activities in relation to Agricultural Produce 3. Retrospective Exemption: Retrospective exemption is being extended to the Indian Railways on the service tax leviable on various taxable services provided by them during the period prior to the 1st day of July 2012, to the extent show cause notices have been issued upto the 28th day of February 2013. Section 99 is being added for this purpose, in Chapter V of the Finance Act, 1994. 4. Rationalisation of Abatement for Residential Construction Service: At present taxable portion for service tax purpose is prescribed as 25% uniformly for constructions where value of land is included in the amount charged from the service recipient. This is being rationalized. Accordingly, where the carpet area of residential unit is upto 2000 square feet, or the amount charged is less than Rs. One Crore, in the case of 'construction of complex, building or civil structure, or a part thereof, intended for sale to a buyer, wholly or partly except where the entire consideration is received after issuance of completion certificate by the competent authority', taxable portion for service tax purpose will remain at 25%. In all other cases taxable portion for service tax purpose will be 30%. This amendment will be effective from 1st March, 2013. 5. Review of Exemptions: (Effective from 1st April, 2013) a) Rationalization of exemption limit prescribed for charitable organizations, providing service towards any other object of general public utility. So far, the limit was 25 Lakh Rupees per annum. Now, they will be covered by the threshold exemption. b) Exemption provided to restaurants other than those having (i) air-conditioning and (ii) license to serve liquor, is being rationalized. Condition regarding 'license to serve liquor' is being omitted. Therefore, with effect from 1st April, 2013, service tax will be levied on taxable service provided in restaurants with air- conditioning or central air heating in any part of the establishment at any time during the year. c) Rationalization of exemption to transport of goods by road and rail/vessel. 6. Exemptions Withdrawn:


13

a) Services provided by an educational institution by way of renting of immovable property. b) Temporary transfer or permitting the use or enjoyment of a copyright relating to cinematographic films was fully exempt so far. Now, this exemption will be restricted to exhibition of cinematograph films in a cinema hall or a cinema theatre. c) Services by way of vehicle parking to general public. d) Services provided to Government, a local authority or a governmental authority, by way of repair or maintenance of aircraft. 7. Amnesty Scheme For Non-Filers and Stop-Filers: To encourage voluntary compliance and broaden the tax base, it is proposed to provide one time amnesty by way of (i) waiver of interest and penalty; and (ii) immunity from prosecution, to the stop filers, non-filers or non-registrants or service providers (who have not disclosed true liability in the returns filed by them during the period from October 2007 to December 2012) who pay the "tax dues". Details of the scheme are available in Chapter VI of the Finance Bill, 2013. The scheme will be operational from the date on which the Finance Bill, 2013 receives the assent of the President. 8. Advance Ruling: The scope of advance ruling is being extended to cover resident public limited companies; a notification is being issued for this purpose, under section 96A (b) (iii) of the Finance Act, 1994.

GOODS AND SERVICE TAX (GST):

1. A sum of Rs. 9,000 Crores towards the first instalment of the balance of CST compensation provided in the Budget. 2. Work on Draft GST Constitutional amendment bill and GST law expected to be taken forward.

INTERNATIONAL TAXATION


14

1. General Anti-Avoidance Rule (GAAR):

The General Anti-Avoidance Rule (GAAR) was introduced by the Finance Act, 2012. The provisions of Chapter-X-A and Section 144BAA were supposed come into force with effect from 1st April, 2014.

It is proposed that these provisions shall be effective from 1st April, 2016 and shall apply from the Assessment Year 2016-17 and subsequent assessment years.

2. Tax Residency Certificate:

The provisions of Sections 90 and 90A of the Income Tax Act empowers the Government to enter into and adopt agreements with the Governments of Foreign Countries for the purpose of granting relief for avoidance of double taxation, exchange of information and recovery of taxes. In exercise of this power, the Central Government has entered into various Double Taxation Avoidance Agreements (DTAAs) with different countries.

Section 90 (4) prescribes the submission of Tax Residency Certificate containing prescribed particulars as a condition for claiming benefits under these sections.

It is proposed to amend Section 90 and 90A in order to provide that the submission of Tax Residency Certificate is a necessary but not sufficient condition for claiming the benefits under these sections.

This amendment will be effective retrospectively from 1st April, 2013 and will apply for Assessment Year 2013-14 and subsequent assessment years.

3. Capital Market:

India’s Capital Market is among the best regulated markets. It is proposed to amend the SEBI Act to strengthen the regulator under consideration. Some of the proposals finalized in consultation with SEBI are:

a) Designated Depository Participants, authorized by SEBI, may register different classes of portfolio investors, subject to compliance of KYC.

b) SEBI will simplify the procedures and prescribe uniform registration and other norms for entry for foreign portfolio investors.


15

c) The following Rule will be laid down: “ Where an Investor has a stake of 10% or less in a company, it will be treated as FII and where an Investor has a stake of more than 10%, it will be treated as FDI.”

d) FIIs will be permitted to participate in the exchange traded currency derivative segment to the extent of their India rupee exposure in India.

e) FIIs will also be permitted to use their investment in corporate bonds and Government Securities as collateral to meet their margin requirements.

f) SEBI to prescribe requirement for angel investor pools by which they can be recognised as

Category I AIF venture capital funds.

***************************************************************************

Taxpert Professionals Private Limited

www.taxpertpro.com

09769134554 || 09769033172

http://www.taxpertpro.com/