Budget 2012 Changes in INCOME TAX AND WEALTH TAX

FINANCE BILL (CLAUSE NO.)

3

SECTION

NEW LAW

APPLI CABLE w.e f

2(14)

3 3

2(16) 2(19AA)(iv)

Amendment of definition of property widen to include rights in or in relation to an Indian company including rights of management or control or any other rights whatsoever Commissioner to include Director of Income-tax. Requirement to issue shares to shareholders of demerged company, relaxed when resulting company is the holding company Amendment of definition of transfer to include disposing of or parting with an asset or any interest therein or creating any interest in any asset in any manner whatsoever, directly or indirectly, absolutely or conditionally, voluntarily or involuntarily by way of an agreement (whether entered into India or outside India) or otherwise, notwithstanding that such transfer of rights has been characterized as being effected or dependent upon or flowing from the transfer of rights of a company registered or incorporated outside India. Two new explanations number 4 and 5 are being inserted. By way of explanation 4, a clarification for removal of doubt is being made to the effect that term through for the purpose of clause shall mean and include and shall be deemed to have always meant and included by means of in consequence of or by reason of. Through insertion of explanation 5 the situs of share or interest in a company incorporated outside India shall be in India if the share or interest derives, directly or indirectly, its value substantially from the assets located in India. Three new explanations numbering 4, 5 and 6 are being inserted in this clause. Non-availability of exemption to a Charitable Trust or Institution if it is engaged in an activity in the nature of trade, commerce or business Eligibility conditions for exempt life insurance policies The units engaged in the business of generation or generation and distribution of power shall be allowed additional depreciation on the lines allowed to an assessee engaged in the business of manufacture or production of any article or thing. Weighted deduction equal to two times of the expenditure incurred on scientific research or in house research and development facility to the business engaged in biotechnology or business of manufacture or production of specified article or thing is being extended to expenditure incurred up to 31.3.2017 Amendment to sub-section (5 & 8)

1.4.1962

AY 1988-89 AY 2013-14

2(47)

1.4.1962

9(1)(i)

1.4.1962

4 5, 6

9(1)(vi) 10(23C), 13, 143 10(10D) 32

1.6.1976 AY 2009-10

5 7

AY 2013-14 1.4.2013

35

1.4.2013

Section 35AD

01.04.2013

Sub-section (6A) and amendment to sub-section (5 & 8) 9 10 11 12 13 Section 35AD Section 35CCC Section 40 S. 40A 44AB Insertion of sub-section 6A Insertion of new section 35CCC Insertion of new provio to sub clause (1a) Amendment to section 40A and insertion of new proviso. Extension of time limit for furnishing tax audit report by assesses who have undertaken international transaction Presumptive taxation not to apply to professionals etc. Requirement to issue shares to shareholders of amalgamating company, relaxed when subsidiary company amalgamates into holding company Cost of acquisition in case of conversion of sole-proprietor / firm into company FMV of capital asset to be considered where sales consideration cannot be determined Exemption available to HUF Insertion of new Section 54GB Reference to Valuation Officer in connection with fair market value of asset as on 1 April 1981 Amendment of clause (e) of explanation Insertion of New Proviso New clause inserted after clause (ii) to explanation in sub section (6). Eligibility condition for deduction in respect of life insurance policies Amendment Amendment Prohibition of deduction of cash donations exceeding Rs.10,000. Prohibition of deduction of cash donations exceeding Rs.10,000. Amendment Insertion of new section New insertion - Sub section (2A), (4) & explanation 3 to S. 90 and New insertion - Sub section (2A), (4) & explanation 3 to S. 90A 01.04.2011 01.04.2013 01.04.2013 01/04/2013 AY 2012-13

14 15

44AD 47(vii)

AY 2011-12 AY 2013-14

16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31, 32

49(1)(iii)(e) 50D 54B(1) Section 54GB 55A Section 56 (2) (A) (vii) Section 68 S. 80A 80C Section 80D Section 80DDB 80G 80GGA Section 80IA(4)(iv) Section 80TTA 90 & 90A

AY 1999-00 AY 2013-14 AY 2013-14 01.04.2013 1 July 2012 01.10.2009 01.04.2013 01/04/2013 AY 2013-14 01.04.2013 01.04.2013 AY 2013-14 AY 2013-14 01.04.2013 01.04.2013 Sections inserted w.e.f 01/04/2013, explanation inserted w.e.f 01/10/2009

33 34

S. 92 92B

Amendment to section 92 and insertion of section (2A) New explanation to sub section (2) inserted.

01/04/2013 01/04/2002

35 36

92BA 92C

37 38

92C, 92D & 92E 92CA

New insertion Two amendments are carried out through this clause. One relates to the proviso to sub section 2 inserted by finance act 2002 and now stands substituted by the finance (No 2) Act 2009. The controversy with regard to assessment years to which this proviso applied was whether or not the tolerance band of five percent linked to arithmetical mean arrived at as per the proviso is a standard deduction. The amendment clarifies that the intent of the law was never to allow this tolerance band to work as standard deduction. Second amendment also resolves a controversy with regard to applicability of the proviso to sub section 2 of section 92C as substituted by the Finance Act 2009 as to all pending proceedings as on 1.10.2009, the date on which this proviso became effective or to assessment year following the said date. Through an explanation to section 2 of section, it is clarified that substituted proviso shall apply to all pending assessment years. Amendment This amendment empowers the TPO on reference by AO to determine ALP of the international transactions noticed by him in the course of proceedings before him provided that the assessee has not furnished a report u/s 92E of the Act. But no reopening/rectification of assessment shall be undertaken by AO on account of this amendment for any assessment year proceedings for which has been completed before 1.7.2012 New Section inserted New chapter inserted Clerical error pertaining to rate of tax in the Proviso rectified. Insertion of new sub clause and amendment of existing clauses Amendment of sub section (1) & (2) and insertion of clause (c) Extension of concessional taxed on Dividend Income of Indian Companies received from Foreign Companies New Section Inserted Book profit in cases of companies not required to prepare P/ L a/c as per Companies law. Gain on revaluation of asset subject to MAT liability. Amendment to chapter heading

01/04/2013 First amendment applies to AY 2002-03 and subsequent assessment years till substituted proviso came into being. The second amendment shall apply to all assessments pending as on 1.10.2009 01/04/2013 1.6.2002

39 40 41 42 43 44

92CC & 92CD Chapter X A 111A Section 115A S. 115BBA(1) Section 115BBD Section 115BBE 115JB

01/07/2012 1st April, 2013 AY 2009-10 01.07.2012 01/04/2013 Extended till 31.03.2013 01.04.2013 AY 2013-14

45 46

47

Chapter XII-BA

01.04.2013

48 49 50 51 52 53 54 55 56 57 58

Section 115JC Section 115JD(1) Section 115JE Section 115JEE Section 115JF Section 115O Section 115U Section 115VG S. 139 Section 140A 143 (3) 143(1D)

Substitution of the Old Section Substitution of New Words Substitution of New Words Insertion of New Section Omission of Clause (c) and amendment to Clause (d) Amendment to existing section. Amendment to existing section Substitution to the Table Amendments made to S. 139 and insertion of new proviso. Amedment in sub-sections Third proviso inserted to S. 143(3). Processing of return not necessary where notice has been issued u/s 143(2) General Anti Avoidance Rule (GAAR) DRP empowered to consider a matter not covered by draft assessment order Insertion of Second Proviso Insertion of clause (c) to sub-section [1] Amendment to sub-section (3) New Explanation 3 Time limits for completion of assessments and reassessments increased by 3 months Notification of a class of search cases where compulsory reopening of past 6 years not required Insertion of new clause C in sub section 1 Substitution of words Increase in Threshold limit Amendment to section 194E Amendment to Section 194J Substitution of limit Insertion of New Section Insertion of new section

01.04.2013 01.04.2013 01.04.2013 01.04.2013 01.04.2013 01.07.2012 01.04.2013 01.04.2013 01/04/2012 01.04.2013 01/04/2009 1 July 2012 AY 2013-14 AY 2009-10 01.07.2012 01.07.2012 01.07.2012 01.07.2012 1 July 2012 1 July 2012 01.07.2012 01.07.2012 01.07.2012 01/07/2012 01.07.2012 01.07.2012 01.10.2012 01.07.2012

59 60 61 62

95 to 102, 14, 144BA 144C Section 147 Section 149 Section 149 Section 149 153, 153B 153A, 153C, 296 Section 54 Section 156 Section 193 194E Section 194J Section 194LA Section 194LAA Section 194LC

63, 65 64, 66, 108 67 68 69 70 71 72 73 74

75

195

Two amendments are brought through this clause in section 195. As per the first amendment non residents are being specifically brought in the ambit of section 195 whether or not such non resident has a residence or place of business or business connection in India or any other presence in India. A new sub section 7 is being proposed by which board is empowered to notify a class of persons or cases where application to the AO for determination of proportion of income chargeable in the payments made to persons specified has to be made and tax at source has to be deducted under this section accordingly. Amendment Insertion of new proviso in sub-section(1) Insertion of new clause Amendment to section 206C Renumber of existing section and insertion of new sub section Advance tax payable where income is received without deduction or collection of tax at source Amedment in sub-sections Amedment in sub-sections Amedment in sub-sections Interest applicable to any proceeding which is completed on or after 1 June 2003 Insertion of new sub heading G and insertion of new section 243E Related person for the purpose of making application before Settlement Commission Increase in fee for filing application before AAR Insertion of new clause Amendment Amendment of existing clauses and insertion of new clauses Amendment to existing section and insertion of new clauses Amendment to existing section Amendment to existing explanation

The first amendment will apply from 1.4.1962 and the second one from 1.7.2012

76 77 78 79 80 81 82 83 84 85 86 87 88 89 89

Section 197A Section 201 Section 204 Section 206C Section 207 209 Section 234A Section 234B Section 234C 234D Section 234E 245C 245Q Section 246A(b)(j) Section 246A Section 246A Section 253 Section 254 Section 271(1) Explanation 7 271AA

01.07.2012 01.07.2012 01.07.2012 01.07.2012 01.04.2012 AY 2013-14 01.04.2013 01.04.2013 01.04.2013 1 June 2003 01.07.2012 1 July 2012 1 July 2012 01.07.2012 01.07.2012 Different dates Different dates 01.07.2012 01.04.2013

90 91 92

93, 94

Penalty for failure to maintain adequate documentation to cover domestic transactions subject to TP regulations Sun-set Clause

AY 2013-14

95

Section

01.07.2012

271AAA(1) 96 97 98 99 100 101, 102, 103, 104 and 105 Section 271AAB Section 271G Section 271H Section 272A Section 273B Section 276C, 276CC, 277, 277A and 278 Section 292CC Section 296 2(ea)(i)(1) (WT Act) Section 17 of Wealth Tax Act 17A (WT Act) 45 New-Section Amendment Insertion of new Section Insertion of new proviso Amendment Scope of Section Enlarged 01.07.2012 01.07.2012 01.07.2012 01.07.2012 01.07.2012 01.07.2012

106 107

Insertion of new sections. Insertion of new section

01.07.2012 01.04.1976 (retrospective amendment) 01.07.2012 1 April 2013 01.07.2012

108 109 110

Insertion of new words Exclusion of house from purview of assets

111

Extension of time limit for assessment and reassessment

1 July 2012

112 113

Wealth tax not applicable for RBI Validation clause - Validation of demand etc. under Income-tax Act in certain cases

1 April 1957 Coming into force of Finance Act, 2012