Key Features of Budget 2012-13 on Direct Tax Front

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DIRECT - INCOME TAX

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1. Income tax exemption limit raised to Rs.2 lakh to provide relief of relief of Rs.2,000 for assessee in this category; 20 percent tax on income over Rs.10 lakh, up from Rs.8 lakh. 2. No change in corporate tax 3. Deduction of up to Rs.10,000 from interest from savings bank accounts Under Section 80TTA . Assesses can claim relief while filing they return.
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4. New equity savings scheme (RAJIV GANDHI EQUITY SCHEME) to provide for income tax deduction of 50 percent for New Retail investors those who invest Rs.50,000 in equity and whose annual income is less than Rs.10 lakh. Maximum Tax relief Rs.5,000 Scheme details will be given at a later date. Deduction will be a one time only and NOT on an annual basis.
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5. Proposal to allow deduction of up to Rs.5,000 for preventive health check up. Part of the normal limit of Rs.15,000
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6. Senior citizens not having income from business or Profession proposed to be exempted from payment of advance tax.
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7. Proposal to extend weighted deduction of 200 per cent for R&D expenditure in an in-house facility for a further period of 5 years beyond March 31, 2012. 8. Turnover limit for compulsory tax audit of account and presumptive taxation of SMEs to be raised from Rs. 60 lakh to Rs. 1 Crore, and for Professionals from 15 lakh to Rs.25 lakhs.
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9. Re-open tax assessment for 15 years of overseas assets

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10 .Reduction in securities transaction tax by 20 per cent on cash delivery transactions. New STT rate will be 0.1%
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Tax Audit & presumptive taxation Limit rasied to One Crore

Turnover or gross receipts for audit of accounts and presumptive taxation

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I. Under the existing provisions of section 44AB, every person carrying on business is required to get his accounts audited if the total sales, turnover or gross receipts in the previous year exceed sixty lakh rupees. Similarly, a person carrying on a profession is required to get his accounts audited if the total sales, turnover or gross receipts in the previous year exceed fifteen lakh rupees. In order to reduce the compliance burden on small businesses and on professionals, it is proposed to increase the threshold limit of total sales, turnover or gross receipts, specified under section 44AB for getting accounts audited, from sixty lakh rupees to one crore rupees in the case of persons carrying on business and from fifteen lakh rupees to twenty five lakh rupees in the case of persons carrying on profession.
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II. It is also proposed that for the purposes of presumptive taxation under section 44AD, the threshold limit of total turnover or gross receipts would be increased from sixty lakh rupees to one crore rupees. These amendments will take effect from 1st April, 2013 and will, accordingly, apply to the assessment year 2013-14 and subsequent assessment years.

Senior Citizens not having Business Income Exempt From Advance tax payment
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Exemption for Senior Citizens from payment of advance tax

Under the existing provisions of Income-tax Act, every assessee is required to pay advance tax if the tax liability for the previous year exceeds ten thousand rupees. In case of senior citizens who have passive income of the nature of interest, rent, etc., the requirement of payment of advance tax results in raising compliance burden. In order to reduce the compliance burden of such senior citizens, it is proposed that a resident senior citizen, not having any income chargeable under the head Profits and gains of business or profession, shall not be liable to pay advance tax and such senior citizen shall be allowed to discharge his tax liability (other than TDS) by payment of self assessment tax. This amendment will take effect from the 1st April, 2012. Accordingly, the aforesaid senior citizen would not be required to pay advance tax for the financial year 2012-13 and subsequent financial years.

Budget 2012 : TDS on transfer of certain immovable properties (other than agricultural land)
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Tax Deduction at Source (TDS) on transfer of certain immovable properties (other than agricultural land)
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Under the existing provisions of the Income-tax Act, tax is required to be deducted at source on certain specified payments made to residents by way of salary, interest, commission, brokerage, professional services, etc. On transfer of immovable property by a non-resident, tax is required to be deducted at source by the transferee. However, there is no such requirement on transfer of immovable property by a resident except in the case of compulsory acquisition of certain immovable properties. In order to collect tax at the earliest point of time and also to have a reporting mechanism of transactions in the real estate sector, it is proposed to insert a new provision to provide that every transferee, at the time of making payment or crediting any sum by way of consideration for transfer of immovable property (other than agricultural land), shall deduct tax, at the rate of 1% of such sum, if the consideration paid or payable for the transfer of such property exceeds (a) fifty lakh rupees in case such property is situated in a specified urban agglomeration; or (b) twenty lakh rupees in case such property is situated in any other area. It is further proposed to provide that where the consideration paid or payable for the transfer of such property is less than the value adopted or assessed or assessable by any authority of a State Government for the purposes of payment of stamp duty, the value so adopted or assessed or assessable shall be deemed as consideration paid or payable for the transfer of such immovable property. For better compliance, it is also proposed to provide that a registering officer appointed under the Indian Registration Act, 1908 (Registrar) shall not register the transfer of any immovable property where taxes are required to be deducted under this provision unless the transferee furnishes proof of deduction and payment of TDS. For reducing the compliance burden on the transferee, it is also proposed that a simple one page challan for payment of TDS would be prescribed containing details (including PAN) of transferor and transferee and also certain details of the property. The transferee would not be required to obtain any Tax Deduction and Collection Account Number (TAN) or to furnish any TDS statement as this would

be mostly a one time transaction. The transferor would get credit of TDS like any other pre-paid taxes on the basis of information furnished by the transferee in the challan of payment of TDS. This amendment will take effect from 1st October, 2012.

Budget 2012 Tax rates for Individual, HUF, Senior Citizen, Female, AOP, Firms, Company for F.Y. 2012-13
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RATES OF INCOME-TAX
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I. Rates of income-tax in respect of income liable to tax for the assessment year 2012-13. In respect of income of all categories of assessees liable to tax for the assessment year 2012-13, the rates of income-tax have been specified in Part I of the First Schedule to the Bill. These are the same as those laid down in Part III of the First Schedule to the Finance Act, 2011, for the purposes of computation of advance tax, deduction of tax at source from Salaries and charging of tax payable in certain cases.
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(1) Surcharge on income-tax Surcharge shall be levied in respect of income liable to tax for the assessment year 2012-13, in the following cases: (a) in the case of a domestic company having total income exceeding one crore rupees, the amount of income-tax computed shall be increased by a surcharge for the purposes of the Union calculated at the rate of five per cent of such income tax.
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(b) in the case of a company, other than a domestic company, having total income exceeding one crore rupees, the amount of income-tax computed shall be increased by a surcharge for the purposes of the Union calculated at the rate of two per cent. of such income tax. However, marginal relief shall be allowed in all these cases to ensure that the additional amount of income-tax payable, including surcharge, on the excess of income over one crore rupees is limited to the amount by which the income is more than one crore rupees. Also, in the case of every company having total income chargeable to tax under section 115JB of the Income Tax Act, 1961 (hereinafter referred to as Incometax Act) and where such income exceeds one crore rupees, surcharge at the rates mentioned above shall be levied and marginal relief shall also be provided.
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(2) Education Cess For assessment year 2012-13, additional surcharge called the Education Cess on income-tax and Secondary and Higher Education Cess on income-tax shall continue to be levied at the rate of two per cent. and one per cent., respectively,

on the amount of tax computed, inclusive of surcharge, in all cases. No marginal relief shall be available in respect of such Cess. II. Rates for deduction of income-tax at source during the financial year 2012-13 from certain incomes other than Salaries. The rates for deduction of income-tax at source during the financial year 2012-13 from certain incomes other than Salaries have been specified in Part II of the First Schedule to the Bill. The rates for all the categories of persons will remain the same as those specified in Part II of the First Schedule to the Finance Act, 2011, for the purposes of deduction of income-tax at source during the financial year 2011-12, except that in case of certain interest payments made to a nonresidents by a specified Indian company engaged in prescribed business of infrastructure development, the rates for deduction have been now provided in the proposed new section 194LC.
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(1) Surcharge The amount of tax so deducted, in the case of a company other than a domestic company, shall be increased by a surcharge at the rate of two per cent. of such tax, where the income or the aggregate of such incomes paid or likely to be paid and subject to the deduction exceeds one crore rupees. No surcharge will be levied on deductions in other cases. (2) Education Cess Education Cess on income-tax and Secondary and Higher Education Cess on income-tax shall continue to be levied at the rate of two per cent. and one per cent. respectively, of income tax including surcharge wherever applicable, in the cases of persons not resident in India including companies other than domestic company. III. Rates for deduction of income-tax at source from Salaries, computation of advance tax and charging of income-tax in special cases during the financial year 2012-13. The rates for deduction of income-tax at source from Salaries during the financial year 2012-13 and also for computation of advance tax payable during the said year in the case of all categories of assessees have been specified in Part III of the First Schedule to the Bill. These rates are also applicable for charging income-tax during the financial year 2012-13 on current incomes in cases where accelerated assessments have to be made , for instance, provisional assessment of shipping profits arising in India to nonresidents, assessment of persons leaving India for good during the financial

year, assessment of persons who are likely to transfer property to avoid tax, assessment of bodies formed for a short duration, etc. The salient features of the rates specified in the said Part III are indicated in the following paragraphs A. Individual, Hindu undivided family, association of persons, body of individuals, artificial juridical person
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Paragraph A of Part-III of First Schedule to the Bill provides following rates of income-tax:(i) The rates of income-tax in the case of every individual (other than those mentioned in (ii) and (iii) below) or Hindu undivided family or every association of persons or body of individuals , whether incorporated or not, or every artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2 of the Income-tax Act (not being a case to which any other Paragraph of Part III applies) are as under : Upto Rs. 2,00,000 - Nil. Rs. 2,00,001 to Rs. 5,00,000 10 per cent. Rs. 5,00,001 to Rs. 10,00,000 20 per cent. Above Rs. 10,00,000 - 30 per cent. (ii) In the case of every individual, being a resident in India, who is of the age of sixty years or more but less than eighty years at any time during the previous year,
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Upto Rs. 2,50,000 - Nil. Rs. 2,50,001 to Rs. 5,00,000 10 per cent. Rs. 5,00,001 to Rs.10,00,000 - 20 per cent. Above Rs. 10,00,000 - 30 per cent.

(iii) in the case of every individual, being a resident in India, who is of the age of eighty years or more at anytime during the previous year, U

Upto Rs. 5,00,000 - Nil. Rs. 5,00,001 to Rs. 10,00,000 - 20 per cent. Above Rs. 10,00,000 - 30 per cent. No surcharge shall be levied in the cases of persons covered under paragraph-A of part-III of the First Schedule.

B. Co-operative Societies In the case of co-operative societies, the rates of income-tax have been specified in Paragraph B of Part III of the First Schedule to the Bill. These rates will continue to be the same as those specified for assessment year 2012-13. No surcharge will be levied. C. Firms In the case of firms, the rate of income-tax has been specified in Paragraph C of Part III of the First Schedule to the Bill. This rate will continue to be the same as that specified for assessment year 2012-13. No surcharge shall be levied. D. Local authorities
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The rate of income-tax in the case of every local authority is specified in Paragraph D of Part III of the First Schedule to the Bill. This rate will continue to be the same as that specified for the assessment year 2012-13. No surcharge will be levied. E. Companies The rates of income-tax in the case of companies are specified in Paragraph E of Part III of the First Schedule to the Bill. These rates are the same as those specified for the assessment year 2012-13. The existing surcharge of five per cent in case of a domestic company shall continue to be levied. In case of companies other than domestic companies, the existing surcharge of two per cent. shall continue to be levied.

However, the total amount payable as income-tax and surcharge on total income exceeding one crore rupees shall not exceed the total amount payable as income-tax on a total income of one crore rupees by more than the amount of income that exceeds one crore rupees. The existing surcharge of five per cent. in all other cases (including sections 115JB, 115-O, 115R, etc.) shall continue to be levied. For financial year 2012-13, additional surcharge called the Education Cess on income-tax and Secondary and Higher Education Cess on incometax shall continue to be levied at the rate of two per cent. and one per cent. respectively, on the amount of tax computed, inclusive of surcharge (wherever applicable), in all cases. No marginal relief shall be available in respect of such Cess. [Clause 2]

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Income Tax exemption limit raised to Rs 2 lakh

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Exemption Limit for Individual Taxpayers Raised to Rs. 2 Lakh Upper Limit of 20 Per Cent Tax Slab Raised to Rs. 10 Lakh Deduction up to Rs. 10,000 Proposed for Savings Bank Interest Senior Citizens not Having Income from Business Exempted from Payment of Advance Tax
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The exemption limit for the general category of individual taxpayers has been enhanced to Rs. 2,00,000 from Rs. 1,80,000 in the General Budget 2012-13, presented by the Union Finance Minister Shri Pranab Mukherjee in the LokSabha here today. This measure will provide tax relief up to Rs. 2,000 to every taxpayer in this category. The Finance Minister, Shri Mukherjee introduced the DTC (Direct Taxes Code) rates for personal income tax, marking progress in the direction of movement towards DTC and GST (Goods and Services Tax). It has also been proposed to raise the upper limit of 20 per cent tax slab from Rs. 8 lakh to Rs. 10 lakh. The proposed personal income tax slabs are: Income uptoRs. 2 lakh Income above Rs. 2 lakh and uptoRs. 5 lakh Income above Rs. 5 lakh and upto Rs.10 lakh Income above Rs. 10 lakh Nil 10 per cent 20 per cent 30 per cent

In another relief to the individual taxpayers, a deduction of up to Rs. 10,000 has been proposed for interest from savings bank accounts. This would help a large number of small taxpayers with salary incomes up to Rs. 5 lakh and interest from savings bank accounts up to Rs. 10,000 as they would not be required to file income tax returns. It has also been proposed to allow deduction of Rs. 5,000 for preventive health check up. For senior citizens not having income from business, it has been proposed to exempt them from payment of advance tax.

Finance Minister Speech in Parliament Direct Taxes

With this reminder, let me now turn to the tax proposals.

136. Last year, I had set the compass for movement towards the DTC in Direct Taxes and GST in Indirect Taxes. My tax proposals for fiscal year 2012-13 mark further progress in that direction. Direct Taxes I shall now deal with direct taxes. 137. Last year I provided relief to individual taxpayers by enhancing the exemption limit as a move towards DTC rates. Although DTC will not be effective from this year, I propose to introduce the DTC rates for personal income tax. I propose to enhance the exemption limit for the general category of individual taxpayers from `1,80,000 to `2,00,000. This measure will provide tax relief upto `2,000 to every taxpayer of this category. I also propose to raise the upper limit of the 20 per cent tax slab from `8 lakh to `10 lakh. The proposed personal income tax slabs are: Income upto `2 lakh Income above `2 lakh and upto `5 lakh Income above `5 lakh and upto `10 lakh Income above `10 lakh Nil 10 per cent 20 per cent 30 per cent

These changes will provide substantial relief to taxpayers. 138. I propose to allow individual taxpayers, a deduction of upto `10,000 for interest from savings bank accounts. This would help a large number of small taxpayers with salary incomes upto `5 lakh and interest from savings bank accounts up to ` 10,000, as they would not be required to file income tax returns. 139. Within the existing limit for deduction allowed for health insurance, I propose to allow a deduction of upto `5,000 for preventive health check-up. 140. Senior citizens who do not have any income from business are proposed to be exempted from the payment of advance tax. This will reduce their compliance burden. 141. In the case of corporates, I am not proposing any change in the tax rates. However, I propose certain measures to allow corporates to access lower cost funds and to promote higher level of investments in several sectors.

142. In order to provide low cost funds to some stressed infrastructure sectors, the rate of withholding tax on interest payments on external commercial borrowings is proposed to be reduced from 20 per cent to 5 per cent for three years. These sectors are: power; airlines; roads and bridges; ports and shipyards; affordable housing; fertilizer; and dams

143. The restriction on Venture Capital Funds to invest only in nine specified sectors is proposed to be removed. It is further proposed to remove the cascading effect of Dividend Distribution Tax (DDT) in a multi-tier corporate structure. I also propose to continue to allow repatriation of dividends from foreign subsidiaries of Indian companies to India at a lower tax rate of 15 per cent as against the tax rate of 30 per cent for one more year i.e. upto March 31, 2013. 144. Investment linked deduction of capital expenditure incurred in the following businesses is proposed to be provided at the enhanced rate of 150 per cent, as against the current rate of 100 per cent. Cold chain facility Warehouses for storage of food grains Hospitals Fertilisers Affordable housing

145. The following new sectors are proposed to be added for the purposes of investment linked deduction: bee keeping and production of honey and beeswax container freight station and inland container depots

warehousing for storage of sugar

146. To promote investment in research and development, it is proposed to extend the weighted deduction of 200 per cent for R&D expenditure in an in-house facility beyond March 31, 2012 for a further period of five years. 147. I also propose to provide weighted deduction of 150 per cent on expenditure incurred for agri-extension services in order to facilitate growth in the agriculture sector. 148. For the power sector, besides access to low cost funds as outlined above, I also propose extension of the sunset date by one year for power sector undertakings so that they can be set up on or before March 31, 2013 for claiming 100 per cent deduction of profits for 10 years. Additional depreciation of 20 per cent in the initial year is proposed to be extended to new assets acquired by power generation companies. 149. For SMEs, the turnover limit for compulsory tax audit of accounts as well as for presumptive taxation is proposed to be raised from `60 lakh to ` 1 crore. 150. In order to augment funds for SMEs, I propose to exempt capital gains tax on sale of a residential property, if the sale consideration is used for subscription in equity of a manufacturing SME company for purchase of new plant and machinery. 151. Considering the shortage of skilled manpower in the manufacturing sector and to generate employment, I propose to provide weighted deduction at the rate of 150 per cent of expenditure incurred on skill development in manufacturing sector in accordance with specified guidelines. 152. In order to reduce transaction costs in the capital markets, I propose reduction in Securities Transaction Tax (STT) by 20 per cent (from 0.125 per cent to 0.1 per cent) on cash delivery transactions. 153. In order to moderate the outgo on profit linked deductions, I propose to extend the levy of Alternate Minimum Tax (AMT) on all persons other than companies, claiming profit linked deductions. 154. I propose to introduce a General Anti Avoidance Rule (GAAR) in order to counter aggressive tax avoidance schemes, while ensuring that it is used only in appropriate cases, by enabling a review by a GAAR panel. 155. I propose a series of measures to deter the generation and use of unaccounted money. To this end, I propose Introduction of compulsory reporting requirement in case of assets held abroad.

 Allowing for reopening of assessment upto 16 years in relation to assets held abroad. Tax collection at source on purchase in cash of bullion or jewellery in excess of ` 2 lakh. Tax deduction at source on transfer of immovable property (other than agricultural land) above a specified threshold. Tax collection at source on trading in coal, lignite and iron ore.

Increasing the onus of proof on closely held companies for funds received from shareholders as well as taxing share premium in excess of fair market value. Taxation of unexplained money, credits, investments, expenditures etc., at the highest rate of 30 per cent irrespective of the slab of income. 156. My proposals on Direct Taxes are estimated to result in a net revenue loss of ` 4500 crore for the year

Finance Minister Speech in Parliament Service Tax

158. At the end of June this year, this tax will attain adulthood by completing 18 years. It is therefore time to shift gears and accelerate ahead. However, service tax needs to confront two important challenges to sustain the journey. These are: The share of services in taxes remains far below its potential. There is a need to widen the tax base and strengthen its enforcement; Service Tax law is complex and sometimes avoidably different from Central Excise. We need to bring the two as close as possible in the light of our eventual goal of transition to GST. I have attempted to address both these issues this year. 159. Last year, I had initiated a public debate on the desirability of moving towards taxation of services based on a negative list. In the debate that continued for the better part of the year, we received overwhelming support for this new concept. It has been perceived both as sound economics and prudent fiscal management. 160. Thus, I propose to tax all services except those in the negative list. The list comprises 17 heads and has been carefully drawn up, keeping in view the federal nature of our polity, the best international practices and our socio-economic requirements. 161. The important inclusions in the negative list comprise all services provided by the government or local authorities, except a few specified services where they compete with private sector. The list also includes pre-school and school education, recognised education at higher levels and approved vocational education, renting of residential dwellings, entertainment and amusement services and a large part of public transportation including inland waterways, urban railways and metered cabs. 162. Agriculture and animal husbandry enjoy a very important place in our lives. Practically all services required for cultivation, breeding, production, processing or marketing up to the stage the produce is sold in the primary markets are covered by the list. 163. In addition to the negative list, there is a list of exemptions which include health care, services provided by charities, religious persons, sportspersons, performing artists in folk and classical arts, individual advocates providing services to non-business entities, independent journalists, and services by way of animal care or car parking. 164. To take financial services to the door steps in rural areas, I have also exempted the services of business facilitators and correspondents to banks and insurance companies. 165. Construction services relating to specified infrastructure, canals, irrigation works, post-harvest infrastructure, residential dwelling, and low-cost mass housing up to an area

of 60 sq. mtr. under the Scheme of Affordable Housing in Partnership are also included in the exemptions. To make the life of those who already own an apartment a little easier, I propose to raise the exemption for the monthly charges payable by a member to a housing society from ` 3,000 to `5,000. 166. The Year 2012 marks the beginning of the centenary year of Indian cinema. Despite the change in titles from Dada Saheb Phalkes Raja Harishchandra to Ra. One in recent times, the industry has played a pivotal role in unifying our country in the wake of her considerable diversity. To add to their spirit of celebration, I propose to exempt the industry from service tax on copyrights relating to recording of cinematographic films. 167. Movement towards the negative list will result in reducing nearly 290 definitions and descriptions in the Act to 54, and the exemptions from the existing 88 to 10, of course merging some of the existing exemptions into a revised notification. In terms of number of pages, the law will be shorter by nearly 40 per cent. 168. As a measure of harmonisation between Central Excise and Service Tax, a number of alignments have been made. These include a common simplified registration form and a common return for Central Excise and Service Tax, to be named EST-1. This common return will comprise only one page, which will be a significant reduction from the 15 pages of the two returns at present. 169. Revision Application Authority and Settlement Commission are being introduced in Service Tax to help resolve disputes with far greater ease. 170. Cascading of taxes has been significantly reduced by permitting utilisation of input tax credits in a number of services such as catering, restaurants, hotel accommodation, pandal and shamiana and transport sectors. 171. Place of Supply Rules, that will determine the location where a service shall be deemed to be provided, are being placed in public domain for stakeholders comments and shall be notified when the negative list is put into effect. These rules will also provide a possible backdrop to initiate an informed debate to assess all the issues that may arise in the taxation of inter-state services for the eventual launch of GST. 172. I propose to set up a Study Team to examine the possibility of a common tax code for service tax and central excise which could be adopted to harmonise the two legislations as much as possible at the right time. 173. While the problems faced by exporters of goods with respect to taxes on input services was addressed earlier this year, disbursement of taxes that go into the export of services has been an irritant for long. I now announce a new scheme that will simplify refunds without resorting to voluminous documentation or verification. As an added incentive, such refunds will also be admissible for taxes on taxable services that have been exempted.

174. Rules pertaining to the Point of Taxation are also being rationalised, providing greater clarity and removing the irritants. Cenvat credits in a number of areas are being restored. There are a number of other proposals both for the facilitation of business and to check malpractices. I do not wish to take the valuable time of this House for discussing all these proposals. 175. You will notice that most of these measures are guided by the need to move towards a system that is simple, equitable and progressive but are unlikely to make the exchequer richer in any significant way. Looking at our vast commitments and to maintain a healthy fiscal situation, I propose to raise the service tax rate from 10 per cent to 12 per cent, with consequential changes in rates for services that have individual tax rates. 176. My proposals from service tax are expected to yield an additional revenue of ` 18,660 crore. Keeping in mind that the share of services in GDP is 59 per cent, you would agree that the proposed increase is not too harsh