snk budget analysis 2013
TRANSCRIPT
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CONTENT
1 HIGHLIGHTS
A. INCOME TAX .... 01-12
B. SERVICE TAX..... 13-15
C. CENTRAL EXCISE .. 16-19
D. CUSTOMS ... 20-21
2 ANALYSIS OF BUDGET, 2013
A. INCOME TAX . 22-48
B. SERVICE TAX .. 49-55
3 MAJORSECTORIAL IMPACTS.. 56-60
4
ECONOMIC SURVEY HIGHLIGHTS ..61-63
5 KEY FEATURES OF BUDGET, 2013-2014.. 64-74
6 MICRO ECONOMIC VIEW 75
7 BUDGET AT GLANCE 76-79
8
GRAPH SHOWING SOURCES AND APPLICATION OF
RUPEE 81
9 STATEMENT OF REVENUE FOREGONE 82
10 ANALYSIS OF TAX AND NON-TAX REVENUE RECEIPTS 83
11 TRENDS IN EXPENDITURE .. 84
12 DEBT POSITION OF THE GOVERNMENT OF INDIA 85
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H I G H L I G H T S - I N C O M E T A X FINANCE BILL, 2013
Change in Basic Tax Rates :
Basic exemption l imit for super senior citizen, senior citizen and
others continues to be same at Rs. 5,00,000/-, 2,50,000/- and
2,00,000/- respectively.
However, tax rebate of Rs. 2,000/- or tax payable, whichever is less,
wil l be given to the individuals having total income upto Rs.
5,00,000/-. Consequently any individual having income upto Rs.
2,20,000/- wil l not be required to pay any tax.
There is no change in tax rate of company, fi rm, AOP, BOI, Co-
operative society, local authority and artif icial juridical person
except surcharge.
Change in Surcharge :
Part iculars Ex ist ing
Rate
Proposed
Rate
Individual/HUF/AOP/BOI/Co-operative society/Fi rm / Local authori ty/Art i fic ial jur idical person
- Having total income exceeding Rs. 1 crore Ni l 10%Domest ic Company
- Having total income exceeding Rs. 1 crore butless than 10 crore
5% 5%
- Having total income exceeding Rs. 10 crore 5% 10%
Foreign Company
- Having total income exceeding Rs. 1 crore butless than 10 crore
2% 2%
- Having total income exceeding Rs. 10 crore 2% 5%
The above rates of surcharge wil l also be applicable for MAT, AMT,
DDT & IDT provis ions.
Applicability of Surcharge on TDS provisions :
Part iculars Proposed
Rate
Non Resident Other than Company
- Having total income exceeding Rs. 1 crore 10%
Foreign Company
- Having total income exceeding Rs.1 Crore but less than 10
Crores
2%
- Having total income exceeding Rs. 10 crore 5%
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Education Cess:
No change in 2% Education Cess and 1% Secondary and Higher
Education Cess.
Definitions:
Agricultural Income and Agricultural Land [Section 2(1A)(c)(ii)(B)
and Section 2(14)]
I t is proposed to amend the definition of capital asset so as to
include agricultural land s i tuated in any area -
- within two ki lometers from the local l imits of any municipality or
cantonment board and which has a population of more than ten
thousand but not exceeding one lakh; or
- within s ix ki lometers from the local l imits of any municipality or
cantonment board and which has a population of more than one
lakh but not exceeding ten lakh; or
- within eight ki lometers from the local l imits of any municipality or
cantonment board and which has a population of more than ten
lakh,
and accordingly, i f the same is transferred then provis ions of capital
gain would be attracted. Similarly, income derived from any building
on or in the immediate vicinity of the above mentioned land wil l not be
considered as agricultural income.
(w.e.f. A.Y.2014-2015)
Exemptions :
Life Insurance Policy [Section 10(10D)]
Any sum including the sum allocated by way of bonus received
under an insurance policy issued on or after 01.04.2013 for the
insurance on the l i fe of any person who is -
a person with disabil ity or a person with severe disabil ity as
referred to in section 80U, or
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suffering from disease or ai lment as specified in the rules made
under section 80DDB,
shall be exempt if the premium payable for any of the years during
the term of the policy does not exceed 15% (earl ier 10%) of the
actual capital sum assured.
(w.e.f. A.Y.2014-2015)
Keyman Insurance Policy [(Section 10(10D)]
Any keyman insurance policy which has been assigned to a person
during its term with or without consideration shall be taxable in the
hands of assignee at the time of its maturity.
(w.e.f. A.Y.2014-2015)
Income of securitization trust from the activity of securitization
[(Section 10(23DA)]
Any income of securitization trust from the activity of securitization is
exempt from tax.
(w.e.f. A.Y.2014-2015)
Income from depositary of Investor Protection Fund [(Section
10(23ED)]
Any income by way of contributions received from a depository of
Investor Protection Fund set up in accordance with the regulations
prescribed by SEBI wil l not be included while computing the total
income of the fund.
(w.e.f. A.Y.2014-2015)
Definition of Venture Capital company, Venture Capital fund and
Venture capital undertaking [(Proposed Explanation 1 to clause
Section 10(23FB)]
New definition has been provided for Venture Capital
Company/Venture Capital Fund/Venture Capital Undertaking.
(w.e.f. A.Y.2014-2015)
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Income to shareholder on account of Buyback of shares [(Section
10(34A)]
Any income aris ing to an assessee being a shareholder on account
of buyback of shares of a company not being l isted on recognized
stock exchange is exempt from tax.
(w.e.f. A.Y.2014-2015)
Income by way of distributed income by any person from the
Securitization Trust [(Section10(35A)]
Any income of the investor received by way of distr ibuted income
from a securitization trust is exempt from tax.
(w.e.f. A.Y.2014-2015)
Income of National Financial Holdings Company Limited
[(Section10(49)]
Any income of National Financial Holdings Company Limited, being
a company set up by the Central Government is exempt from tax.
(w.e.f. A.Y.2014-2015)
Business Income:
Deduction for investment in new plant & machinery (Section 32AC)
Incentive proposed in the form of deduction to a company is as
fol lows:
Assessee
el igible
for
deduction
Business Condit ions Minimum
Investment
in new
asset
Incentive/ Deduction
A.Y.2014-
15
A.Y.2015-16
Company Manufacture
of an art icle
or th ing
Acquires and
instal l s new
assets after 31-03-13 but
before
01-04-15
Above Rs.
100 crore
15% of the
actual
cost of thenew assets
acquired
15% of the
actual cost of
new assetsacquired from
01-04-13 to 31-
03-15 as
reduced bydeduct ion
claimed under
th is sect ion in
A.Y.2014-15
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I f the company transfers the new asset within a period of 5 years
from the date of its instal lation, the amount of deduction claimed
under this section shall be deemed to be the income of the previous
year in which such new asset is transferred under the head Profits
and Gains of Business or Profession.
However this restriction shall not apply in case of amalgamation or
de-mergers.
(w.e.f. A.Y.2014-2015)
Amount eligible as deduction as bad debts in case of banks (Section
36)
I t is proposed to al low deduction in respect of bad debts actually
written off in excess of the credit balance in the provis ion of bad
and doubtful debts without any distinction between provis ion for
bad and doubtful debts provided on rural or other advances.
(w.e.f. A.Y.2014-2015)
Amount not allowed as deduction in case of State Government
Undertakings (Section 40)
I t is proposed to provide that any amount paid by way of royalty,
l icense fee, service fee, privi lege fee, service charge etc or any
amount appropriated, by the State Government undertaking to the
State Government, shall not be allowed as deduction from business
income of the State Government undertaking.
(w.e.f. A.Y.2014-2015)
Special Provision for full value of consideration for transfer of asset
other than capital assets in certain cases (Section 43CA)
The provis ions of Section 50C is applicable to immovable property
held as capital asset and not to immovable property held as stock in
trade. It is proposed u/s 43CA to make provis ions of Section 50C
applicable on transfer of immovable property held as stock in trade.
The stamp duty value to be adopted for the same wil l be the stamp
duty value as on the date of agreement for transfer and not as on
the date of registration of such transfer provided consideration
received before or on the date of agreement of transfer is by way of
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any mode other than cash.
(w.e.f. A.Y.2014-2015)
Income from other sources
Deemed Income in the hands of purchaser (individual & HUF) ofimmovable property (Section 56)
Type of
property
Consideration Value of taxable Income u/s 56 in
the hands of purchaser ( Indiv idual &
HUF)
Immovable
Property
Without Considerat ion
(and stamp duty
value of property
exceeds Rs. 50,000/-)
The stamp duty value of such
property.
(Stamp Duty Value to be adopted is
the value as on the date ofagreement for t ransfer and not as
on the date of registrat ion of such
transfer provided consideration
received before or on the date of
agreement of transfer is by way of
any mode other than cash).
Immovable
Property
For a Considerat ion
less than the stamp
duty value of the
property by an
amount exceeding Rs
50,000/-
Stamp duty value of such property
as exceeds such considerat ion.
(Stamp Duty Value to be adopted is
the value as on the date of
agreement for t ransfer and not ason the date of registrat ion of such
transfer provided consideration
received before or on the date of
agreement of transfer is by way of
any mode other than cash.)
(w.e.f. A.Y.2014-2015)
Deduction u/s. 80C
The amount of deduction for payment of Life Insurance premium other
than deferred annuity plan shall be al lowable upto 15% (presently 10%)
of the actual sum assured on policies issued after 01-04-2013; in case of
fol lowing persons
- a person with disabil ity or a person with severe disabil ity as referred
to in section 80U,
- suffering from disease or ai lment as specified in the rules made
under section 80DDB.
(w.e.f. A.Y.2014-2015)
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Rajiv Gandhi Equity Saving Scheme u/s. 80CCG
The incentive available for investment in capital markets by the new
retail investors under RGESS shall also be available in case of
investment in l isted units of an equity oriented fund. Further, the said
deduction shall be available for 3 consecutive assessment years as
against the present provis ions of 1 year.
The deduction earl ier al lowable in case of gross total income upto Rs
10 lakhs is proposed to amended to be allowed in case of gross total
income upto Rs 12 lakhs.
(w.e.f. A.Y.2014-2015)
Amendment of Section 80D in respect of Health Insurance premia
Any payment or contribution made by the assessee to Health schemes
as may be notif ied by the Central Government shall also be available
u/s 80D, subject to overall monetary l imit.
(w.e.f. A.Y.2014-2015)
Deduction in respect of interest on loan taken for residential house
property
A new section 80EE has been proposed to be introduced to provide
that in computing the total income of an individual, interest payable
on loan taken by him from any financial institution for the purpose of
acquisit ion of a residential house property shall be deducted subject to
fol lowing conditions
- The deduction shall not exceed one lakh rupees,
- In a case where the interest payable for the previous year is less
than one lakh rupees, the balance amount shall be al lowed in the
assessment year beginning on 1st Apri l , 2015,
- The loan should be sanctioned by the financial institution during the
period beginning on 1st Apri l , 2013 and ending on 31st March, 2014,
- The amount of loan sanctioned for acquisit ion of the residential
house property does not exceed twenty-five lakh rupees,
- The value of the residential house property does not exceed fortylakh rupees,
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- The assessee does not own any residential house property on the
date of sanction of the loan.
- Where a deduction under this section is al lowed for any assessment
year, in respect of interest on housing loan, deduction shall not be
allowed in respect of such interest under any other provis ions of the
Income-tax Act for the same or any other assessment year.
Presently deduction in respect of interest on home loan is al lowable
u/s. 24(b) subject to maximum of Rs. 1,50,000/-. However, the condition
of fi rst house or value of the house or amount of loan is not prescribed
under this section.
(w.e.f. A.Y.2014-2015)
Deductions for contribution made to National Childrens Fund
Deduction u/s. 80G of donation made to National Childrens Fund shall
be al lowed at 100% as against present deduction of 50 %.
(w.e.f. A.Y.2014-2015)
Contribution made to political parties or an electoral trust
Contribution made to polit ical parties or an electoral trust by any
assessee, except a local authority and every artif icial juridical person
shall not be allowable as deduction u/s. 80GGB / 80GGC if the
contribution is made in cash. (w.e.f. A.Y.2014-2015)
Deduction under Section 80IA to power sector
With a view to provide further time to the undertakings to commence
the el igible activity, sunset date under section 80IA for the power
sector to avail the tax incentive, is proposed to be extended by a
further period of one year i .e. up to 31st March, 2014.
Deduction under Section 80JJAA
The tax incentive under section 80JJAA equal to thirty per cent of
additional wages paid to the new regular workmen shall hence forth be
allowable only on employment of persons employed in factories and
not to other employees. It is also proposed that the deduction 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. (w.e.f. A.Y.2014-2015)
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Tax Credit U/s 87A
With a view to provide tax rel ief to the res ident individual tax payers
having income above Rs. 2,00,000 but not exceeding Rs. 5,00,000/- shall
get a tax rel ief of Rs. 2000/-
The rebate shall be equal to the amount of income-tax payable on the
total income for any assessment year or an amount of two thousand
rupees, whichever is less.
(w.e.f. A.Y.2014-2015)
Clarif icatory & Other Amendments
I t is clarif ied that submission of a tax residency certif icate (TRC) is
necessary but submission of the TRC would not be a sufficient
condition for claiming benefits under the agreements referred to in
sections 90 and 90A.
(w.e.f. A.Y.2014-2015)
I t is proposed to amend section 115A to provide that income earned
by non-resident taxpayer by way of royalty and fees for technical
services be increased from 10% to 25%.
(w.e.f. A.Y. 2014-2015)
Beneficial provis ions of section 115BBD of Income-tax Act providing
for taxation of gross dividends @ 15% received by an Indian
company from a specified foreign company (in which it has
shareholding of 26% or more) if such dividend is included in the total
income of the Indian company, is proposed to be extended for one
more year, i .e. the same would be applicable for A.Y. 2014-15 also.
I t is proposed to amend section 115-O in order to remove cascading
effect whereby the tax on dividends received from the foreign
subsidiary (i .e. the foreign company in which domestic company
holds more than 50% of equity share capital) is payable under
section 115BBD by the holding domestic company then, any
dividend distr ibuted by the holding company in the same year, to
the extent of such dividends, shall not be subject to Dividend
Distribution Tax under section 115-O of the Income-tax Act.
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(w.e.f. 1s t June, 2013)
I t is proposed to insert a new section 115QA to provide that any
distr ibution of income to a shareholder by a domestic unl isted
company on buy-back of shares shall be chargeable to additional
income-tax @20% on the distr ibuted income, i .e. consideration paid
by the company on buy-back of shares as reduced by the amount
received by the company for issuance of such shares. Such receipt
would be exempt in the hands of shareholders.
(w.e.f. 1s t June, 2013)
I t is proposed to amend section 115R to provide uniform taxation for
al l types of funds, other than equity oriented fund, by increasing
rate of tax on distr ibuted income from 12.5% to 25% in al l cases
where distr ibution is made to an individual or a HUF. Further, in
respect of income distr ibuted by a Mutual Fund under an
Infrastructure Debt Fund (IDF) scheme to a non-resident Investor is
proposed to be taxed @ 5%.
(w.e.f. 1s t June, 2013)
I t is proposed to insert Chapter XII-EA consisting of sections 115TA,
115TB and 115TC to provide a special tax regime in respect of
taxation of income & distr ibution of income of securitisation entities,
set up as a trust from the activity of securit ization.
(w.e.f. 1s t June, 2013)
Rate of tax of Securities Transaction Tax (STT) is proposed to be
reduced and new provis ions related to Commodities Transaction Tax
(CTT) is proposed to be inserted on sale of commodity derivatives,
other than agricultural commodities, traded in recognised
associations.
(w.e.f. A.Y. 2014-2015)
General Anti Avoidance Rules
Provis ions of GAAR in Chapter X-A and Section 144BA is proposed to be
modified replacing old provis ions.
(w.e.f. 1s t
Apri l 2016)
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Application of seized assets under section 132B
The assets seized during the course of search or requis it ion pursuant to
search may be adjusted against the existing l iabil ity which has been
due on account of assessments pursuant to search but not against the
advance tax l iabil ity payable by the assessee.
(w.e.f. 1 s t June, 2013)
Defective return u/s. 139(9)
Where the return is f i led without payment of self assessment tax along
with the interest, the return shall be treated as a defective return by
assessing officer.
(w.e.f. 1 s t June, 2013)
Direction for special audit u/s. 142 (2A) and exclusion of time incomputing the period of l imitation for completion of assessments and
reassessments
The reasons for which the Assessing Officer may direct special audit
of accounts of the assessee is elaborately explained by the words
the nature and complexity of the accounts, volume of the
accounts, doubts about the correctness of the accounts, multipl icity
of transactions in the accounts or special ised nature of business
activity of the assessee.
Where the Assessing Officer directs for special audit u/s. 142(2A),
and whereas such direction is challenged before a court, ending
with the date on which the order setting aside such direction is
received by the Commissioner, shall be excluded in computing the
period of l imitation for the purposes of section 153.
(w.e.f. 1st June, 2013)
Clarif ication of the phrase tax due for the purposes of recovery incertain cases
Section 167C and Section 179 provides that where the tax due from LLP
or a private company as the case may be is i rrecoverable from such
LLP or company, then the partner/ director shall be jointly and severally
l iable for payment of such tax.
An explanation has been inserted to widen the definition of tax due
so as to cover penalty, interest and other sum payable under the Act.
(w.e.f. 1st June, 2013)
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Provisions pertaining to TDS:
Under proposed new section 194IA, Tax at the rate of 1% to be
deducted by the purchaser of immovable property (other than
agricultural land) from the payment made to sel ler where
consideration is Rs. 50 lacs or more. (w.e.f. 1st June, 2013).
Proposed to amend section 194LC to provide that where a non-
resident uti l ize the money deposited in designated bank account for
subscription to a long-term infrastructure bond issue of an Indian
company, then, the borrowing by the company shall be deemed to
be in foreign currency & concessional rate of 5% TDS would be
applicable. (w.e.f. 1 s t June, 2013).
Penalty for non-fil l ing Annual Information Return (AIR):
I t is proposed to provide in u/s. 271FA that where a person fai ls to
furnish the return within the period specified in the notice u/s
285BA(5), shall pay a sum of Rs. 500/- instead of Rs. 100/- for every
day during which the fai lure continues by way of penalty from the
date of expiry of period mentioned in the notice
(w.e.f. 1st Apri l , 2014).
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H I G H L I G H T S -S E R V I C E T A X All changes wil l come in to effect on enactment of Finance Bi l l , 2013
unless stated otherwise.
No change in Rate of Service Tax
Following amendments are proposed to be made in the Finance Act,
1994:
(a) Proposed to change the definition of Approved Vocational
Education Course [Sec. 65B(11)] -
- to include courses run by an industrial training institute/ centre
affi l iated to State Council along with National Council for
Vocational Training
- to delete clause (i i i) dealing with courses run by an institute
affi l iated to the National Ski l l Development Corporation.
(b) Proposed to expand the definition of process amounting to
manufacture or production of goods [Sec. 65B(40)] to include
processes under the Medicinal and Toi let Preparations (Excise
Duties) Act, 1955
(c) Proposed to delete the word Seed u/s. 66D(d)(i) to al low the
benefit of non applicabil ity of service tax to al l other testing inrelation to agriculture or agricultural produce
(d) Proposed to insert new section 73(2A) that If a demand of Service
Tax made under extended period of l imitation is found to be
unsustainable by the Appellate authority/Tribunal/Court on
grounds of l imitation the tax l iabil ity for eighteen months (normal
period of l imitation) may be computed
(e) Proposed to substitute section 77(1)(a) to restrict the maximum
penalty to Rs. 10,000/- for fai lure to obtain registration.
(f) Proposed to insert new section 78A in order to impose penalty on
directors & officials of company for specified offences in cases of
wil l ful actions.
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(g) Proposed to amend section 86(5) to empower Appellate Tribunal
to extend operation of stay for a period of 185 days where the
delay is not attributable to the assessee. The stay order, however,
wil l stand vacated at the end of 365 days from the date of the
order.
(h) Proposed to amend section 89 and to insert new section 90 to
prescribe revised punishments for offences, make certain
offences cognizable/non cognizable & bailable.
(i ) Proposed to insert new section 91 to provide power to
commissioner to arrest a person for specified offences.
(j ) Proposed to insert new section 99 to provide retrospectiveexemption to the Indian Railways on the service tax leviable on
various taxable services provided.
Following amendments are notif ied:
(a) Abatement for construction of a complex, building, civi l
structures etc. is being reduced from the existing 75% to 70% for
construction other than residential unit having a carpet area up
to 2,000 sq ft or where the amount charged is less than Rs 1 cr.
(Effective rate of ST is 3.708%)
(w.e.f 1 s t March, 2013)
(vide noti f ication no. 2/2013 ST)
(b) Review of Exemptions
The fol lowing exemptions are being withdrawn:
- Services provided by an educational institution by way of
auxi l iary educational services or renting of immovable
property.
- Temporary transfer or permitting the use or enjoyment of a
copyright relating to cinematographic fi lms other than
exhibition of cinematograph fi lms in a cinema hall or a cinema
theatre.
- Services by way of vehicle parking to general public.
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- Services provided to Government, a local authority or a
governmental authority, by way of repair or maintenance of
aircraft.
The fol lowing exemptions are streamlined / rationalized:
- Exemption l imit of Rs. 25 lacs for charitable organizations,
providing service towards any other object of general public
uti l i ty would not be avai lable.
- Service tax wil l be leviable 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 by
omitting condition regarding l icense to serve l iquor.
- Exemption to transport of goods by road and rai l/vessel is
rationalized.
(w.e.f 1 s t Apri l , 2013)
(vide noti f ication no. 3/2013 ST)
Advance Ruling [u/s. 96A(b)(i i i)]
Scope of advance rul ing is being extended to cover resident public
l imited companies.
(w.e.f 1 s t March, 2013)(vide noti f ication no. 4/2013 ST)
Service Tax Voluntary Compliance encouragement Scheme, 2013
(VCES):
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
(i i) immunity from prosecution,
to stop fi lers, non-fi lers or non-registrants or service providers (who have
not disclosed true l iabil ity in the returns fi led by them during the period
from October 2007 to December 2012) who pay the "tax dues".
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H I G H L I G H T S - C E N T R A L E X C I S E
Following are the highlights of important amendments made in the Central
Excise Act, 1944 through the Finance Bi l l , 2013 and Central Excise
Notifications.
All changes come into effect immediately unless otherwise
specified .
No change in the basic rate of excise duty.
First Schedule is being amended to substitute the existing tariff rates for
various lengths of cigarettes and cigars of heading 2402 with the
enhanced rates.
Excise duty is being increase on-
- Sport Uti l i t ies Vehicles except SUVs used as taxis from 27% to 30%.
- Compounded levy on stainless steel "Patta Patti" from Rs 30,000 per
machine per month to Rs 40,000 per machine per month.
- mobile phones with retai l sale price exceeding Rs 2000/- from 1% to
6%
- cigarettes except cigarettes of length not exceeding 65 mm, cigars
and cigari l los has been increased to about 18%.
- marble ti les and slabs from Rs 30 per sq. mtr to Rs 60 per sq. mtr.
Excise duty is being reduced on-
- truck chass is (8706 00 42) from 14% to 13%.
Ful l exemption from excise duty has been provided in the fol lowing
cases:
- Hand made carpets and carpets and other texti le floor coverings of
coir or jute, whether or not handmade
- Intermediate goods manufactured and consumed captively by
exempted units under Area Based Exemption Scheme in Himachal
Pradesh and Uttarakhand.
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- tapioca sago (sabudana) and tapioca starch manufactured and
consumed captively in the manufacture of tapioca sago.
- henna powder or paste, not mixed with any other ingredient.
- ships and other vessels. Henceforth, no CVD on these ships and
vessels when imported.
Excise duty of 4% is being levied on si lver manufactured from zinc/lead
smelting.
I t is being clarif ied that the item "tr immed or untrimmed sheets or
circles of copper intended for use in the manufacture of handicrafts or
utensi ls" presently leviable to excise duty at Rs. 3500 per MT includes
copper and copper al loys 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 wil l be zero duty at the fibre stage and, in the
case of spun yarn of man made fibres, there wil l be a duty of 12% at
the fibre stage. The 'Zero excise duty route' wil l be in addition to the
CENVAT route now available.
MRP based assessment with abatement of 35% from MRP applied to
Branded Ayurvedic medicaments and medicaments of Unani, Siddha,
Homeopathic or bio-chemic system.
Section 9 pertaining to punishment with term of imprisonment
extending to seven years along with fine has been l iberalised to apply
in cases where the evasion of duty leviable exceeds Rs 50 lakhs as
against the present l imit of Rs 30 lakhs.
Section 9A is being amended to propose that where the duty l iabil ity
exceeds Rs. 50 lakh, the offence for evasion of such duty shall be
cognizable and non-bailable and punishable under clause (b) or
clause (bbbb) of sub-section (1) of section 9 by way of imprisonment
upto seven years along with fine.
Section 11 is being amended so as to provide for recovery of money
due to the Government from any person other than from whom money
is due after giving a proper notice, if that other person holds money for
or on account of the first person.
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The person to whom such notice has been issued is bound to comply
with the same and in case of non-compliance; he shall face all the
consequences under this Act.
Section 11A is being amended to provide that subsequent to issue of
notice under this section if the officer provides a statement containing
details of duty not paid, short levied or erroneously refunded, the same
shall be deemed to be a service of notice.
Reference to sub-section (1) in section 11DDA is being omitted.
A person who is forwarded to a police office under section 20 may be
admitted for bail before magistrate only to offence which is non-
cognizable.
Section 21 is being amended so as to make the provis ions regarding
release of arrested person on bail or personal bond applicable only to
offence which is non-cognizable.
Definition of activity in Section 23A pertaining to advance rul ing is
proposed to be substituted by the fol lowing definition:
Activity means production or manufacture of goods and includes any
new business of production or manufacture proposed to be undertaken
by the existing producer or manufacturer, as the case may be;
Earl ier, definition was restricted to Activity means production or
manufacture of goods.
Section 23C pertaining to questions which may be referred for advance
rul ing has been proposed to be amended to include admissibi l i ty of
credit of service tax paid or deemed to have been paid on input
service or excise duty.
Section 35C is proposed to be amended to entitle the assessee to
make an application to the Tribunal for extending the stay for a further
period of 185 days where the delay in disposing the appeal is not
attributable to any reason on the part of the assessee and on expiry of
such further extension of stay if the appeal is being not disposed off the
stay shall stand vacated. These provis ions are made at par with the
provis ion under the Income Tax Act.
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Section 37C is being amended to specify additional modes of delivery
of specified documents i .e. by speed post with proof of delivery or
through courier approved by the Central Board of Excise & Customs.
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H I G H L I G H T S - C U S T O M S No change in the basic rate of Custom duty.
BCD increased on certain products such as:
Description of Goods Present Rate Proposed Rate
Cars/ Motor vehicles ( i r respective ofengine capacity) with CIF value > USD40000
75% 100%
Luxury Motor cycle with engine capacity of
800 cc or more60% 75%
Old cars 100% 125%
Raw Si lk 5% 15%
Set Top boxes 5% 10%
Steam coal Ni l 2%
BCD reduced on certain products such as:
Description of Goods Present Rate Proposed Rate
Specif ied text i le machinery and partsthereof
7.5% 5%
Specif ied machinery for use in theleather indust ry or footwear indust ry
7.5% 5%
Pre-forms of precious and semi-precious
stones
10% 2%
Bituminous coal 5% 2%
Export duty introduced on the fol lowing goods:
Description of Goods Effective Rate
Raw sugar, white or ref ined sugar Ni l
Bauxite 10%
I lmenite :
- Processed
- Unprocessed
10%
5%
Baggage Rules
Limit on duty free baggage allowance of Jewellery enhanced
Description of Goods Present
l imit
Proposed
l imit
E ither
An Indian passenger, who has been res id ingabroad for over one year
Or
A person who is t ransfer r ing his res idence to
India,
Gent leman passenger Rs 10,000 Rs 50,000Lady passenger Rs 20,000 Rs 1,00,000
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The CVD on steam coal is being raised from 1% to 2% while CVD on
bituminous coal is being reduced from 6 % to 2 %.
Exemption from BCD on l ithium ion automotive battery for manufacture
of l ithium ion battery packs for supply to manufacturers of hybrid and
electric vehicles.
Clarif ication has been provided that LCD and LED TV Panels and LCD
and LED TV Modules are one and the same thing for the purpose of
exemption under notif ication No 12/2012-Customs (S. No. 432)
The validity period of exemption granted to identif ied parts of hybrid
and electric vehicles is being extended by two more years up to 31st
March, 2015.
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A n a l y s i s - I N C O M E T A X Following is the analysis of the important proposals as recommended in
the Income Tax Act, 1961 by the F inance Bi l l , 2013.
CHANGE IN BASIC TAX RATES :
Basic exemption l imit for super senior citizen, senior citizen and
others continues to be same at Rs. 5,00,000/-, 2,50,000/- and
2,00,000/- respectively.
However, tax rebate of Rs. 2,000/- or tax payable, whichever is less,
wil l be given to the individuals having total income upto Rs.
5,00,000/-.
Consequently individual having income upto 2,20,000/- wil l not
required to pay any tax.
Impact of introduction of tax rebate on tax savings of Individuals
Part iculars Amount ( in Rs.)
Total Income 2,20,000 5,00,000 5,00,001
Current Tax (excluding cess) 2,000 30,000 30,001
Proposed Tax (excluding cess) Ni l 28,000 30,001
Savings in Tax 2,000 2,000 Ni l
There is no change in tax rate of company, fi rm, AOP, BOI, co-
operative society, local authority and artif icial juridical person
except surcharge.
CHANGE IN SURCHARGE :
Fol lowing table mention the change in rates of surcharges.
Part iculars Ex ist ing
Rate
Proposed
Rate
Indiv idual/HUF/AOP/BOI/ Co-operat ive
society/Fi rm/Local authori ty/Art i f ic ial jur idical
person
- Having total income exceeding Rs. 1 crore Ni l 10%
Domest ic Company
- Having total income exceeding Rs. 1 crore but less
than 10 crore
5% 5%
- Having total income exceeding Rs. 10 crore 5% 10%
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Part iculars Ex ist ing
Rate
Proposed
Rate
Foreign Company
- Having total income exceeding Rs. 1 crore but lessthan 10 crore
2% 2%
- Having total income exceeding Rs. 10 crore 2% 5%
Impact of introduction of New Surcharge on companies tax rate is as
under:
Part iculars Ex ist ing
Rate
Proposed
Rate
Domest ic Company
- Having total income not exceeding Rs. 1 crore 30.90% 30.90%
- Having total income exceeding Rs. 1 crore but
less than 10 crore
32.45% 32.45%
- Having total income exceeding Rs. 10 crore 32.45% 33.99%
Foreign Company
- Having total income not exceeding Rs. 1 crore 41.20% 41.20%
- Having total income exceeding Rs. 1 crore butless than 10 crore
42.02% 42.02%
- Having total income exceeding Rs. 10 crore 42.02% 43.26%
The proposed surcharge rates are also applicable for MAT, AMT, DDT
& IDT provis ions.
Impact of introduction of New Surcharge on companies effective
rate of MAT is as fol lows:
Part iculars Ex ist ing
Rate
Proposed
Rate
Domest ic Company
- Having book prof i t not exceeding Rs. 1 crore 19.05% 19.05%
- Having book prof i t exceeding Rs. 1 crore but lessthan 10 crore
20.01% 20.01%
- Having book prof i t exceeding Rs. 10 crore 20.01% 20.96%
Foreign Company
- Having book prof i t not exceeding Rs. 1 crore 19.05% 19.05%
- Having book prof i t exceeding Rs. 1 crore but less
than 10 crore
19.44% 19.44%
- Having book prof i t exceeding Rs. 10 crore 19.44% 20.01%
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DEFINITIONS:
Agricultural Income and Agricultural Land [Section 2(1A)(c)(ii)(B)
and Section 2(14)]
I t is proposed to amend caluse (14) of Section 2 so as to amend the
definition of capital asset to include therein agricultural land
situated in any area -
- within two ki lometers from the local l imits of any municipality or
cantonment board and which has a population of more than ten
thousand but not exceeding one lakh; or
- within s ix ki lometers from the local l imits of any municipality or
cantonment board and which has a population of more than one
lakh but not exceeding ten lakh; or
- within eight ki lometers from the local l imits of any municipality or
cantonment board and which has a population of more than ten
lakh,
and accordingly, i f the same is transferred then provis ions of capital
gain would be attracted.
Similarly, It is proposed to amend item (B) of clause (i i) of proviso to
sub clause (c) of clause(1A) of Section 2 so as to provide income
derived from any building on or in the immediate vicinity of the
above mentioned land wil l not be considered as agricultural
income.
Consequential amendment has been made in the definition of urban
land in The Wealth Tax Act, 1957.
(w.e.f. A.Y.2014-2015)
EXEMPTIONS:
Life Insurance Policy [Section 10(10D)]
I t is proposed to insert new proviso in sub clause (d) of clause (10D)
so as to provide that any sum including the sum allocated by way of
bonus received under an insurance policy issued on or after01.04.2013 for the insurance on the l i fe of any person who is
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- a person with disabil ity or a person with severe disabil ity as
referred to in section 80U, or
- suffering from disease or ai lment as specified in the rules made
under section 80DDB,
shall be exempt if the premium payable for any of the years during
the term of the policy does not exceed 15% (earl ier 10%) of the
actual capital sum assured.
Consequential amendment has been made in Section 80C in respect
of deduction of premium paid on insurance policy not exceeding
15% of the capital sum assured in case of the person suffering from
disabil ity/disease mention in Section 80U and 80DDB respectively.
The above proposed amendment is applicable in respect of policy
issued on or after 01.04.2013 for insurance of the l i fe of a person
referred to herein above.
(w.e.f. A.Y.2014-2015)
Keyman Insurance Policy [(Section 10(10D)]
I t is proposed to amend the Explanation to Sec. 10(10D) so as to
provide that any keyman insurance policy which has been assigned
to a person during its term with or without consideration shall be
taxable in the hands of assignee at the time of its maturity
The effect of the proposed change is explained herein below under
different s ituations through an example
i . X Ltd. takes keyman insurance policy in the name of its
keyman Mr. Y. The premium is paid by X Ltd. and the maturity
amount is also received by X Ltd.
Part iculars Tax Impact before
Proposed
Amendment
Tax Impact after
Proposed Amendment
Sum received
including bonus on
matur ity by X Ltd.
Taxable in the
hands of X Ltd.
Taxable in the hands
of X Ltd.
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i i . X Ltd. takes keyman insurance policy in the name of its
keyman Mr. Y. The premium is paid by X Ltd. Thereafter, the
policy is assigned in the mid-term to Mr. Y without any
consideration. Thereafter, Mr. Y pays the premium and on
maturity of the policy, the matured amount is received by Mr.
Y.
Part iculars Tax Impact before
Proposed
Amendment
Tax Impact after
Proposed Amendment
**Sur render Value at
the t ime ofass ignment
**Taxable in the
hands of Mr. Y asperquis i te.
**Taxable in the hands
of Mr. Y as perquis i te.
Sum received
including bonus on
matur ity by Mr. Y
Not taxable in the
hands of Mr. Y.
Taxable in the hands of
Mr. Y (taxable amount
= matur i ty amount Sur render Value at the
t ime of ass ignment)
** There i s no specif ic provis ion in the Income Tax Act for taxabi l i ty on the
sur render value of the pol icy at the t ime of assignment and hence the
same remains a grey area.
i i i . X Ltd. takes keyman insurance policy in the name of its
keyman Mr. Y. The premium is paid by X Ltd. Thereafter, the
policy is assigned in the mid term to Mr. Y with consideration(Surrender Value). Thereafter, Mr. Y pays the premium and on
maturity of the policy, the matured amount is received by Mr.
Y.
Part iculars Tax Impact before
Proposed
Amendment
Tax Impact after
Proposed Amendment
**Sur render Value at
the t ime ofass ignment
**Taxable in thehands of X Ltd.
**Taxable in the handsof X Ltd.
Sum received
including bonus onmatur ity by Mr. Y
Not taxable in the
hands of Mr. Y.
Taxable in the hands
of Mr. Y (taxable
amount = matur i ty
amount Sur render
Value paid by Mr. Y to
X Ltd. at the t ime ofass ignment)
** There i s no specif ic provis ion in the Income Tax Act for taxabi l i ty on the
sur render value of the pol icy at the t ime of assignment and hence the
same remains a grey area.
(w.e.f. A.Y.2014-2015)
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Income of securitization trust from the activity of securitization
[(Section 10(23DA)]
I t is proposed to insert new clause (23DA) to provide that any
income of securitization trust from the activity of securitization is
exempt from tax.
Further a new Chapter XII-EA has been inserted for providing special
tax regime, sal ient features of which are as fol lows:
(i) In case of securitization 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 securitization of such trusts wil l be
exempt from taxation.
(i i) The securitization trust wil l be l iable to pay additional income-
tax on income distr ibuted to its investors on the l ine of
distr ibution tax levied in the case of mutual funds. The
additional income-tax shall be levied @ 25% in case of
distr ibution being made to investors who are individual and HUF
and @ 30% in other cases. No additional income tax shall be
payable if the income distr ibuted by the securitization trust isreceived by a person who is exempt from tax under the Act.
(i i i) Consequent to the levy of distr ibution tax, the distr ibuted
income received by the investor wil l be exempt from tax.
(iv) The securitisation trust wil l be l iable to pay interest @ 1 % for
every month or part of the month for default in payment of
additional income-tax ( Section 115TB).
(v ) Any person responsible for making payment of the income
distributed by the securitisation trust and the securitisation
trustdoes not pay the tax, then he or it shall be deemed to be
an assessee in default in respect of amount of tax payable and
all the provis ions of the Act relating to recovery and collection
of taxes shall apply (Section 115TC).
(w.e.f. A.Y.2014-2015)
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Income from depositary of Investor Protection Fund [(Section
10(23ED)]
Under the existing provis ions, section 10(23EA) provides that income
by way of contributions from a recognized stock exchange received
by a Investor Protection Fund set up by the recognized stock
exchange shall be exempt from taxation .
On similar l ines, it is proposed that income, by way of contribution
from a depository, of the Investor Protection Fund set up by the
depository in accordance with the regulations prescribed by SEBI wil l
not be included while computing the total income subject to same
conditions as are applicable in respect of exemption to an Investor
Protection Fund set up by recognized stock exchanges.
However, where any amount standing to the credit of the fund and
not charged to income-tax during any previous year is shared wholly
or partly with a depository, the amount so shared shall be deemed
to be the income of the previous year in which such amount is
shared.
(w.e.f. A.Y.2014-2015)
Definition of Venture Capital company, Venture Capital fund and
Venture capital undertaking [(Proposed Explanation 1 to clause
Section 10(23FB)]
I t is proposed to substitute explanation to clause (23FB) so as to
provide new definition for Venture Capital Company/Venture
Capital Fund/Venture Capital Undertaking.
The said amendment is made to give consequential effect post
replacement of SEBI (Venture Capital Fund) Regulations, 1996 (VCF
regulations) by The SEBI(Alternative Investment Funds) Regulations,
2012 (AIF regulations) from 21st May, 2012.
In order to provide benefit of pass through to s imilar venture capital
funds as are registered under new regulations and subject to same
conditions of investment restrictions in the context of investment in a
venture capital undertaking , it is proposed to amend section
10(23FB) to provide that
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(i ) The existing VCFs and VCCs (i .e. which have been registered
before 21/05/2012) and are regulated by the VCF regulations,
as they stood before repeal by AIF regulations, would continue
to avai l pass through status as currently avai lable.
(i i) In the context of AIF regulations, the Venture Capital
Company shall be defined as a company and Venture capital
fund shall be defined as a fund set up as a trust, which has
been granted a certif icate of registration as Venture Capital
Fund being a sub-category of Category I Alternative
Investment Fund and satisfies the fol lowing conditions:-
(a) That at least two-thirds of its investible funds are invested
in unl isted equity shares or equity l inked instruments of
venture capital undertaking.
(b) No investment has been made by such AIFs in a VCU
which is an associate company.
(c) Units of a trust set up as AIF or shares of a company set up
as AIF, are not l isted on a recognized stock exchange.
(i i i) In the context of AIF regulations, the Venture Capital
Undertaking shall be defined as it is defined in the Alternative
Investment Funds Regulations.
(w.e.f. A.Y.2014-2015)
Income to shareholder on account of Buyback of shares [(Section
10(34A)]
It is proposed to insert new clause (34A) so as to provide for
exemption in respect of any income aris ing to an assessee being
shareholder on account of buy back of shares (not being l isted on a
recognized stock exchange) by the company.
This amendment is consequential to insertion of new Chapter XII-DA
relating to special provis ions for tax on distr ibuted income of
domestic company for buy back of shares.
(w.e.f. A.Y.2014-2015)
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Income by way of distributed income by any person from the
Securitization Trust [(Section10(35A)]
I t is proposed to insert new clause (35A) in Section 10 so as to
provide for exemption in respect of any income received by investor
by way of distr ibuted income from a securitization trust.
This amendment is consequential to insertion of new Chapter XII-EA
for providing special tax regime for trust carrying on the activity of
securitization.
(w.e.f. A.Y.2014-2015)
Income of National Financial Holdings Company Limited
[(Section10(49)]
I t is proposed to insert new clause (49) in Section 10 to grant
exemption to National Financial Holdings Company Limited in
respect of its income accruing, aris ing or received on or before
March 31, 2014.
The said amendment is proposed to provide exemption on l ines of
SUUTI (The Specified Undertaking of Unit Trust of India) to National
Financial Holdings Company Limited incorporated on June 07, 2012post wounding up of SUUTI (The Specified Undertaking of Unit Trust of
India) which was created vide Unit Trust of India (transfer of
Undertaking and Repeal Act) Act, 2002 as successor of Unit Trust Of
India.
(w.e.f. A.Y.2014-2015)
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BUSINESS INCOME:
Deduction for investment in new plant & machinery (Section 32AC)
Incentive proposed in the form of deduction to a company is as
fol lows:
Assessee
el igible
for
deduction
Business Condit ions Minimum
Investment
in new
asset
Incentive/ Deduction
A.Y.2014-
15
A.Y.2015-16
Company Manufacture
of an art icle
or th ing
Acquires and
instal l s new
assets after
31-03-13 but
before
01-04-15(Meaning of
new asset
given below)
Above Rs.
100 crore
15% of the
actual
cost of the
new assets
acquired
15% of the
actual cost of
new assets
acquired from
01-04-13 to 31-
03-15 asreduced bydeduction
claimed under
th is sect ion in
A.Y.2014-15
The phrase new asset has been defined as new plant or machinery
but does not include
- any plant or machinery which before its instal lation by the
assessee was used either within or outside India by any other
person;
- any plant or machinery instal led in any office premises or any
residential accommodation, including accommodation in the
nature of a guest house;
- any office appliances including computers or computer software;
- any vehicle;
- ship or aircraft; or
- any plant or machinery, the whole of the actual cost of which is
al lowed as deduction (whether by way of depreciation or
otherwise) in computing the income chargeable under the head
Profits and gains of business or profession of any previous year.
If the company transfers the new asset within a period of 5 years
from the date of its instal lation, the amount of deduction claimed
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under this section shall be deemed to be the income of the previous
year in which such new asset is transferred under the head Profits
and Gains of Business or Profession.
Further, where the new asset is sold or otherwise transferred in
connection with the amalgamation or demerger within a period of
five years from the date of its instal lation, the provis ions of this
section shall apply to the amalgamated company or the resulting
company, as the case may be, as they would have applied to the
amalgamating company or the demerged company.
The effect of the proposed change is explained herein below under
different s ituations through an example
(Rs. in crores)
Par t iculars S i tuat ion 1 S i tuat ion 2 S i tuat ion 3 S i tuat ion 4
A.Y.
2014-
15
A.Y.
2015-
16
A.Y.
2014-
15
A.Y.
2015-
16
A.Y.
2014-
15
A.Y.
2015-
16
A.Y.
2014-
15
A.Y.
2015-
16
Investment
in new
asset
99 11 110 - - - - 110 105 50
Deduct ion
u/s 32AC
@15% of
cost
- - 16.5 16.5 16.5 - - 16.5 15.75 23.25
Less :
Deduct ion
claimed in
ear l ier
year
- - - - - - 16.5 - - - - - - 15.75
Avai lable
Deduct ion
16.5 16.5 -- -- 16.5 15.75 7.5
(w.e.f. A.Y.2014-2015)
Amount eligible as deduction as bad debts in case of banks (Section
36)
I t is proposed to insert an Explanation 2 to clause (vi i) of sub section
(1) of Section 36 so as to al low deduction in respect of bad debts
actually written off in excess of the credit balance in the provis ion of
bad and doubtful debts without any distinction between provis ion
for bad and doubtful debts provided on rural or other adv ances.
(w.e.f. A.Y.2014-2015)
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Amount eligible as deduction of Commodities Transaction Tax
(Section 36)
I t is proposed to amend section 36 of the Income-tax Act so as to
provide that an amount equal to the Commodities Transaction Tax
paid by the assessee in respect of the taxable commodities
transactions entered into in the course of his business during the
previous year shall be al lowable as deduction, if the income aris ing
from such taxable commodities transactions is included in the
income computed under the head Profits and gains of business or
profession.
This amendment is consequential in l ine with levy of new tax called
Commodities Transaction Tax on taxable commodities transactions
entered into in a recognized association.
(w.e.f. A.Y.2014-2015)
Amount not allowed as deduction in case of State Government
Undertakings (Section 40)
I t is proposed to amend Section 40 so as to provide that any amount
paid by way of royalty, l icense fee, service fee, privi lege fee, servicecharge etc or any amount appropriated, by the State Government
undertaking to the State Government, shall not be allowed as
deduction from business income of the State Government
undertaking.
This amendment has been proposed to resolve disputes that have
arisen in respect of income-tax assessment of some State
Government undertakings as to whether any sum paid by way ofprivi lege fee, l icense fee, royalty, etc. levied or charged by the
State Government exclusively on its undertakings are deductible or
not for the purposes of computation of income of such undertakings.
(w.e.f. A.Y.2014-2015)
Special Provision for full value of consideration for transfer of asset
other than capital assets in certain cases (Section 43CA)
The provis ions of Section 50C is applicable to immovable property
held as capital asset and not to immovable property held as stock in
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trade. It is proposed u/s 43CA to make provis ions of Section 50C
applicable on transfer of immovable property held as stock in trade.
The stamp duty value to be adopted for the same wil l be the stamp
duty value as on the date of agreement for transfer and not as on
the date of registration of such transfer provided consideration
received before or on the date of agreement of transfer is by way of
any mode other than cash.
The effect of the proposed change is explained herein below under
different s ituations through an example
Si tuat ions Tax Impact before
Proposed Amendment
Tax Impact after
Proposed Amendment
I f the seller sel l s
immovable property
held as capital asset at
a considerat ion less
than the value as per
stamp duty author i t ies
Provis ions of Sect ion
50C is appl icable to
the sel ler .
The di f ference
between the stamp
duty value and the
sales considerat ion
ment ioned in sa le
deed is charged totax in the hands of
the sel ler under the
head Income f rom
capital gains.
Provis ions of Section
50C is appl icable to
the sel ler .
The di f ference
between the stamp
duty value and the
sales considerat ion
ment ioned in sa le
deed is charged to taxin the hands of the
seller under the head
Income from capital
gains .
I f the seller sel l s
immovable property
held as Stock in trade
at a considerat ion less
than the value as per stamp duty author i t ies
Not Taxable in the
hands of sel ler
Provis ions of proposed
new sect ion 43CA is
appl icable to the
sel ler .
The di f ference
between the stamp
duty value and the
sales considerat ion
ment ioned in sa le
deed is charged to tax
in the hands of the
seller under the head
Profits and gains of
business or profession .
(w.e.f. A.Y.2014-2015)
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INCOME FROM OTHER SOURCES:
Deemed Income in the hands of purchaser (being individual & HUF)
of immovable property (Section 56)
Type ofproperty Consideration Value of taxable Income u/s 56 in thehands of purchaser ( individual & HUF)
Immovable
Property
Without
Consideration (andstamp duty value of
property exceeds
Rs. 50,000/-)
The stamp duty value of such
property.
(Stamp Duty Value to be adopted is
the value as on the date of
agreement for transfer and not as on
the date of registrat ion of such
transfer provided consideration
received before or on the date of
agreement of transfer is by way of
any mode other than cash).
Immovable
Property
For a Consideration
less than the stamp
duty value of the
property by an
amount exceedingRs 50,000/-
Stamp duty value of such property as
exceeds such considerat ion.
(Stamp Duty Value to be adopted is
the value as on the date of
agreement for transfer and not as on
the date of registrat ion of such
transfer provided consideration
received before or on the date of
agreement of transfer is by way of
any mode other than cash.)
The effect of the proposed change is explained herein below under
different s ituations through an example
Si tuat ions Tax Impact before
Proposed
Amendment
Tax Impact after
Proposed Amendment
Immovable Propertypurchased without
considerat ion (stamp dutyvalue is Rs. 10 lacs)
Taxable Income inthe hands of
purchaser = Rs. 10lacs
Taxable Income in thehands of purchaser =
Rs. 10 lacs
Immovable Property
purchased for Rs. 5 lacs
(stamp duty value is Rs. 10
lacs)
Taxable Income in
the hands of
purchaser = Ni l
Taxable Income in the
hands of purchaser =
Rs. 5 lacs (stamp duty
Rs 10 lacs Purchase
Pr ice Rs 5 lacs)
(w.e.f. A.Y.2014-2015)
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TAX INCENTIVES AND RELIEFS :
Deduction u/s. 80C for l ife in surance premia, etc. :
The amount of deduction for payment of Life Insurance premium
other than deferred annuity plan shall be al lowable upto 15%
(presently 10%) of the actual sum assured on policies issued after 01-
04-2013; in case of fol lowing persons
- a person with disabil ity or a person with severe disabil ity as
referred to in section 80U,
- suffering from disease or ai lment as specified in the rules made
under section 80DDB.
(w.e.f. Assessment Year 2014-15)
Rajiv Gandhi Equity Saving Scheme u/s. 80CCG:
Rajiv Gandhi Equity Savings Scheme was introduced in last Budget,
wherein the deductions of 50% subject to maximum l imit of Rs
25,000/- was available for investment in equity shares of l isted
companies.
It is proposed to extend the deduction to investment in l isted units of
an equity oriented fund.
The deduction u/s 80CCG shall be available for 3 consecutive
assessment years as against the present provis ions of 1 year.
The deduction earl ier al lowable in case of gross total income upto
Rs 10 lakhs is proposed to amended to be allowed in case of gross
total income upto Rs 12 lakhs.
(w.e.f. A.Y.2014-2015)
Amendment of Section 80D in respect of Health Insurance premia:
The Central Government has introduced various health schemes
which were hitherto not covered under Section 80D. Hence, it is
proposed to cover any payment or contribution made by the
assessee to Health schemes as may be notif ied by the Central
Government u/s 80D, subject to overall monetary l imit.
(w.e.f. A.Y.2014-2015)
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Deduction in respect of interest on loan taken for residential house
property
At present, deduction U/s 24(b) on account of interest on home loan
upto maximum of Rs 1,50,000 /- p.a. is available under the head
Income from House Property.
As a boost to the housing industry, a new section 80EE has been
proposed to be introduced to provide that in computing the total
income of an individual, interest payable on loan taken by him from
any financial institution for the purpose of acquisit ion of a residential
house property shall be deducted subject to fol lowing conditions
- The deduction shall not exceed one lakh rupees,
- In a case where the interest payable for the previous year is less
than one lakh rupees, the balance amount shall be al lowed in
the assessment year beginning on 1st Apri l , 2015,
- The loan should be sanctioned by the financial institution during
the period beginning on 1st Apri l , 2013 and ending on 31st March,
2014,
- The amount of loan sanctioned for acquisit ion of the residential
house property does not exceed twenty-five lakh rupees,
- The value of the residential house property does not exceed forty
lakh rupees,
- The assessee does not own any residential house property on the
date of sanction of the loan.
- Where a deduction under this section is al lowed for any
assessment year, in respect of interest on housing loan, deduction
shall not be allowed in respect of such interest under any other
provis ions of the Income-tax Act for the same or any other
assessment year. However, the deduction under this section is in
addit ion to deduction u/s. 24(b) of the Act.
(w.e.f. A.Y.2014-2015)
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Deductions for contribution made to National Childrens Fund
Donation made to National Childrens Fund shall be entitled to
deduction u/s. 80G at 100% as against present deduction of 50%.
(w.e.f. A.Y.2014-2015)
Contribution made to political parties or an electoral trust
Contribution made to polit ical parties or an electoral trust by any
assessee, except a local authority or every artif icial juridical
person shall not be allowable as deduction u/s. 80GGB / 80GGC if
the contribution is made in cash.
(w.e.f. A.Y.2014-2015)
Deduction under Section 80IA to power sector
With a view to provide further time to the undertakings to
commence the el igible activity, sunset date under section 80IA
for the power sector to avail the tax incentive, is proposed to be
extended by a further period of one year i .e. up to 31st March,
2014.
(w.e.f. A.Y.2014-2015)
Deduction under Section 80JJAA
Presently, section 80JJAA provide for a deduction equal to thirty
per cent of additional wages paid to the new regular workmen
employed by an Indian company in its industrial undertaking
engaged in manufacture or production of art icle or thing.
The tax incentive was intended for employment of factory workers
in the manufacturing sector. In order to clarify the same, it is
proposed to amend the provis ions of section 80JJAA so as to
provide that the deduction shal l be avai lable to an Indian
Company for an amount equal to thirty per cent of additional
wages paid to the new regular workmen employed by the
assessee in such factory and not to other employees.
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I t 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.
(w.e.f. A.Y.2014-2015)
Tax Credit U/s 87A
With a view to provide tax rel ief to the resident individual tax
payers having income above Rs. 2,00,000/- but not exceeding Rs.
5,00,000/- rebate of tax is proposed to be allowed for a sum not
exceeding Rs. 2,000/-.
(w.e.f. A.Y.2014-2015)
TAXATION OF INCOME BY WAY OF ROYALTY OR FEES FOR TECHNICAL
SERVICES:
Majority of tax treaties al lows India to levy tax on gross amount of
royalty at rates ranging from 10% to 25%, whereas the tax rate as per
section 115A is 10%. In some cases, this has resulted in taxation at a
lower rate of 10% even if the treaty al lows the income to be taxed at a
higher rate.
In order to correct this anomaly, the tax rate in case of non-resident
taxpayer, in respect of income by way of royalty and fees for technical
services as provided under section 115A, is proposed to be increased
from 10% to 25% to any agreement entered after 31.03.1976, which is
taxable under section 115A.
(w.e.f. A.Y.2014-2015)
LOWER RATE OF TAX ON DIVIDENDS RECEIVED FROM FOREIGN
COMPANIES:
I t is proposed to amend section 115BBD which provides for taxation of
gross dividends @ 15% received by an Indian Company from a specified
foreign company in which it has a share holding of 26% or more for the
financial year 2013-2014 which was previous ly f inancial year 2012-2013.
(w.e.f. A.Y. 2014-15)
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REMOVAL OF CASCADING EFFECT OF TAX ON DIVIDENDS RECEIVED FROM
FOREIGN COMPANIES:
I t is proposed to amend section 115-O in order to remove cascading
effect whereby the tax on dividends received from the foreign
subsidiary (i .e. the foreign company in which domestic company holds
more than 50% of equity share capital) is payable under section 115BBD
by the holding domestic company then, any dividend distr ibuted by
the holding company in the same year, to the extent of such dividends,
shall not be subject to Dividend Distr ibution Tax under section 115-O of
the Income-tax Act.
(w.e.f. 1st June, 2013)
ADDITIONAL INCOME-TAX ON DISTRIBUTED INCOME BY COMPANY FOR
BUY-BACK OF UNLISTED SHARES :
I t is proposed to insert a new section 115QA to provide that any
distr ibution of income to a shareholder by a domestic unl isted
company on buy-back of shares shall be chargeable to additional
income-tax @ 20% on the distr ibuted income, i .e. consideration paid by
the company on buy-back of shares as reduced by the amount
received by the company for issuance of such shares. Such receipt
would be exempt in the hands of shareholders.
It is also proposed to insert a new section 115QB to provide levy of
interest @ 1% per month or part thereof, for fai lure of payment of tax
within the prescribe time l imit.
It is further proposed to insert a new section 115QC to provide that in
case of fai lure on payment of tax, the principal officer of the companyand the company shall be deemed to be an assessee in default and all
the provis ions of the Act relating to recovery and collection of taxes
shall apply accordingly.
(w.e.f. 1st June, 2013)
RATIONALISATION OF TAX ON DISTRIBUTED INCOME BY THE MUTUAL
FUNDS:
I t is proposed to amend section 115R to provide uniform taxation for al l
types of funds, other than equity oriented fund, by increasing rate of
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tax on distr ibuted income from 12.5% to 25% in al l cases where
distr ibution is made to an individual or a HUF. Further, in respect of
income distr ibuted by a Mutual Fund under an Infrastructure Debt Fund
(IDF) scheme to a non-resident Investor is proposed to be taxed @ 5%.
Infrastructure debt fund scheme shall have the same meaning as
assigned to it in clause (1) of regulation 49L of the Securities and
Exchange Board of India (Mutual Funds) Regulations, 1996 made under
the Securit ies and Exchange Board of India Act, 1992.
(w.e.f. 1st June, 2013)
REDUCTION IN THE RATE OF SECURITY TRANSACTION TAX (STT )
The proposed new rates of STT are as under :
(w.e.f. 1st June, 2013)
Nature of taxable securit ies transaction Payable
by
Exist ing
Rates %
Proposed
Rates %
Del ivery based purchase of units of an
equity
or iented fund entered into in a recognisedstock exchange
Purchaser 0.1 Ni l
Del ivery based sale of units of an equity
or iented fund entered into in a recognisedstock exchange
Sel ler 0.1 0.001
Sale of a futures in secur i t ies Sel ler 0.017 0.01
Sale of a unit of an equity or iented fund tothe mutual fund
Sel ler 0.25 0.001
INTRODUCTION OF COMMODITIES TRANSACTION TAX:
A new tax called Commodities Transaction Tax (CTT) is proposed to be
levied on taxable commodities transactions entered into in a
recognised association.
It is proposed to define taxable commodities transaction to mean a
transaction of sale of commodity derivatives in respect of commodities,
other than agricultural commodities, traded in recognised associations.
The proposed rates of CTT are as under :
Nature of taxable securit ies transaction Payable by Proposed
Rate %
Sale of commodity der ivat ive Sel ler 0.01
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The provis ions with regard to collection and recovery of CTT, furnishing
of returns, assessment procedure, power of assessing officer,
chargeabil ity of interest, levy of penalty, institution of prosecution,
fi l ing of appeal, power to the Central Government, etc. have also been
proposed to be provided by insertion of Clause 105 to 124 in Chapter
VII of the Finance Bi l l , 2013, which wil l come into force by way of
notif ication in the Official Gazette by the Central Government.
Further, it is proposed to insert clause (xvi) in section 36 to provide that
an amount equal to the CTT paid by the assessee in respect of the
taxable commodities transactions entered into in the course of his
business during the previous year shall be al lowable as deduction, if
the income aris ing from such taxable commodities transactions is
included in the income computed under the head Profits and gains of
business or profession. (w.e.f. A.Y. 2014-15)
TAX RESIDENCE CERTIFICATE (TRC) FOR CLAIMING RELIEF UNDER DTAA :
I t is clarif ied that submission of a tax residency certif icate (TRC) is
necessary but submission of the TRC would not be a sufficient condition
for claiming benefits under the agreements referred to in sections 90
and 90A. It is imperative to note that treaty benefit can be claimed
after satisfying two separate conditions namely residency and
beneficial ownership. TRC satisfies only residence criteria and not
criteria of beneficial ownership. Thus, introduction of this clarif ication
may lead to l it igation related to claim of beneficial ownership even
though TRC is submitted.
(w.r.e.f. A.Y. 2013-14)
GENERAL ANTI AVOIDANCE RULES (GAAR):
The Finance Bi l l proposes to replace provis ions of Chapter X-A and
section 144BA and is proposed to be made applicable from Apri l 1,
2016 as against the current date of Apri l 1, 2014.
Fol lowing amendments have been made in the existing GAAR
provis ions:
- An arrangement, the main purpose of which is to obtain a tax
benefit, would be considered as an impermissible avoidance
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arrangement. The current provis ion of section 96 providing that it
should be the main purpose or one of the main purposes has been
proposed to be amended accordingly.
- The factors l ike, period or time for which the arrangement had
existed; the fact of payment of taxes by the assessee; and the fact
that an exit route was provided by the arrangement, would be
relevant but not sufficient to determine whether the arrangement is
an impermissible avoidance arrangement. The current provis ions of
section 97 which provided that these factors would not be relevant
has been proposed to be amended accordingly.
- An arrangement shall also be deemed to be lacking commercial
substance, if it does not have a significant effect upon the business
risks, or net cash flows of any party to the arrangement apart from
any effect attributable to the tax benefit that would be obtained
but for the appl ication of Chapter X-A. The current provis ions as
contained in section 97 are proposed to be amended to provide
that an arrangement shall also be deemed to lack commercial
substance if the condition provided above is satisfied.
- The directions issued by the Approving Panel shall be binding on the
assessee as well as the income-tax authorities and no appeal
against such directions can be made under the provis ions of the
Act. The current provis ions of section 144BA providing that the
direction of the Approving Panel wil l be binding only on the
Assessing Officer have been proposed to be amended accordingly.
Consequential amendments in other sections relating to procedural
matters have also been proposed.
APPLICATION OF SEIZED ASSETS UNDER SECTION 132B :
The amount of existing l iabil ity of tax, interest or penalty under the
Income-tax Act, Wealth-tax Act, the Expenditure-tax Act, the Gift-tax
Act and the Interest-tax Act determined on completion of assessments
pursuant to search is al lowed to be adjusted against the assets seized
during the course of search.
The amendment is proposed to clarify that the existing l iabil ity does not
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include advance tax payable in accordance with the provis ions of Part
C of Chapter XVI I of the Act.
(w.e.f. 1 s t June, 2013)
DEFECTIVE RETURN u/s. 139(9) :Where the return is f i led without payment of self assessment tax or
interest thereon, the return shall be treated as a defective return by
assessing officer.
(w.e.f. 1 s t June, 2013)
DIRECTION FOR SPECIAL AUDIT U/S. 142 (2A) AND EXCLUSION OF TIME IN
COMPUTING THE PERIOD OF LIMITATION FOR COMPLETION OF
ASSESSMENTS AND REASSESSMENTS :
The reasons for which the Assessing Officer may direct special audit
of accounts of the assessee is elaborately explained by the words
the nature and complexity of the accounts, volume of the
accounts, doubts about the correctness of the accounts, multipl icity
of transactions in the accounts or special ised nature of business
activity of the assessee.
Following period shall be excluded in computing the period ofl imitation for the purposes of section 153 / 153B:
- where the decision of the Assessing Officer for special audit u/s.
142(2A) is challenged before a court, the period for which the
matter is pending before the court (sub-clause (i i i) substituted
w.e.f. 1 s t June, 2013))
- period commencing from the date on which a reference or fi rst of
the references for exchange of information is made by an
authority competent under an agreement referred to in section
90 or section 90A and ending with the date on which the
information requested is last received by the Commissioner or a
period of one year, whichever is less (sub-clause (vi i i) substituted
w.e.f. 1 s t June, 2013))
- period commencing from the date on which a reference for
declaration of an arrangement to be an impermissible avoidance
arrangement is received by the Commissioner under section
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144BA(1) and ending on the date on which a direction under
subsection (3) or sub-section (6) or an order under sub-section (5)
of the said section is received by the Assessing Officer (sub-
clause (ix) substituted (w.e.f. A.Y. 2016-17)
CLARIFICATION OF THE PHRASE TAX DUE FOR THE PURPOSES OF
RECOVERY IN CERTAIN CASES :
Section 167C and Section 179 provides that where the tax due from LLP
or a private company as the case may be is i rrecoverable from such
LLP or company, then the partner/ director shall be jointly and severally
l iable for payment of such tax. .
An explanation has been inserted to widen the definition of tax due
so as to cover penalty, interest and other sum payable under the Act.
(w.e.f. 1st June, 2013)
PROVISIONS PERTAINING TO TDS/TCS:
TDS on transfer of certain immovable properties other than
agricultural land:
Applicability
I t is proposed to insert new section 194-IA according to which -
- I f any immovable property [other than agricultural land as
defined in section 2(14)(i i i)];
- is transferred;
- by any person (other than the person referred to in section 194LA
related to compulsory acquisit ion);
- to a resident transferor;
- for a consideration of Rs. 50 lacs and above;
- then the transferee shall deduct tax at source @ 1% of the
consideration;
- at the time of credit of such sum to the account of the transferor
or at the time of payment of such sum in cash or by issue of a
cheque or draft or by any other mode, whichever is earl ier;
(w.e.f. 1st June, 2013)
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Scope of TDS u/s 194-LC extended :
In order to facil itate subscription by a non-resident in the long term
infrastructure bonds issued by an Indian company in India (rupee
denominated bond), it is proposed to amend section 194LC of the
Income-tax Act so as to provide that where a non-resident deposits
foreign currency in a designated bank account and such money as
converted in rupees is uti l ised for subscription to a long-term
infrastructure bond issue of an Indian company, then, for the
purpose of this section, the borrowing by the company shall be
deemed to be in foreign currency.
The benefit of reduced rate of tax would, therefore, be available to
such non-resident in respect of the interest income aris ing on such
subscription subject to other conditions provided in the section.
The designated bank account should be solely for the purpose of
deposit of money in foreign currency and such money is to be used,
after conversion, for subscription to a rupee denominated long-term
infrastructure bond issue of an Indian company.
(w.e.f. 1st June, 2013)
PENALTY FOR NON FILLING ANNUAL INFORMATION RETURN (AIR):
It is proposed to amend section 271FA to provide that if a person who is
required to furnish an AIR, as required under section 285BA(1), fai ls to
furnish such return on or before 31 s t August as prescribed in section
285BA(2), then income-tax authority may direct that such person shall
pay, by way of penalty, a sum of Rs. 100/- for every day during which
the fai lure continues.
It is further proposed to provide that where such person fai ls to furnish
the return within the period specified in the notice under section
285BA(5), he shall pay, by way of penalty, a sum of Rs. 500/- instead of
Rs. 100/- for every day during which the fai lure continues, starting from
the day immediately fol lowing the day on which the time specified in
such notice for furnishing the return expires.
(w.e.f. A.Y. 2014-15)
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WEALTH TAX
Definition of urban land substituted :
Definition of urban land in clause (b) of Explanation 1 of section
2(ea) of Wealth Tax Act is proposed to be substituted in l ine withdefinition of Agricultural Land as proposed in Section 2(14) of the
Income Tax Act.
urban land means land situate -
(i i) in any area which is comprised within the jurisdiction of a
municipality (whether known as a municipality, municipal
corporation, notif ied area committee, town area committee,
town committee, or by any other name) or a cantonment boardand which has a population of not less than ten thousand; or
( i i i) in any area within the distance, measured aerial ly,
- not being more than two ki lometres, from the local l imits of
any municipality or cantonment board referred to in sub-
clause (i) and which has a population of more than ten
thousand but not exceeding one lakh; or
- not being more than six ki lometres, from the local l imits of
any municipality or cantonment board referred to in sub-
clause (i) and which has a population of more than one lakh
but not exceeding ten lakh; or
- not being more than eight ki lometres, from the local l imits of
any municipality or cantonment board referred to in sub-
clause (i) and which has a population of more than ten lakh,
but does not include land on which construction of a building is
not permissible under any law for the time being in force in the
area in which such land is s ituated or the land occupied by any
building which has been constructed with the approval of the
appropriate authority or any unused land held by the assessee
for industrial purposes for a period of two years from the date of
its acquisit ion by him or any land held by the assessee as stock-
in-trade for a period of ten years from the date of its acquisit ion
by him. (w.e.f. A.Y. 2014-15)
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