Finance Bill 2011 Direct Tax Proposals Hyderabad Branch - ICAI 02

nd

March-2011

PVSS Prasad, FCA [email protected]

Page 1

Tax Slabs Individual, HUF, AOP and BOI

In Lakhs Up to 1.60

1.60 – 1.80

1.80 – 5.00

5.00-8.00

8.00-above Existing NIL 10% 10% 20% 30% Proposed NIL NIL 10% 20% 30%

Contd.

Page 2

Tax Slabs Individual, HUF, AOP and BOI Contd… The Age Limit for Sr Citizen has been reduced from 65 to 60 Yrs .

The Senior Citizen Class has been classified into 2 Categories.

- Age of 60 Yrs or more but less than 80 Yrs is Rs 2.50 lakhs - Age of Eighty years or more is Rs. 5.00 lacs For women the basic slab is up to Rs.1.90 lakhs

Contd.

Page 3

Corporate and firms Tax Rates

Surcharge reduced from 7.5% to 5 % for domestic companies. Surcharge for companies other than domestic coys reduced from 2.5 % to 2.0% No change in corporate & firm tax rates.

Contd.

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Section 2(15)-Charitable purpose

The current monetary limit in respect of Gross Receipts referred to in this section has been hiked to Rs.25 Lakhs from the existing Rs. 10 Lakhs. ( w.e.f 01.04.2012 ) and will accordingly apply in relation to the assessment year 2012-13 and subsequent years.

Contd.

Page 5

Exemption of certain perquisites of Chairmen and Members of UPSC – Sec.10

To Extend the existing benefit of exemption in respect of specific perquisites and allowances to both serving as well as retired chairmen & members of UPSC.

With Retrospective Effect from 01.04.2008 –to apply in relation to AY 2008-09 and subsequent Years.

Contd.

Page 6

Exemption of income of Notified Body or Authority or Trust or Board or commission

Insertion of new clause exempting income of Notified bodies constituted with an objective of regulating and administering an activity for the benefit of the General Public, provided – - it is not engaged in any commercial activity, and - is notified by the Central Government

Contd.

Page 7

Income of Infrastructure Debt Fund

Income of Notified Debt Funds shall be exempted from tax under Section 10.

Sec 115 A – provides that any income received by a non resident from such notified infrastructure debt fund shall be taxable at the rate of 5 % on the gross amount of such interest income.

Page 8

Provisions relating to Minimum Alternate Tax(MAT) and Dividend Distribution Tax (DDT) in case of Special Economic Zones ( SEZs)

The Exemptions under 80-IAB, & 115-O(6) relating to Special Economic Zones (SEZ) shall be withdrawn from 01.06.2011.

Similar Exemption Provision under Section 115JB (6) relating to Special Economic Zones (SEZ) shall be withdrawn from 01.04.2012 (A.Y 2012-13 and subsequent years).

Page 9

Amendment to Sec 35(2AA)- Weighted Deduction for Contribution made for Scientific Research Programme.

Weighted deduction proposed increased from 175% to 200% .

to be Amendment to take effect from 1 st April 2012 (A.Y 2012-13 and subsequent years).

Page 10

Investment linked deduction for specified business(Sec 35AD) Two New Businesses have been included under the definition of Specified Business – 1. Developing and building a Housing Project under a Scheme for affordable housing framed by Government.

2. Production of fertilizer in India.

Amendment to take effect from 01.04.2012

(A.Y 2012-13 and subsequent years).

Contd..

Page 11

Amendment to definition of Specified Business

The definition of Specified Business has been amended to remove the words NEW in respect of business of Hotels & Hospitals under Sec 35 AD (8)(c), thereby facilitating the Set Off of the profits of Such Business against the losses (under sec.73A), if any, of a new hospital or new hotel which begins operation after 01.04.2010.

Contd..

Page 12

Tax Benefit for New Pension Scheme (NPS)

Sec.36 is amended to provide deduction to an employer by way of Contribution towards a Pension Scheme referred to in Sec 80CCD(2) to the extent it does not extend 10% of the salary of the Employee Sec 80 CCE has been amended to exclude the Employer’s contribution to this Scheme from the Rs. 1 Lakhs Limit

.

Page 13

Deduction for Investment in Long Term Infrastructure Bonds–Sec.80 CCF The Investment Savings). - Sec.80 CCF in Long Term Infrastructure Bonds for a sum of Rs.

20,000 is allowed as deduction(over and above the existing limit of Rs. 1 Lac available under Sec 80 CCE for Tax The deduction is extended Assessment Year 2012-13 also.

for the Page 14

Extension of Sunset Clause for Tax holiday for Power Sector–Sec.80-IA(4)(iv) The deduction under sec 80 – IA (4) (iv) allowed to Undertakings in the Power Sector has been extended for a further period of one year .

Page 15

Sunset of Tax Holiday for undertakings engaged in Commercial Production of Mineral Oil – Sec 80IB(9)

The aforesaid deduction available for commercial production of Mineral Oil will not be available for Blocks licensed under a Contract awarded after 31 st March 2011 under the New Exploration Licensing Policy

Page 16

Provisions relating to Transfer Pricing

Sec 92C – Arrival of ALP is by a fixed margin of 5% .The fixed margin shall be removed and the allowable variation shall be as notified by the Govt. ( W.e.f 01.04.2012) Sec 92CA– The jurisdiction of the TPO has been extended to Include any other International Transactions which comes to his notice during the course of proceedings before him. c

ontd..

Page 17

Provisions relating to Transfer Pricing Sec 92 CA(7) - Amended to enable the TPO to exercise the Power of Survey U/s. 133A of the Income Tax Act ( W.e.f 01.06.2011) Sec 139 – The due date for filing the Return Of Company extended to 30th November of the A.Y. 2011-12 Page 18

Counter measures in respect of Transactions with persons located in a Notified Jurisdictional Area Insertion of New Section 94A to enable the Govt. notify any country or territory outside india as a Notified Jurisdictional Area.

Procedures & Provisions relating to Notified Jurisdictional Area.

( W.e.f 01.06.2011)

Page 19

Taxation of Certain Foreign Dividends at a reduced rate Insertion of New Sec 115BBD – Dividends from a foreign subsidiary company shall be taxed at 15% as against 30% (Plus Applicable Surcharge & Cess). amended w.e.f 1-04-2012.

Page 20

Minimum Alternate Tax (MAT) Increase of Tax Rate from 18 % to 18.5% Applicable from 1-4-2012(AY 2012-13) Page 21

Alternate Minimum Tax for Limited Liability Partnership( LLP) Insertion of New Chapter XII- BA containing Special Provisions relating to certain Limited Liability Partnerships .

Alternate Minimum Tax payable shall be 18.5% ( where the regular IT payable is less than minimum tax payable) Amended w.e.f 01.04.2012 (A.Y. 2012-13) Page 22

Rationalisation of Tax on Income distributed to Unit Holders.

Amendment of Sec 115R(2) – MF shall be liable to Additional Income Tax on Distributed Income – The Rates of Tax on Distribution of income are as un der: Nature of Recipient

Individual or HUF Others

Money Market Fund or Liquid Fund

25 %

Debt Fund

30 % 12.5% 30%

Amendment w.e.f 01.06.2011.

Page 23

Collection of Information on Requests received from Tax Authorities Outside India To facilitate prompt collection of information on requests received from Tax Authorities outside in relation to an agreement for exchange of information u/s 90 or 90A of the IT Act. New subsec (2) in Sec 131 has been inserted to provide for Enquiry and Investigation in respect of Such persons referred to in Sec 90 & 90A.

The Competent Authority shall be an Officer of the rank of ACIT & above.

Amendment with effect from 01.06.2011

Page 24

Exemption to a Class or Classes of Persons from furnishing return of income In order to reduce the Compliance burden on the small tax payer , Salaried tax Payers whose entire tax liability is discharged by the employer shall not be required to file Return Of Income( ROI).

Amendment will take effect from 01.06.2011

Page 25

Extension of Time Limit for Assessments in case of Exchange of Information – Sec 153 Insertion of New Clause (viii) in Explanation

1 to section 153 – To exclude the time taken in obtaining the information from tax authorities in jurisdictions situated outside india , under an Agreement referred to in Sec 90 & 90A , from the Statutory time limit.

Page 26

Modification in conditions for filing an Application before Settlement Commission New Clause (ia) in the proviso to section 245 C(1) stipulates that an Application can also be made (a) Relatives of the person in whose case proceedings have been initiated and such person has filed an application and (b) Persons in whose case proceedings have been initiated as a result of search Amended w.e.f 01.06.2011.

Page 27

Power of Settlement Commission to Rectify its Orders New subsec (6B) in section 245 D provides that the Settlement Commission may at any time within a period of 6 months from the date of its order ,with a view to rectify any mistake , amend any order passed by it u/s 245D(4). Amendment with effect from 1-6-2011 .

Page 28

Omission of the requirement of Quoting of Director Identification Number(DIN) Considering the practical difficulties due to non- availability of requisite infrastructure , It is proposed to Omit the aforesaid section.

Amendment applicable retrospectively from 1-04-2011 Page 29

Reporting of Activities of Liaison Offices New Section 285 is proposed mandating the filing of Annual Information, within 60 days from the end of Financial Year , providing prescribed details by Non- residents.

Amendment Effective from 1-6-2011.

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T H A N K Y O U

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