Please note that the budget announced on 16th March 2012 is applicable for the period 01.04.2012 to 31.03.2013. The taxation on income tax is therefore made for the income accrued or earned during the said period. We present herewith the budget highlights in summarised form which also includes the points as were made applicable during the previous budget (wherever applicable):
1. Introduction of Direct Tax Code (DTC) proposed from 01st April 2013 as against 01st April 2012 announced in the previous budget;
2. Introduction of Goods & Service Tax (GST) is in progress but postponed as against 01st April 2012 announced in the previous budget. This is due to the fact that there are still some issues which needs to be resolved between the state and the centre;
3. Income Tax Rates
(i) Tax rates for Individuals, Hindu Undivided Family (HUF), Association of Persons (AOP), Body of Individuals (BOI), Artificial Judicial Person EXCEPT Co-operative Society
a. Upto Rs. 200,000/- – Nil
b. Rs. 2.00 lacs to Rs. 5.00 lacs – 10%
c. Rs. 5.00 lacs to Rs. 10.00 lacs – 20%
d. Rs. 10.00 lacs and above – 30%
(ii) In respect of women resident in India below the age of 60 years, the basic exemption limit would remain same as that for male residents, which is Rs. 200,000/-. It is imperative to note that there is no distinction between a male or a female as far as income tax exemption limit is concerned. The age for senior citizens was taken at 65 years for the purpose of granting benefits till 31.03.2011 however this age was reduced from 65 years to 60 years during the previous budget itself (and hence this age criteria is applicable for the period from 01.04.2011 onwards);
(iii) In respect of Senior citizens (man and woman above the age of 60 years) resident in India, the basic exemption limit would continue to be Rs. 250,000/-;
a. Upto Rs. 250,000/- – Nil
b. Rs. 2.50 lacs to Rs. 5.00 lacs – 10%
c. Rs. 5.00 lacs to Rs. 10.00 lacs – 20%
d. Rs. 10.00 lacs and above – 30%
(iv) The previous budget announced a new class of citizens who would be classified under the head “Very Senior Citizens”. These citizens would be man and woman above the age of 80 years. The basic exemption limit for such class of citizens was kept at Rs. 5,00,000/- and this would continue in the current budget as well. The rates would thus be as under:
a. Upto Rs. 500,000/- – Nil
b. Rs. 5.00 lacs to Rs. 10.00 lacs – 20%
c. Rs. 10.00 lacs and above – 30%
(v) Education Cess (EC) would continue to be levied @ 2% of Income Tax & surcharge;
(vi) Secondary & Higher Education Cess (SHE) would continue to be levied @ 1% of Income Tax & surcharge (not including Education Cess);
(vii) No surcharge on individual assessees;
(viii) No change in corporate tax rates. Domestic companies would continue to be taxed at 30%. The Surcharge for domestic companies which was reduced from 10% to 7.5% in the last to last budget has further been reduced to 5% for taxable income exceeding Rs. 1.00 crore during the last budget. This is going to continue in the current budget as well. No surcharge on taxable income less than Rs. 1.00 crore. EC and SHE would continue to be at 2% and 1% respectively;
(ix) For Foreign Companies, the tax rate would stay at 40%. The Surcharge rate would be 2% where total income of the company exceeds Rs. 1.00 crore. EC and SHE would continue to be at 2% and 1% respectively;
(x) Concept of ‘Marginal’ relief is available for companies due to the levy of surcharge;
(xi) Minimum Alternate Tax (MAT) retained at 18.5% of the book profit. Surcharge would be as applicable. Proposal to extend the levy of MAT to all persons (both companies & non-companies) including profit linked deductions;
4. Minimum Alternate Tax (MAT) & Dividend Distribution Tax (DDT) on Special Economic Zones (SEZ):
(i) MAT U/s. 115JB would be applicable from 01.04.2011;
(ii) Whereas, DDT would be applicable from 01.06.2011.
5. Alternate Minimum Tax (ALT) for the Limited Liability Partnerships (LLPs) would be levied at 18.5% on the adjusted total incomes, where regular income is lower than the ALT. LLPs are permitted to take advantage of ALT paid over and above the regular income tax which is to be carried forward upto next 10 assessment years as in the case of MAT credits (applicable from the previous budget and continued during the current budget as well);
6. No Return of Income to be filed by employee, where:
– Entire tax liability has already been discharged by this employer through Tax Deducted at Source (TDS);
– If the said income from salary does not exceed Rs. 5.00 Lacs; &
– If the complete details are already reported by his employer through TDS statements or TDS returns
MISCELLANEOUS DIRECT TAX RELATED
7. Remove Cascading effect of Dividend Distribution Tax.
8. Income tax on short term capital gains U/s. 111A and 115AD would remain at 15%.
9. Partnership firms would continue to be taxed @ 30%.
10. No change in tax rate structure incase of co-operative society and local authority.
11. The Limited Liability Partnership (LLP) would continue to be taxed @ 30%. There will be no change in the tax rate.
12. Service Tax
- New concept of taxing services based on negative list. Proposal to tax all services except those in the negative list comprising of 17 heads.
- To raise service tax rate from 10 per cent to 12 per cent, with corresponding changes in rates for individual services.;
- Penalty for delayed payment of Service Tax (U/s. 76) reduced from 2% per month to 1% per month or Rs. 100/- per day, whichever is higher however the maximum penalty would be restricted to 50% of the tax amount involved instead of the 100% till the introduction of the precious budget (applicable for the current budget too);
- Penalty for delay in submission of Service Tax Returns hiked from Rs. 2,000/- to Rs. 20,000/- during the previous budget and this would be retained by the current budget as well;
13. Turnover Limits (i) Threshold turnover limit in relation to presumptive taxation for small businesses increased from Rs. 40.00 lacs to Rs. 60.00 lacs in the previous budget;
14. Threshold turnover / gross receipts limits for compulsory audit (Sec 44AB) of accounts increased from Rs. 60.00 lacs to Rs. 100.00 lacs and from Rs. 15.00 lacs to Rs. 25.00 lacs for profession;
15. Penalty on failure to get the accounts audited would remain at Rs. 1.50 lacs;
16. Deduction of upto Rs. 10,000/- from Interest on Savings Account U/s. 80TTA;
17. Preventive Health Check-Up Allowed upto Rs. 5,000/- (U/s. 80D);
18. Long Term Capital Gains on sale of residential property sold till 31.03.2017 exempt, if proceeds invested in Equity Shares / Voting rights of appropriate eligible company (U/s. 54GB);
19. Domestic transactions with ‘Specified persons / parties’ for Rs. 5.00 crores and above subject to Transfer Pricing Regulations;
20. Jewellers to collect Tax Collected at Source (TCS) @ 1% for cash buying of bullion / jewellery above Rs. 2.00 Lacs;
21. No Advance Tax payment liability for Senior Citizen who do not have business income;
22. Compulsory reporting of ‘Foreign Assets’ by Residents;
23. Tax Deducted at Source (TDS) @ 1% by purchaser of Immovable Property (non-agriculture) for payments to Seller, if value above Rs. 50.00 Lacs or more in specified areas (Rs. 25.00 Lacs or more in non-specified areas)
OUR VIEWS ON THIS BUDGET
1. The Government (including the Finance Ministry) is still to come up with bold and innovative budgets – Thanks to coalition politics;
2.Instead of raising the revenue and reducing the administrative burden of related tax compliances, the Govt is hell-bent on increasing the same;
3. Getting into nitty gritty or offering minor respite in the name of deductions or exemptions is just a face-wash. They are making the laws more complicated. Such several changes each year has made the layman confused. The Government must look into a broader perspective of getting into development while ensuring that the laws are clean, transparent, easy to comply and offer respite from administrative burden as well;
4. If I have to express my opinion, I should give a thumbs down to the current budget. The Government has said that the increase in tax exemption limit / slabs would cost the exchequer loss of Rs. 4,500/- crore, however they did not highlight the fact that increase in 2% service tax (up from 10% to proposed 12%) would benefit the exchequer by over Rs. 22,000/- crore;
5. Lastly, no body is taking the stand to take up the issues boldly in the budget, There are cosmetic changes here and there. They are coming out with the budget only by tweaking some provisions and giving little respite – however compensating the same with higher taxes and compliances in other areas! We need to change the way we look at the budget only then we can take progressive steps hereafter.
Good Luck to all my readers in their future endeavours, including savings in taxes and to be fully compliant administratively !!!!!