In depth. Incisive. Comprehensive.
Budget Highlights
February 2013 www.deloitte.com/in
Direct Taxes
Personal taxation No change proposed in the present slab or tax rates which is currently as under: Tax Rate Nil 10% 20% 30% Current Slabs, ` Upto 200,000* 200,001 500,000 500,001 1,000,000 Above 1,000,000 Eligible limit of gross total income of the investor for this purpose is proposed to be enhanced from ` 10 lakhs to ` 12 lakhs Deduction available for three consecutive years Keyman Insurance Policy assigned to the Keyman before its maturity will not enjoy the exemption available for a life insurance policy and will continue to be treated as a Keyman Insurance Policy Increase in surcharge for corporates Particulars Below `100 lakhs Surcharge rate Domestic Foreign Nil (Nil) Nil (Nil) Effective tax rate 30.90% (30.90%) 41.20% (41.20%) Above `100 lakhs upto `1000 lakhs Surcharge rate 5% (5%) 2% (2%) Effective tax rate 32.45% (32.45%) 42.02% (42.02%) Above `1000 lakhs Surcharge rate 10% (5%) 5% (2%) Effective tax rate 33.99% (32.45%) 43.26% (42.02%)
* Basic exemption limit for senior citizens and very senior citizens is ` 250,000 and ` 500,000 respectively
Surcharge proposed at the rate of 10% payable if income exceeds ` 100 lakhs Rebate upto ` 2,000 available to resident individuals whose total income does not exceed ` 5 lakhs Impetus to first-time home buyers Additional deduction of ` 1 lakh (over and above the existing ` 1.5 lakhs) on interest on housing loan not exceeding ` 25 lakhs and value of property not exceeding ` 40 lakhs Only for loans sanctioned during FY 2013-14 Can be carried forward to next year if not fully utilized Rajeev Gandhi Equity Savings Scheme Deduction presently available to new retail investors for investment in equity share extended to include investment in equity oriented mutual fund
Note: Figures in bracket refers to the current rates Education cess of 3% has been considered for determining the effective tax rates
Surcharge at 10% to be payable on additional taxes levied on distribution of profits by domestic companies / mutual funds / securitization trusts and on buybacks.
In depth. Incisive.Comprehensive. Budget Highlights
Policy proposals Direct tax code (DTC) DTC is work in progress DTC not an amended version of existing tax laws but a new code based on best international practices Ministry of Finance to consider Standing Committee recommendations and place the revised DTC Bill before the Parliament Circular on Development Centres Circular covering tax matters of Development Centres based on based on Rangachary Committee recommendations to be issued shortly Safe Harbour Rules on Safe Harbour to be issued after examining the Rangachary Committee recommendations Tax incentives and reliefs Incentive for investment in specified plant or machinery Applicable to a Company engaged in the manufacture of article or thing and which invests more than ` 100 crores in specified plant or machinery Investment to be done between 1 April 2013 to 31 March 2015 Deduction of 15% on actual cost of plant or machinery acquired and installed Assets to be held for a period of 5 years, failing which deduction availed shall be treated as income
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Extension of sunset clause for power sector Sunset date for the power sector to commence eligible activity extended from 31 March 2013 to 31 March 2014 Deduction for employment of new workmen Presently, deduction available for additional wages paid to new regular workmen employed in manufacturing or production activities Amendment proposed to restrict the deduction only in respect of workmen employed in manufacturing activities carried out in a factory Concessional rate of withholding tax on interest Interest income for a non-resident from the rupee denominated long-term infrastructure bonds of an Indian company is eligible for lower rate of withholding tax @ 5% - Applicable from 1 June 2013 Buyback of shares Additional tax of 20% on distributed income in the course of buyback of shares by unlisted companies, payable by such company Distributed income is the consideration for buyback less issue price of the shares Buyback consideration exempt in the hands of the shareholder
Rate of tax on royalty and fees for technical services payable to a non-resident Rate of withholding on royalty and fees for technical services payable to a non-resident increased from 10% to 25% Lower rate as per tax treaty can be availed, subject to tax residency certificate Dividends from specified foreign company Beneficial tax rate of 15% on dividend income from specified foreign company extended by 1 year till 31 March 2014 Dividend distribution tax not payable on dividends payable out of dividends received from a specified foreign company being a subsidiary General Anti-avoidance Rules (GAAR) GAAR provisions now applicable from 1 April 2016 Amendments proposed in line with the Shome Committee recommendations Definition of Impermissible Avoidance Arrangement amended to restrict to arrangements, the main purpose of which is to obtain a tax benefit as against the main purpose or one of the main purposes Constitution of an approving panel comprising three members being a judge of the high court, member of the Indian Revenue Service and member having specialized knowledge
Transfer of immovable property Consideration for transfer of any immovable property of ` 50 lakhs and above attracts withholding tax @ 1% - Applicable from 1 June 2013 Sale consideration on the transfer of immovable property when held as stock in trade to be the higher of the stamp duty value or the actual consideration in computation of business profit Purchase of immovable property by individual or HUF for inadequate consideration (Consideration minus Stamp duty value > ` 50,000) taxable in the hands of the recipient Amendments in response to judicial precedents Bad debts written off are deductible only if the same exceeds the credit balance in the provision for bad and doubtful debts account made under section 36(1)(viia) without any distinction between rural and other advances Amendment made in response to the Supreme Court decision in Catholic Syrian bank Others Commodities transaction tax (CTT)- Introduced at the rate of 0.01% on commodity derivatives (except agricultural commodities)
In depth. Incisive.Comprehensive. Budget Highlights
Securities transaction tax (STT)- Existing rates on taxable securities transactions reduced Tax Residency Certificate (TRC) is necessary but not a sufficient condition for claiming the benefits under the treaty Income of Securitisation Trust to be exempt from income tax subject to conditions Pass through status for Alternate Investment Funds (AIF)
Indirect Taxes
Customs Duty Peak rate of Basic Customs Duty (BCD) maintained at 10% Exemption from education cess, secondary and higher education cess is being withdrawn on aeroplanes, helicopters and a few other goods BCD increased on the following: Description of goods Cars / motor vehicles (irrespective of engine capacity) with CIF value more than $ 40,000 New motorcycles with engine capacity of 800cc or more Raw silk Set Top Boxes From 75% To 100% Reduction in CVD on bituminous coal from 6% to 2% Exemption from BCD on lithium ion automotive battery for manufacture of lithium ion battery packs for supply to manufacturers of hybrid and electric vehicles Exemption from BCD extended to parts and testing equipment for maintenance, repair and overhauling of aircrafts and their parts Export duty introduced on the following goods: Bauxite (effective rate 10%) Raw sugar, white or refined sugar (effective rate Nil) Ilmenite processed (effective rate 10%) Ilmenite unprocessed (effective rate 5%) Exemption from export duty on de-oiled rice bran oil cake Limit on duty free baggage allowance for jewellery enhanced as below: Coverage An Indian passenger, who has been residing abroad for over one year Gentleman passenger Lady passenger A person who is transferring his residence to India Gentleman passenger Lady passenger From To
60% 5% 5%
75% 15% 10% 2% To 5% 2% 5%
Steam coal Nil BCD reduced on the following: Description of goods Specified textile machinery and parts thereof Pre-forms of precious and semi-precious stones Specified machinery for use in the leather industry or footwear industry From 7.5% 10% 7.5%
` 10,000 ` 20,000
` 50,000 ` 100,000
Bituminous coal 5% 2% Increase in Countervailing duty (CVD) on steam coal from 1% to 2%
` 10,000 ` 20,000
` 50,000 ` 100,000
In depth. Incisive.Comprehensive. Budget Highlights
Time limit for payment of import duty reduced from 5 days to 2 days Storage of imported goods in a public warehouse pending clearance for home consumption is permitted up to a period of 30 days and the Commissioner of Customs can grant a further extension of 30 days Provisional attachment of property is extended to cases involving suppression, willful mis-statement or collusion Appellate Tribunal can extend operation of stay for a period of 185 days where the delay is not attributable to the assessee. The stay order, however, will stand vacated at the end of 365 days from the date of the order Section 142 of the Customs Act has been amended to provide for recovery of money due to the Government from an assessee, from any person who holds money for or on account of the assessee Central Excise Duty Standard rate maintained at 12% Excise duty increased on the following: Cigarettes Cellular mobile phones (of Retail Sale Price more than ` 2000) from 1% to 6% Marble slabs and tiles from ` 30 per square meter to ` 60 per square meter SUVs from 27% to 30% Manufacturers of branded readymade garments and made ups can now avail exemption from payment
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of excise duty provided no CENVAT credit on inputs is availed Branded medicaments used in Ayurvedic, Unani, Sidha, Homeopathic or Bio-Chemic system brought under MRP-based assessment with an abatement of 35% Excise duty on chassis of diesel motor vehicles for transport of goods reduced from 14% to 13% Excise duty of 4% imposed on silver produced or manufactured during the process of zinc or lead smelting Specified goods manufactured and captively used as intermediate products by units located in Uttaranchal or Himachal Pradesh have been exempted from excise duty Appellate Tribunal can extend operation of stay for a period of 185 days where the delay is not attributable to the assessee. The stay order, however, will stand vacated at the end of 365 days from the date of the order An explanation has been inserted in Rule 3 of the CENVAT Credit Rules, 2004 to enable recovery of amounts not paid on removal of inputs or capital goods, as such or after being put to use and also in those cases where they have been fully or partially written off Section 11 of the Central Excise Act, 1944 has been amended to provide for recovery of money due to the Government from an assessee, from any person who holds money for or on account of the assessee
Service Tax Service Tax rate remains unchanged Changes effective upon enactment of the Finance Bill, 2013 Negative list modified as follows: Courses run by Industrial Training Institute / Centre affiliated to State Council for Vocational Training included in negative list under the definition of approved vocational educational course Scope of testing related to the agriculture sector broadened for the purpose of inclusion in negative list Course run by an institute affiliated to the National Skill Development Corporation subject to service tax Process amounting to manufacture to include processes under the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 Appellate Tribunal can extend operation of stay for a period of 185 days where the delay is not attributable to the assessee. The stay order, however, will stand vacated at the end of 365 days from the date of the order New Section 78A introduced to impose penalty on directors and officials of the company for specified offences in cases of willful actions Amnesty scheme proposed to be introduced for those assessees who have not filed or have stopped filing service tax returns
If a demand of Service Tax made under extended period of limitation is found to be unsustainable by the Appellate authority/Tribunal/Court on grounds of limitation the tax liability for eighteen months (normal period of limitation) may be computed Changes effective 1 March 2013 A Resident Public Limited Company would be eligible to seek advance ruling Abatement in respect of construction of a complex, building, civil structures etc., is being reduced from the existing 75% to 70% for construction other than residential properties having a carpet area up to 2000 square feet or where the amount charged is less than ` 1 crore Changes effective 1 April 2013 All restaurants having air-conditioning or central air-heating facility liable to service tax Exemptions in relation to transportation of goods by various modes (road, railways & vessels) aligned Service tax exemption on the following have been withdrawn: Vehicle parking to general public Aircraft repair or maintenance services provided to government, a local authority or governmental authority Renting of immovable property and auxiliary education services provided by educational institution
In depth. Incisive.Comprehensive. Budget Highlights
Charities for advancement of any other object of general public utility Exemption for temporary licensing of copyright of cinematographic films restricted to films exhibited in cinema halls or theatre Central Sales Tax (CST) Central Sales Tax rate continues at 2% against production of Form C Goods and Services Tax (GST) Majority of the State Governments have agreed on the need for a Constitutional amendment to facilitate GST introduction ` 9,000 crore set apart towards payment of first installment of balance CST compensation due to the States State Finance Ministers and the GST Council to draft the GST legislation Draft bill on Constitutional amendment and a Draft bill on GST to be introduced in the Parliament in the coming months
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In depth. Incisive.Comprehensive. Budget Highlights
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