BUDGET 2012 - 13

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Announced on 16th March, 2012 By the Honorable Finance Minister SHRI. PRANAB MUKHARJEE

This presentation is not an offer, invitation or solicitation of any kind and is meant for use of clients and internal use only. All reasonable care has been taken in preparation of this presentation. It is recommended that professional advice be taken based on the specific facts and circumstances.

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INTRODUCTARY APPROACH TO THE BUDGET

On 16th March, 2012, the Finance Minister of the UPA Government, Shri. Pranab Mukharjee opened his speech as under :

For Indian Economy, recovery was interrupted due to intensification of debt crisis in Euro Zones, political turmoil in Middle East, rise in crude oil prices and earthquake in japan, the GDP is estimated to grow at 6.9 per cent in 2011 12, after having grown at 8.4 per cent in preceeding two years.

India however remains front runner in economic growth in any cross country comparision.

Monetary and Fiscal for better part of past two years aimed at taming domestic inflationary pressure.

Growth moderated and fiscal balance deteriorated due to tight monetary policy and expanded outlays.

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Indicators suggest that economy is turning around as core sectors and manufacturing shows signs of recovery in coal, fertilizers, cement and electricity sectors.

At this juncture, it is necessary to take hard decision to improve macroeconomic environment and strengthen domestic growth drivers.

Twelfth Five Year Plan to be launched with the aim of FASTER, SUSTAINABLE AND MORE INCLUSIVE GROWTH. thus identifying five objectives to be addressed as under :

Focus on Domestic demand driven growth recovery.

Create Conditions for rapid revival of high growth in private investments. Address supply bottlenecks in agriculture, energy and transport sectors,

particularly in coal, power, national highways, railways and civil aviation.

Intervene decisively to address the problem of malnutrition especially in the

200 high burden districts.

Expedite coordinated implementation of decisions being taken to improve

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delivery systems, governance, and transparency and address the problems of black money and corruption in public life.

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OVERVIEW OF THE ECONOMY

Indias GDP is estimated to grow at 6.9 per cent in real terms in 2011-12 to be divided as 2.5 per cent in agriculture, 3.9 per cent in industry and 9.4 per cent in services.

It is expected that the headline inflation is to moderate further in the next few months and remain stable thereafter.

Steps taken to bridge gaps in distribution, storage and marketing systems to strengthen food supply chains have helped us in a more effective management of inflation and led to a decline in food inflation.

During April-January 2011-12, exports grew by 23 per cent to reach US Dollar 243 billion, while imports at US Dollar 391 billion recorded a growth of over 29 per cent.

The current account deficit as a proportion of GDP for 2011-12 is likely to be around 3.6 per cent thus putting pressure on the exchange rates along with the net capital inflows of second and third quarters.

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Indias GDP growth in 2012-13 is expected to be 7.6 per cent, +/- 0.25 per cent.

Average Inflation to be lower in next year.

The current account deficits are also expected to be smaller, aided by improvements in domestic financial savings.

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FISCAL RESPONSIBILTY AND BUDGET MANAGEMENT ACT

The FRBM Act is introduced as a part of the Finance Bill, 2012.

EFFECTIVE REVENUE DEFECIT and MEDIUM TERM EXPENDITURE FRAMEWORK STATEMENT forms important features of amendments to FRBM Act in the direction of expenditure reforms.

Effective Revenue Deficit is the difference between revenue deficit and grants for creation of capital assets. Focusing on this will help in reducing the consumptive component of revenue deficit and create space for increased capital spending.

Medium-term Expenditure Framework Statement shall set forth a threeyear rolling target for expenditure indicators.

The Central Plan Scheme Monitoring System would be expanded to facilitate better tracking and utilisation of funds released by the Central Government.

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SUBSIDIES

Fiscal consolidation calls for efforts both to raise the tax-GDP ratio and to lower the expenditure.

The major subsidies at the Centre are for food, fertilisers and petroleum products.

Some subsidies at this juncture in our development are inevitable. But they become undesirable if they compromise the macroeconomic fundamentals of the economy, more so, when they dont reach the intended beneficiaries.

The Government has decided that from 2012-13 subsidies related to food and for administering the Food Security Act will be fully provided for.

On the recommendations of the task force headed by Shri Nandan Nilekani, a mobile- based Fertiliser Management System (mFMS) has been designed to provide end-to-end information on the movement of fertilisers and subsidies, from the manufacturer to the retail level.

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All the three public sector Oil Marketing Companies have launched LPG transparency portals to improve customer service and reduce leakage.

Endeavour to scale up and roll out these Aadhaar enabled payments for various government schemes in at least 50 selected districts within the next six months.

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DIRECT TAXES

Income Tax Exemptions for tax payers increased from 1.80 Lacs to 2.00 Lacs. Also the applicable slab rate of 30% in excess of 8.00 Lacs increased to 10.00 Lacs.

Relief to senior citizens from advance taxes.

No changes made to the corporate taxation rates.

Sale of residential property exempted from capital gains if invested in equity or equipments of an SME.

Sunset clause on tax holidays for power sector is extended by one year upto 31st March, 2013.

Limits for Presumptive Taxation u/s and Tax Audit U/s 44AB has been enhanced to Rs. 1 Cr from Rs. 60 Lacs.

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Interest earned on savings bank account to be exempted upto Rs. 10,000.

Existing limits for health insurance deduction enhanced by Rs. 5,000 for preventive health check up.

Withholding tax rates on External Commercial Borrowings (ECB) reduced from 20% to 5% for Power, Airlines, Roads & bridges, Ports & Shipyards, Affordable Housing, Fertilizers and Dams thus providing low cost funds to the stressed infrastructure sectors.

Cascading effect of Dividend distribution taxes removed thus benefiting the Indian MNCs.

Investment linked deduction on capital expenditure incurred u/s 35AD enhanced to 150% from the existing 100% for Cold Chain Facilities, Warehouses for Storage of food garins, Hospitals, Fertilizers and Affordable Housing.

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Also new sectors added u/s 35AD viz. Bee Keeping and production of

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Weighted deduction of 200% for R & D expenditure in in-house facilities beyond 31st march, 2012 for a further period of five years.

Weighted deduction of 150% on expenditure for agro extension services.

Weighted deduction of 150% of expenditure incurred on skill development in manufacturing sectors.

Security Transaction Tax (STT) reduced by 20% from 0.125% to 0.10% on delivery based transactions.

THE DIRECT TAXES PROPOSALS ARE ESTIMATED TO RESULT A LOSS TO THE REVENUE OF RS. 4,500 CRORES FOR THE YEAR.

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INDIRECT TAXES

Service Tax rates increased from 10% to 12%.

Scope of service tax widened to include most sectors except the services mentioned in the negative list which comprises of government services, preschool and high school education, entertainment services renting of residential dwellings, and public transport including inland waterways, urban railways and metered cabs.

Standard rate of excise duty also hiked from 10% to 12%.

Peak rate of custom duty on non agricultural goods to remain unchanged at 10%.

GST network to roll out from August 2012.

THE INDIRECT TAXES PROPOSAL IS ESTIMATED TO RESULT IN A GAIN OF Rs. 45,940 CRORES.

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OTHERS

Fiscal deficit seen at 5.1% of GDP in Financial year 2012 13 against 5.9% of revised estimates for FY 2011 12.

Government to provide Rs. 160 Billion capital infusion to state run banks.

IPO norms amended in order to increase participations in small towns.

Subsidies level down to 1.7% of GDP over next three years.

Divestment target for the fiscal year estimated at Rs. 30,000 crores.

GDP growth expected at 7.6% (+/- 0.25%) during FY 2012 13.

Women SHG can avail additional 3% subvention for prompt repayments of loans.

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ECONOMIC SURVERY
The Economic Survey for the Financial year 2012 13 features sustained growth and steady fiscal consolidation.

The growth rate of the Indian Economy is expected to be around 7.6% as against 6.9% in the Financial Year 2011 12.

The broad based growth estimates expected to rebound the agricultural, manufacturing and the service sectors.

Savings, Investments and exports expected to have an upward trend.

However, slowdown of the Economy, high fiscal deficit, food inflation, unemployment has been a cause of concern underscoring the need of fiscal consolidation and stronger reserves.

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HIGHLIGHTS OF ECONOMIC SURVEY 2012

GROWTH AND INFLATION
Growth estimated at 6.9%, 7.6% and 8.6% in FY 2012, 2013 and 2014 respectively. Agriculture to grow at 2.5% in FY 12. Services to grow at 9.4% in FY 12 with a 59% share in GDP. Industrial growth estimates at 4-5% in FY 13. Indias sovereign credit rating rises by 2.98% in 2007 12. Inflation expected to moderate at 6.5-7% by March end. Forex reserves upto USD 305 bn in March 11 as against USD 279 bn in March 10. Exports grew at 40.5% and imports by 30.4%.

SERVICE SECTOR
Services Grow by 9.4% despite of slow GDP rate. Share of services in GDP increased from 55.1% in FY 12 to 56.3% in FY 13. Financial & Non Financial services, IT, Telecom and real estate constitute of 41.9%

of total FDI equity inflow.

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AGRICULTURE AND INDUSTRIES

FDI in multi-brand retail recommended. Agriculture grows at 2.5% Vs target of 4% in five yr plan.

Agriculture, allied activities account for 13.9 % of GDP in FY 12.

Industrial growth pegged at 4-5% in FY 12. Basic goods and non-durables goods grew at 6.1%.

Negative growth observed in capital goods and intermediates segments. Manufacturing GCF growth rate declined to 7% in FY 11 Vs 42% in FY 10. Need to address land acquisition and infra issue on priority.

TRADE
Exports decelerated in Oct-Nov due to global downturn; recovered in Dec-Jan. Key performers in export - petroleum and oil products, gems and jewellery,

engineering, cotton fabrics, electronics, readymade garments, drugs.

Key import areas -POL (petroleum, oil and lubricant), gold and silver. Growth in export of services moderated in H1 17.1%. 3/30/12 ANKIT TOTLA, B'COM, TOTLA,-FY 12 to& ASSOCIATES ANKIT A.C.A. B'COM, SVA

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RUPEE

Rupee falls by 12.4 % against USD. Rupee falls from 44.97 per USD in March 2011 to 51.34 per USD in January 2012. Rupees high volatility impairs investor confidence. Aggressive stand to check Rupee volatility recommended.

BANKING AND MACRO ECONOMICS

Public sector banks show 19 % growth in priority sector lending. Credit Disbursement to agricultural sector exceeded target by 19%. Credit Disbursement helped over 12.7 million new farmers. 98 % public sector bank branches fully computerized. Self Help Group- bank linkage program major success. Capital in banks essential for balance sheet expansion. Growth in bank credit extended by Scheduled Commercial Banks grew at 17.1%.

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EDUCATION AND EMPLOYMENT

Reform process in education continued in FY 12. Aakash, low cost computing device launched. Sarva Shiksha Abhiyan norms revised to correspond with the provisions of the RTE Act. National Council for Teacher Education notified as the academic authority for teacher qualifications. Need to scale up the successful centres of innovations, create higher technical institutions. Labour Bureau Survey indicates upward trend in employment since July 2009 maintained. Employment in organized sector increased by 1.9 % in 2010. Share of women in organized-sector employment at 20.4% in 2010 March end.

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PART B FINANCE BILL, 2012

Coming to the Part B of the Budget, the Finance minister Shri. Pranab Mukharjee begun his speech saying, The life of a Finance Minister is not easy. Various players, including policy makers, politicians, agriculturists and business houses, participate in the making of the economy. When everything goes well with the economy, we all share in the joy. However, when things go wrong, it is the Finance Minister who is called upon to administer the medicine. Economic policy, as in medical treatment, often requires us to do something, which, in the short run, may be painful, but is good for us in the long run. As Hamlet, the Prince of Denmark, had said in Shakespeares immortal words, I must be cruel only to be kind.

Last year, I had set the compass for movement towards the DTC in Direct Taxes and GST in Indirect Taxes. My tax proposals for fiscal year 2012-13 mark further progress in that direction.

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BASIC TAX RATES

The threshold limit of the basic exemption has been raised in case of Individual, HUF and Senior citizens.

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No change in Tax Rates of Domestic Company and Firms which are chargeable to Tax at 30%. Similarly no change in Tax Rates of Foreign companies which are chargeable to Tax at 40%.

Surcharge continues to be applicable only to Domestic Companies and Foreign Companies where the total income exceeds Rs. 1 Crore @ 5% and 2% respectively.

The marginal relief continues to be available in cases where taxable income is exceeding Rs. 1 crore, so that additional tax payable does not exceed additional income over Rs. 1 crore.

The tax is to be further increased by Education Cess of 2% and SHEC of 1% in all cases.

Effective rate of 32.445% continues to be applicable in case of Domestic companies having taxable income of more than 1 crore & 30.90% in other case. In case of Foreign Companies effective rate of 42.024% is applicable where taxable income is more than 1 crore & 41.20% in other case.

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INCOME FROM BUSINESS OR PROFESSION

DEPRECIATION

Section 32(1)(iia): It is proposed to allow initial depreciation of 20% on new machinery or plant acquired and installed in a previous year and used in the business of generation or generation and distribution of power. Hitherto this allowance was restricted to manufacturing or production of any article or thing.

EXPENDITURE ON SCIENTIFIC AND OTHER RESEARCH

Section 35: This section allows weighted deduction @ 200% for expenditure incurred

on approved in house research and development facilities up to 31st March 2012. The allowability of weighted deduction under this section has been extended for a further period of 5 years i.e. up to 31st March 2017.

INVESTMENT LINKED DEDUCTION IN RESPECT OF SPECIFIED BUSINESS

Under Section 35AD, an assessee is entitled to deduction @ 100% of Capital

Expenditure (other than Land, Goodwill and Financial Instrument) incurred on specified business. The definition of specified business has been widen to include the following businesses also:

Setting up and operating an inland depot or a container freight station notified or approved under the Customs Act, 1962; Bee Keeping and production of honey and beeswax; and

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The date of commencement of the above business operations shall be on or after 1st April 2012 to be eligible for deduction subject to conditions. However, the assessee engaged in the following specified business shall be allowed deduction @ 150% of Capital Expenditure (other than Land, Goodwill and Financial Instrument) incurred:

Setting up and operating a cold chain facility; Setting up and operating a warehousing facility for storage of agricultural produce; Building and operating, anywhere in India, a hospital with at least one hundred beds for patients; Developing and building a housing project under a scheme for affordable housing framed by the Central Government or a State Government, as the case may be, and notified by the Board in this behalf in accordance with the guidelines as may be prescribed; and Production of fertilizer in India.

An assessee who builds a hotel of two-star or above category as classified by the Central Government and subsequently, while continuing to own the hotel, transfers the operation thereof to another person shall be deemed to be carrying on the specified business of building and operating hotel.

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EXPENDITURE ON AGRICULTURAL EXTENTION PROGRAM

It is proposed to insert a new section i.e. Sec 35CCC to allow the benefit of weighted deduction @ 150% on expenditure incurred by the assessee on approved agricultural extension project notified by the Board.

EXPENDITURE ON SKILL DEVELOPMENT EXPENDITURE

It is proposed to insert a new section i.e. Sec 35CCD to allow the benefit of weighted

deduction @ 150% on expenditure incurred by the assessee (not being expenditure in the nature of cost of any land or building) on approved skill development project notified by the Board.

APPLICABILITY OF TAX AUDIT

Section 44AB: Every person carrying on business is required to get his accounts

audited under section44AB if his total sales, turnover or gross receipts in business exceed Rs. 60 Lacs in the previous year. In case of professionals, the said limit is ` 15 Lacs. It is proposed to increase the said turnover/receipt ceiling to Rs. 1 Crore and Rs. 25 Lacs respectively.
For the purposes of presumptive taxation under section44AD for computing profits

and Gains of business of civil construction, etc, the threshold limit is proposed to be increased to Rs. 1 Crore from Rs. 60 Lacs.

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SEC 40A : TRANSACTIONS WITH RELATED PARTIES

Section 40A(2) specifies disallowance of certain expenditure, where payments are made to related parties defined therein. It is proposed to amend Sec 40A(2) by enlarging the definition of relatives to include the transactions by a company, firm, association of persons or Hindu undivided family having a substantial interest in the business or profession of any other company within its ambit. Further, no disallowance shall be made with respect to any expenditure being excessive or unreasonable having regard to the fair market value in respect of a specified domestic transaction under section92BA if such transaction is at ALP.

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INCOME FROM CAPITAL GAINS

EXEMPTIONS UNDER SECTION 54B ON SALE OF AGRICULTURAL LAND BY HUF

It is proposed to extend the exemption under section54B to HUF on capital gains derived from sale of agricultural land if the said land has been used by the HUF for agricultural purposes for 2 years preceding the year in which it is sold and the capital gains is reinvested in purchase of agricultural land in the next 2 years of sale.

EXEMPTIONS UNDER SECTION 54GB ON SALE OF RESIDENTIAL PROPERTY

It is proposed to insert a new section 54GB so as to provide relief from long term

capital gains tax to an individual or an HUF on sale of a residential property (house or plot of land) in case of re-investment of sale consideration in the equity of a new start-up SME company in the manufacturing sector which is utilized by the company for the purchase of new plant and machinery.
This relief would be subject to the conditions that :

the amount of net consideration is used by the individual or HUF before the due date of furnishing of return of income under sub-section (1) of section 139, for subscription in equity shares in the SME company in which he holds more than 50% share capital or more than 50% voting rights. The amount of subscription as share capital is to be utilized by the SME company for the purchase of new plant and machinery within a period of one year from the date of subscription in the equity shares.

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If the amount of net consideration subscribed as equity shares in the SME company is

not utilized by the SME company for the purchase of plant and machinery before the due date of filing of return by the individual or HUF, the unutilized amount shall be deposited under a deposit scheme to be prescribed in this behalf.

Suitable safeguards so as to restrict the transfer of the shares of the company, and of the plant and machinery for a period of 5 years are proposed to be provided to prevent diversion of these funds. Further, capital gains would be subject to taxation in case any of the conditions are violated. The relief would be available in case of any transfer of residential property made on or before 31st March, 2017.

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INCOME FROM OTHER SOURCES

TRANSFER OF ASSETS WITHOUT ADEQUATE CONSIDERATION

Under Section 56(2)(vii), any sum of money exceeding Rs. 50000 or immovable property valuing exceeding Rs. 50000 received by an individual or HUF without any consideration shall be taxable under the head income from other sources. However, if the said income is received from relative, the income shall not be taxable. The definition of relative has been widened to include the members of HUF also.

SHARE PREMIUM IN EXCESS OF FAIR MARKET VALUE OF THE SHARES

The issue of shares by a closely held company to any person or persons being a

resident will be taxable to the closely held Company under section56 if the consideration on issue of such shares exceeds the face value of the shares.

Amount taxable

= Consideration

Fair Market Value

under section56(2)(viib)

received of the shares

However, the said provision will not apply where the consideration for issue of shares

is received by a venture capital undertaking from a venture capital company or a venture capital fund.

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DEDUCTIONS
DEDUCTION UNDER SECTION 80C

Section 80C provides that in computing the total income of individual and HUF, a deduction up to Rs. 1 Lac is allowed for life insurance premium, contribution to PPF, tuition fees, etc. The deduction for LIC premium was allowed only to the extent of 20% of actual capital sum insured. The said constraint of 20% has been further reduced to 10% of actual capital sum insured in respect of insurance policies issued on or after 1st April 2012.

DEDUCTIONS UNDER SECTION 80D AND 80DDB

Section 80D is proposed to be amended to allow deduction of Rs. 5000 on payment

made by the assessee on account of preventive health checkup of self, spouse, dependent children or parents during the previous year. However, the said limit is within the existing overall allowability limits prescribed under section 80D.
For the purposes of availing deduction under section80D, payment will have to be

made in the following modes :

On account of Preventive Health checkup => Any Mode of Payment including Cash. In other Cases like health insurance, contribution to Central Government Health Scheme => Any Mode of Payment other than Cash.

For the purposes of deduction under section80D and 80DDB, the definition of senior

citizens has been amended to be age of 60 years instead of 65 years erstwhile.

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DONATIONS UNDER SECTION 80G AND 80GGA

For the purposes of deduction under section80G and 80GGA, the payment of

donation will have to be in the following modes:

Donation less than or equal to Rs. 10,000 => Any Mode of Payment including Cash. Donation exceeding Rs. 10000/- => Any Mode of Payment other than Cash.

DEDUCTIONS IN RESPECT OF INTEREST ON DEPOSITS IN SAVINGS BANK ACCOUNTS

As per the newly inserted section 80TTA, deduction to the extent of maximum Rs.

10000/- will be allowable from the income of an Individual or HUF in respect of income by way of interest on deposits (not being time deposits) in a savings account with Banking Company / Cooperative Society / Post Office.
The said deduction shall not be allowed in computing the income of a partner or

member, if the savings account is held by or on behalf of a firm, AOP, BOI.

DEDUCTION FOR INFRASTRUCTURAL DEVELOPMENT, ETC

It is proposed to extend time limit for a further period of 1 year up to 31st March 2013

for availing deduction under Section 80 IA(4)(iv) in respect of specified projects.

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MINIMUM ALTERNATIVE TAX (MAT)

Section 115JB has been amended to include in Book Profit, the amount standing in revaluation reserve relating to revalued asset on the retirement or disposal of such asset if it is not credited to profit and loss account.

The said section has allowed companies to prepare its Profit & loss

account in accordance with the provisions of the Act governing such companies instead of mandatory preparation of profit and loss account as per part II of Schedule VI of Companies Act, 1956.

Also the reference to Part III of Schedule VI of the Companies Act, 1956

is proposed to be omitted.

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TRANSFER PRICING

Hitherto the provisions of Transfer Pricing (Section 92A to 92F) were applicable only to International Transaction. As per the proposed amendment to the said section the said provisions are also made applicable to certain Domestic Transactions as follows: Payment made to person referred under section 40A(2)(b) Transaction under section 80A Transaction under section 80(IA)(8) and 80(IA)(10) Transaction under chapter VIA or under section 10AA to which section 80(IA)(8) or

80(IA)(10) are applicable

Others as may be prescribed

The above provision is applicable only if the aggregate amount of all such domestic transactions exceeds Rs. 5 crores in a year.

As per the proposed amendment, the variation rate for determination of the Arms Length Price (ALP) while comparing the actual price of the international transaction with the arithmetical mean of the prices determined under the appropriate methods can be notified by the Central Govt. up to 3%. ANKIT TOTLA, B'COM, A.C.A. - SVA & ASSOCIATES

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In respect of Non Corporate Assessee also, who are required to file report under Section 92E, the due date for filing the return of Income under Section 139 will be 30th November of the Assessment Year. Consequently, the due date for furnishing a report under Section 92E is also extended to 30th November of the Assessment Year retrospectively from A.Y. 2012-13. For the purpose of removal of doubts regarding the ambit of international transaction, an inclusive list of transactions has been inserted through explanation, with retrospective effect from A.Y.2002-03, which would be treated as International Transaction. It consists of :
Purchase, sale, transfer, lease or use of tangible or intangible propertY Capital financing Provision of services Business restructuring or reorganization irrespective of the fact that it has bearing on

the profit, income, losses or assets of enterprise.

An inclusive list for the expression intangible property is also proposed to be inserted. The penalty of 2% of each international transaction under section 271AA for failure to maintain information and document has been extended to failure to report any international transaction and maintains or furnishes incorrect information or document w.e.f 1st July, 2012. ANKIT TOTLA, B'COM, A.C.A. - SVA & ASSOCIATES

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If any international transaction is not reported either by non filing or by not including it in the report, it will be deemed to escapement of income and such a case can be reopened under section147 of the act w.e.f 1st July 2012. However, in relation to assessment years, proceedings of which have been competed before 1st July, 2012 cannot be reopened in either case. Advance Pricing Agreement (APA) (W.e.f 1st July, 2012) : It is proposed to insert new sections namely 92CC and 92CD whereby the Board,

with the approval of Central Govt. may enter into an advance pricing agreement with any person undertaking an international transaction.
Notwithstanding sec 92C or sec 92CA, the APA shall include determination or specify

the manner in which arms length price shall be determined any method including those provided in sec 92C(1), with necessary adjustments or variations.
The APA shall be valid for such previous years as specified in the agreement which

in no case shall exceed five consecutive previous years.

The APA shall be binding only on the person and the Commissioner (including

income-tax authorities subordinate to him) in respect of the transaction in relation to which the agreement has been entered into. The APA shall not be binding if there is any change in law or facts having bearing on such APA.
The Board is empowered to declare, with the approval of Central Government, any

such agreement to be void ab initio, if it finds that the agreement has been obtained by the person by fraud or misrepresentation of facts. In such a case all the provisions of the Act shall apply to the person as if such APA had never been entered into.

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 Where an application is made by a person for entering into such an APA,

proceedings shall be deemed to be pending in the case of the person for the purposes of the Act.
The person entering in to such APA shall necessarily have to furnish a modified

return within a period of three months from the end of the month in which the said APA was entered in respect of the return of income already filed for a previous year to which the APA applies. The modified return has to reflect modification to the income only in respect of the issues arising from the APA and in accordance with it.
Where the assessment or reassessment proceedings for an assessment year

relevant to the previous year to which the agreement applies are pending on the date of filing of modified return, the Assessing Officer shall proceed to complete the assessment or reassessment proceedings in accordance with the agreement taking into consideration the modified return so filed and normal period of limitation of completion of proceedings shall be extended by one year.
If the assessment or reassessment proceedings for an assessment year relevant to a

previous year to which the agreement applies has been completed before the expiry of period allowed for furnishing of modified return, the Assessing Officer shall, in a case where modified return is filed, proceed to assess or reassess or recompute the total income of the relevant assessment year having regard to and in accordance with the APA and to such assessment, all the provisions relating to assessment shall apply as if the modified return is a return furnished under section 139 of the Act. The period of limitation for completion of such assessment or reassessment is one year from the end of the financial year in which the modified return is furnished. All the other provisions of this Act shall apply accordingly as if the modified return is a return furnished under section 139.

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TAXATION IN SPECIAL CASES

TONNAGE INCOME SECTION 115VG
The daily tonnage income of a qualifying ship is proposed to be calculated as per the

following table:

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ANKIT TOTLA, B'COM, A.C.A. - SVA & ASSOCIATES

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3636

TAXABILITY OF DIVIDEND FROM FOREIGN SUBSIDIARY COMPANY

It is proposed to continue Section 115BBD, whereby the dividends received by the

Indian Company from its Foreign Subsidiary Company shall be taxable at the rate of 15%.

VENTURE CAPITAL FUND (VCF) OR VENTURE CAPITAL COMPANY (VCC) SECTION 115 U
Income accruing to VCF / VCC shall be taxable in the hands of investor on accrual

basis.
The exemption from applicability of TDS provisions on income credited or paid by

VCF/ VCC to investors shall be withdrawn.

3/30/12

ANKIT TOTLA, B'COM, A.C.A. - SVA & ASSOCIATES

ANKIT TOTLA, B'COM,

3737

ALTERNATE MINIMUM TAX (AMT) CHAPTER XII-BA

Hitherto the AMT was applicable only to LLP. It is now proposed to apply all the provisions of AMT to all persons other than companies, who have claimed deduction under chapter VIA (except sec 80P) or sec 10AA.

However, the above provisions would not apply to individual, HUF, AOP or BOI (whether incorporated or not) or artificial juridical person if the adjusted total income of such person does not exceed Rs. 20 lacs.

Consequential amendments have been proposed to sec 140A relating to self assessment, section 234A relating to interest for defaults in furnishing return of income, section 234B relating to interest for defaults in payment of advance tax and section 234C relating to interest for deferment of advance tax.

3/30/12

ANKIT TOTLA, B'COM, A.C.A. - SVA & ASSOCIATES

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3838

TDS AND TCS (W.E.F. 1ST JULY, 2012)

SECTION 194E AND 115BBA
Income arising to an Entertainer, who is non resident and non citizen of India,

through its performance in India has also been included under section115BBA. Also, tax rate applicable to persons covered under this section has been increased from 10% to 20%. Accordingly the rate of TDS are also increased to 20%.

SECTION 193
The TDS non deduction limit for interest payable on debenture (whether

listed or not) paid by company in which public is substantially interested has been raised from Rs. 2,500 to Rs. 5,000 if the payment is made by account payee cheque.

SECTION 194J
Remuneration or fees or Commission which is not in the nature of Salary

paid by a company to its director is now covered under section194J. Accordingly, TDS is required to be deducted at the rate of 10%.

SECTION 194LA
The 3/30/12 TDS non deduction limit on compulsory acquisition of immovable ANKIT TOTLA, B'COM,

ANKIT TOTLA, B'COM, A.C.A. - SVA & ASSOCIATES

3939

SECTION 194LAA (NEWLY INSERTED) (W.E.F. 1ST OCTOBER, 2012)

Any person acquiring (other than to whom sec 194LA applies) an immovable

property (other than agricultural land) from a resident transferor shall deduct TDS @ 1%.
TDS is to be deducted at the time of credit or payment whichever is earlier on

Consideration paid or value adopted by Stamp Authority whichever is higher.

TDS is required to be deducted only if the consideration value is equal to or more

than Rs. 50 lacs for property situated in urban specified areas and Rs. 20 lacs for other areas.
The immovable property will be registered in the name of acquirer only if he

furnishes the proof of TDS deduction.

However, the provisions of sec 203A relating to attainment of Tax deduction Account

Number are not applicable to the Acquirer of Immovable Property.

SECTION 194LC (NEWLY INSERTED) AND SECTION 115A

It is proposed to amend Section 115A of the Income Tax Act to provide that any

interest paid by a specified company to a non-resident in respect of borrowing made in foreign currency from sources outside India between 1st July, 2012 and 1st July, 2015 shall be taxable @ 5% as against 20% erstwhile.
The payment of interest has to be under an agreement and rate of the interest

payable should be approved by the Central Government.

3/30/12

Accordingly, TDS will be deducted @ 5% under section194LC.

ANKIT TOTLA, B'COM, A.C.A. - SVA & ASSOCIATES

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SECTION 195
The interest meaning has been changed from any interest to any interest (not being

interest under section194LB or 194LC).

Section 195(1) has been amended to clarify that obligation to comply with sub

section (1) and to make deduction there under applies and shall be deemed to have always applied and extends and shall be deemed to have always extended to all persons, resident or non-resident, whether or not the non - resident has:

a residence or place of business or business connection in India; or Any other presence in any manner whatsoever in India.

These amendments will take effect retrospectively from 1st April, 1962 and will accordingly apply in relation to the assessment year 1962-63 and subsequent assessment years.

SECTION 197A
For filing Form 15H for non deduction of TDS under section 193, 194, 194A, 194EE

and 194K, the age of senior citizens is proposed to be reduced from 65 years to 60 years.

SECTION 201
As per proposed amendments in Section 201, Payer who fails to deduct the whole or

any part of the tax on the payment made to a resident payee shall not be deemed to ANKIT TOTLA, B'COM, A.C.A. - SVA & ASSOCIATES be in respect of such tax if such resident payee 3/30/12 an assessee in default ANKIT TOTLA, B'COM,

4141

has taken into account such sum for computing income in such return of income; and has paid the tax due on the income declared by him in such return of income, the payer furnishes a certificate to this effect from an accountant in such form as may be prescribed.

The date of payment of taxes by the resident payee shall be deemed to be the date

on which return has been furnished by the payer.

It is also proposed to provide that where the payer fails to deduct the whole or any

part of the tax on the payment made to a resident and is not deemed to be an assessee in default under section 201(1) on account of payment of taxes by the such resident, the interest under section 201(1A)(i) shall be payablefrom the date on which such tax was deductible to the date of furnishing of return of income by such resident payee.

SECTION 204
For the purpose of providing clarity to the meaning of person responsible for paying

in case of payment by Central Government or a State Government, it is proposed to provide that in the case of payment by Central Government or a State Government, the Drawing and Disbursing Officer or any other person (by whatever name called) responsible for making payment shall be the person responsible for paying within the meaning of section 204.

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SECTION 206C

Minerals (being coal, lignite or iron ore) have been brought under the ambit of TCS

which is to be collected @ 1%.

Also, the seller of bullion and jewellery shall at the time of receipt of consideration (in

cash only) collect TCS @ 1% as income tax from the buyer if the sale consideration exceeds Rs. 2 lacs.

Provisions relating to TCS for clarifying the deemed date of discharge of tax liability

by the buyer or licensee or lessee are on line with the amendments proposed under section 201.

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ANKIT TOTLA, B'COM, A.C.A. - SVA & ASSOCIATES

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OTHER TAX PROVISIONS

PRESUMPTIVE SCHEME
The Presumptive scheme of income under section 44AD shall not be applicable to

the following business:

a person carrying on profession as referred to in sec 44AA(1); persons earning income in the nature of commission or brokerage income; or a person carrying on any agency business.

TAX ON UNEXPLAINED MONEY, CASH CREDITS, INVESTMENTS, EXPENDITURE, ETC.

It is proposed to insert a new sec 115BBE wherein all the unexplained money, cash

credits, investments, expenditure, etc shall be deemed to be the income and taxable at a flat rate of 30% irrespective of the slab rates. No deduction in respect of any expenditure or allowance shall be allowed under any provisions in computing the said deemed income. The other income of assessee shall be chargeable as per the other applicable provisions of the act.

SENIOR CITIZEN EXEMPT FROM PAYING ADVANCE TAX SEC 207

A resident senior citizen (Age 60yrs or more) shall not be liable to pay advance tax if

he does not have any income chargeable under the head Profits and gains of ANKIT TOTLA, B'COM, A.C.A. - SVA & ASSOCIATES business or profession. ANKIT TOTLA, B'COM, 3/30/12

4444

COMPULSORY FILING OF IT RETURN IF ASSETS LOCATED OUTSIDE INDIA SECTION 139

It is proposed to amend the provisions of section 139 by making it mandatory for

every resident having any asset (including financial interest in any entity) located outside India or signing authority in any account located outside India to file Income Tax Return. Furnishing of return by such a resident would be mandatory irrespective of the fact whether the resident taxpayer has taxable income or not.

REDUCTION IN STT
It is proposed to reduce the STT rates from 0.125% to 0.1% in cash

delivery segment on purchase and sale of equity shares in a company / units of an equity oriented fund entered into through a recognized stock exchange in India.

DIVIDEND DISTRIBUTION TAX (DDT) SECTION 115-O

The cascading effect of DDT in multi-tier corporate structure has been removed.

W.e.f 1st July, 2012, every holding company (irrespective whether it is subsidiary of another company) will be liable to pay DDT on the dividend distributed by it as reduced by the amount of dividend received by it from its subsidiary company.
However, the Subsidiary Company should have paid DDT while distributing dividend.

3/30/12

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ANKIT TOTLA, B'COM,

4545

WEALTH TAX EXCLUSION OF RESIDENTIAL HOUSE ALLOTTED TO EMPLOYEES

If a residential house property is allotted by a Company to an employee or an officer

or a director who is in whole-time employment, having a gross annual salary of less than five lacs rupees, then the said property is excluded from the definition of asset chargeable to wealth tax. It is proposed to revise the limit of salary from 5 Lacs to 10 Lacs.

EXEMPTION TO FOREIGN COMPANIES ON SALE OF CRUDE OIL

It is proposed to insert a new clause (48) in section 10 of the Income-tax

Act to provide for exemption in respect of any income of a foreign company received in India in Indian currency on account of sale of crude oil to any person in India subject to the following conditions:

The receipt of money is under an agreement or an arrangement which is either entered into by the Central Government or approved by it. The foreign company, and the arrangement or agreement has been notified by the Central Government having regard to the national interest in this behalf. The receipt of the money is the only activity carried out by the foreign company in India.

GENERAL ANTI AVOIDANCE RULE

It is proposed to provide General Anti Avoidance Rule in the Income Tax Act to deal

3/30/12

with aggressive tax planning and in order to determine as to whether the ANKIT is an impermissible avoidance - SVA & ASSOCIATES arrangement TOTLA, B'COM, A.C.A.arrangement.

ANKIT TOTLA, B'COM,

4646

UNEXPLAINED CASH CREDITS

It is proposed to amend sec 68 to provide that amount credited by the closely held

company in the nature and source of share capital, share premium, share application money shall be treated to be explained only if the source of funds is also explained by the assessee company in the hands of the resident share holder.

3/30/12

ANKIT TOTLA, B'COM, A.C.A. - SVA & ASSOCIATES

ANKIT TOTLA, B'COM,

4747

CENTRAL EXCISE
MAJOR CHANGES
The effective rate of Excise Duty of 10% on non-petroleum products increased to

12% with few exceptions where exemptions / concessions have been given.
Concessional rate of Excise Duty of 5% on non-petroleum products increased to 6%. The lower rate of Excise Duty of 1% on non-petroleum products increased to 2%

except precious metal jewellery, coal and fertilizers which would remain at 1%.

OTHER CHANGES
Full exemption from excise duty on

Branded silver jewellery Articles of goldsmith and silversmith wares of precious metals or of metals coated with precious metals, not bearing a brand name Gold and Silver coins of purity 99.5% and above Refills and inks used for the manufacture of writing instruments of value not exceeding Rs. 200 per piece subject to actual user condition. Exemption limit on footwear enhanced from Rs. 250 per pair to Rs. 500 per pair. Food preparations containing fruits and vegetables which are prepared in a hotel, restaurant or retail outlet. Intra ocular lens.

3/30/12

ANKIT TOTLA, B'COM, A.C.A. - SVA & ASSOCIATES

ANKIT TOTLA, B'COM,

4848

 The rates of duty applicable to pan masala, gutkha, chewing tobacco, zarda scented

tobacco and unmanufactured tobacco under the compounded levy are being increased.
The rate of Cess leviable on indigenous petroleum crude oil increased from Rs. 2500

per MT to 4500 per MT.

The concessional excise duty rate 2% without cenvat credit being extended to parts,

components and specified accessories viz. battery chargers, PC Connectivity Cables, Memory Cards and hands-free headphones of mobile phones.

PRODUCTS COVERED UNDER THE RETAIL SALE PRICE (RSP) ASSESSMENT :

Cement with an abatement of 30% from RSP. Cigarettes with an abatement of 50% from RSP.

GARMENTS INDUSTRY
The excise duty is being enhanced to 12% on readymade garments bearing a brand

name or sold under a brand name. The rate of abatement on such readymade garments and made-ups is being increased from 55% to 70%. Hence, the tariff value for purposes of charging duty would be 30% of the retail sale price.
Affixing or embossing trade name or brand name on articles of jewellery or on

articles of goldsmiths or silversmiths wares of precious metal or of metal clad with ANKIT TOTLA, B'COM, A.C.A. - SVA & ASSOCIATES precious metal, shall amount to manufacture and liable for Excise duty. 3/30/12 ANKIT TOTLA, B'COM,

4949

 Process of cutting, slitting and printing of aluminum foils (chapter 76) shall amount to

manufacture.

Process of matching, batching and charging of Lithium Ion batteries or the making of

battery packs shall amount to manufacture.

3/30/12

ANKIT TOTLA, B'COM, A.C.A. - SVA & ASSOCIATES

ANKIT TOTLA, B'COM,

5050

SERVICE TAX

RATE OF SERVICE TAX

in the rate of service tax, changes are also being made in specific and compounding rates of tax for the services relating to purchase and sale of foreign currency including money changing, promotion, marketing, organizing or in any manner assisting in organizing lottery, works contract service and reversal of cenvat credit under rule 6(3)(i).

The rate of service tax is being increased from 10% to 12%. Consequent to change

INTRODUCTION OF NEGETIVE APPROACH

A negative list approach to taxation of services is being introduced vide variousnew

sections proposed in Chapter V of the Finance Act, 1994.

The services specified in the Negative List shall remain outside the tax net. All other services, except those specifically exempted, would thus be chargeable to

service tax.
Negative list approach to taxation of services shall come into effect from a date to be

notified, after the Finance Bill, 2012 receives the assent of the President.
To support the negative list approach to taxation of services, draft Place of Provision

of Services Rules, 2012 is being proposed.

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AMENDMENT IN SCOPE OF CERTAIN SPECIFIED SERVICE

In case of life insurance service, where the entire premium is not towards the risk

cover, the first years premium shall be taxed at the rate of three percent while subsequent premium shall attract tax at the rate of 1.5 percent with allowability of full availment of cenvat credit.
In case of transport of passengers embarking in India for domestic and international

journey by air, the dual rate structure of maximum service tax of rupees 150 and rupees 750 in case of economy class travel replaced by an ad valorem rate of 12% with abatement of 60% subject to the condition that no credit on inputs and capital goods is taken.
Proposition of new reverse charge mechanism on three specific services viz. hiring

of means of transport, construction and manpower supply.

In case of renting of immovable property service, the government has decided to

waive the penalty for those tax payers who pay the service tax due in full along with interest. This will be open only for a period of six months from the date of enactment of the Finance Bill, 2012.

OTHERS
Introduction of provisions relating to special audit in the service tax law on the lines

of the Central Excise Act, 1944.

One year time limit for issuance of notice for specified category of offences increased

to eighteen months.

3/30/12 ANKIT in line with the similar provisions applicable to service tax TOTLA, B'COM, provisions contained in the

Settlement Commission,B'COM, A.C.A. - SVA & ASSOCIATES ANKIT TOTLA, revision mechanism and compounding of offence

5252

 Harmonization of the service tax and excise provisions relating to limitation of filing

appeals before the Commissioner (Appeals) and Tribunal.

Replacement of the existing rule with a new one to simplify the procedure for refund

of unutilized credit on the account of exports.

The credit of tax paid on the supply of motor vehicles on rent, insurance and repair

shall be allowed.
Credit of insurance and service station service allowed to insurance companies in

respect of motor vehicles insured and re-insured by them and manufacturers in respect of motor vehicles manufactured by them.
Provision for allowing a service provider to take credit of inputs or capital goods

whenever the goods are delivered to him, subject to specified conditions.

In case of input service distributor, the credit of service tax attributable to service

used wholly in a unit shall be distributed only to that unit and if credit attributable to service used in more than one unit, it shall be distributed prorata on the basis of turnover of the concerned unit.
Availment of credit on the tax payment challan in case of payment of service tax by

the service receiver on reverse charge basis.

Time period for issuance of invoices under Rule 4A increased from 14 to 30 days. In

case of banks and financial institutions, the period shall be 45 days.

Change in the definition of continuous supply of service wherein the scope has been

expanded.

3/30/12

ANKIT TOTLA, B'COM, A.C.A. - SVA & ASSOCIATES

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CUSTOM DUTY

MAJOR CHANGES

Peak rate of Custom duty remains the same at 10%. Portion of Cess leviable on the CVD portion of customs duty is being exempted so

as to avoid computation of such Cess twice.

Duty free allowance under the baggage rules increased from Rs. 25000 to 35000 for

adult passengers of Indian origin and from Rs. 10000 to Rs. 15000 for children upto 10 years of age.

FULL EXEMPTION FROM BASIC CUSTOM DUTY FOR

Nickel oxide/ hydroxide and nickel ore/ concentrate. Initial setting up and substantial expansion of fertilizer projects. Steam coal (also CVD reduced from 5% to 1%). Natural gas / liquefied natural gas imported by a power generation company. Uranium concentrate, sintered natural uranium dioxide, sintered uranium dioxide

pellets for generation of nuclear power.

Equipment imported for road construction projects awarded by Metropolitan

Development Authorities (CVD & SAD also exempt).

Tunnel and boring machines for infrastructure projects (CVD also exempt).

3/30/12

ANKIT TOTLA, B'COM, A.C.A. - SVA & ASSOCIATES

Tunnel excavation and specified line equipment for road construction (CVD also

ANKIT TOTLA, B'COM,

5454

 Parts of aircraft and testing equipment for maintenance and repair of aircraft

imported by third party maintenance, repair and overhaul (MRO) units (CVD also exempt).
Tri band phosphor for manufacture of Compact Fluorescent Lamps. Specified parts of hybrid vehicles (SAD exempt with 6% CVD). Lithium Ion batteries (SAD exempt with 6% CVD). Steel tube and wire, cobalt chromium tube, hayness alloy-25 and polypropylene

mesh for the manufacture of coronary stents/coronary stent systems and artificial heart valves.
Aramid yarn and fabric used in the manufacture of bullet proof helmets for supply of

defence and police.

LCD and LED TV panels of 20 inches and above. Parts of memory cards for manufacture of mobile handsets including cellular phones

((CVD & SAD also exempt).

CRGO steel prime quality. Equipments for setting up of solar thermal projects. Brass scrap, timber logs and dredgers. LEDs required for the manufacture of LED lamps.

3/30/12

ANKIT TOTLA, B'COM, A.C.A. - SVA & ASSOCIATES

ANKIT TOTLA, B'COM,

5555

FULL EXEMPTION FROM SPECIAL ADDITIONAL DUTY OF CUSTOMS (SAD) FOR :

Imposition of Customs Duty for :

2% on cut and polished coloured gemstones. 10% on Digital still cameras of certain specifications. Full exemption from customs duty withdrawn for copper, brass and phosphor bronze strips for connectors, poly laminated aluminium tape and poly laminated steel tape for cables and conductors for telecom use.

Agriculture / Agro processing / Planation Sector

Accordance of project import status to installation of mechanized handling systems and pallet racking systems for horticultural produce with 5% BCD plus nil CVD plus nil SAD. Accordance of project import status to the green houses set up for protected cultivation of horticulture and floriculture produce with concessional rate of BCD at 5%. BCD reduced from 10%/7.5% to 5% on specified coffee plantation and processing machinery. The concessional duty would be available upto 31.3.2014.

Automobiles :

3/30/12

BCD on completely built units (CBUs) of large cars/ MUVs/ SUVs with value exceeding US$40000 and engine capacity exceeding 3000cc for petrol and 2500cc for diesel ANKIT TOTLA, B'COM, A.C.A. - SVA & ASSOCIATES increased from 60% to 75%. ANKIT TOTLA, B'COM,

5656

 Capital Goods / Infrastructure / Health :

BCD rates unified at 2.5% from 10% and 7.5% in case of machinery and instruments for surveying and prospecting of mines. BCD on railway safety (train protection and warning system) equipment and railway track laying machines reduced from 10% to 7.5%. A concessional import duty regime of 2.5% BCD with 6% CVD and Nil SAD prescribed for specified raw materials for the manufacture of syringes, needles, catheters, cannulae, parts and components for the manufacture of blood pressure monitors and blood glucose monitoring systems (Gluco-meters).

3/30/12

ANKIT TOTLA, B'COM, A.C.A. - SVA & ASSOCIATES

ANKIT TOTLA, B'COM,

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THANKS & REGARDS

SVA & ASSOCIATES (CHARTERED ACCOUNTANTS)

3/30/12
ANKIT TOTLA, B'COM, A.C.A. - SVA & ASSOCIATES

ANKIT TOTLA, B'COM, NARESH TOTLA ANKIT

5858