TRC
Fiscal deficit
Taxing
Budget 2013
► Key policy
announcements
► Direct Tax
proposals
Retrospective amendments
Super rich tax
GAAR
February 2013
I
Page 1
Budget 2013
Budget 2013
Budget backdrop
►
Economy expected to grow at around 5.0% in FY 2012-13
►
Agriculture – 1.8%
►
Industry – 3.1%
►
Services – 6.5%
►
GDP growth remains sluggish with higher inflation
►
Growth in next fiscal expected to be 6.1 to 6.7%
►
Fiscal deficit stands at 5.2% of GDP (4.8% for FY 2013-14)
►
Revenue deficit to be 3.9% of GDP in FY 2012-13 (3.3% for
FY 2013-14)
►
Direct tax revenue expected to go up by 18.07% and indirect tax
revenue to go up by 20.24%
February 2013
Page 2
Budget 2013
Budget snapshot
Particulars
BE
RE
FY 2012-13 FY 2012-13
Particulars
BE
FY 2013-14
Variance
(%)
(a)
(b)
(c)
Total Tax Revenues
1,077,612
1,038,037
1,235,870
of (c)
over (b)
19.06
- Direct Tax Receipts
570,257
565,835
668,109
18.07
- Indirect Tax Receipts
507,354
472,202
567,761
20.24
Non-tax revenues
164,614
129,713
172,252
32.79
Total Expenditure
1,490,925
1,430,825
1,665,297
16.39
- Plan expenditure
521,025
429,187
555,322
29.39
- Non-plan expenditure
969,900
1,001,638
1,109,975
10.82
Direct tax revenue expected to go up by 18.07% and indirect tax revenue to
go up by 20.24%
February 2013
Page 3
Budget 2013
Key policy announcements
‘Higher growth leading to inclusive and sustainable development’ to be
the mool mantra
Government believes in inclusive development with emphasis on
improving human development indicators specially of women, the SC,
the ST, the minorities and some backward classes.
►
Tax Reforms
Finance Minister is his speech has stated that to set up a “Tax
Administration Reform Commission” (TARC) to review the application of
tax policies and tax laws and submit periodic reports that can be
implemented to strengthen the capacity of tax system .
The constitution of the TARC reflects the views of Shome on modern tax
administration.
February 2013
Page 4
Budget 2013
Key policy announcements
►
Endeavour to re-introduce DTC before the end of the Budget
session
►
Work on draft GST Constitutional Amendment Bill and GST Law
expected to be taken forward
►
Rules on Safe Harbour to be issued shortly
►
Fifth large tax payer unit to open at Kolkata shortly
►
Number of administrative measures such as extension of refund
banker system, extension of e-payment through more banks,
expansion in the scope of AIR to be introduced
February 2013
Page 5
Budget 2013
Rates of tax – Individuals
►
No change in tax rates and tax slabs for individuals
►
Rebate upto INR 2,000 for resident individuals earning
up to INR 5 Lacs
►
Surcharge of 10% on tax on INR 1 Crore plus income
earners (marginal relief available)
►
Education cess of 3% to continue
February 2013
Page 6
Budget 2013
Rates of tax - companies
►
No change in corporate tax rates
►
Rate of surcharge on domestic companies with income
exceeding INR 10 Crores increased from 5% to 10%
►
Rate of surcharge on non-resident companies with
income exceeding INR 10 Crores increased from 2% to
5%
►
Rate of surcharge on dividend distribution tax increased
from 5% to 10%; effective rate would now be 16.995%
►
Where book profits of a domestic company exceed INR
10 Crores, the rate of MAT to increase to 20.96%
February 2013
Page 7
Budget 2013
Rates of tax - companies
►
Foreign dividend
►
Beneficial tax rate of 15% on dividend declared, distributed or paid
by specified foreign company again extended for one more year
►
The above foreign dividend if received from subsidiary, is to be
reduced for the purpose of DDT payable by the domestic company
February 2013
Page 8
Budget 2013
Securities Transaction Tax (STT)
►STT
rates revised as follows:
Nature of transaction
Payable by Present (%)
Proposed (%)*
Delivery based purchase of
Purchaser
units of an equity oriented fund
on a recognized stock exchange
0.1
Nil
Delivery based sale of units of
an equity oriented fund on a
recognized stock exchange
Seller
0.1
0.001
Sale of futures in securities
Seller
0.017
0.01
Sale of a unit of an equity
oriented fund to the mutual fund
Seller
0.25
0.001
*Effective
from 1st June, 2013
February 2013
Page 9
Budget 2013
Commodities Transaction Tax (CTT)
►
CTT to be levied on taxable commodities transactions
(other than in agricultural commodities) from the date
the Finance Bill is notified
►
CTT to be levied at 0.01% and would be payable by the
seller
►
CTT paid to be deductible in computing business
income from taxable commodities transactions
February 2013
Page 10
Budget 2013
Capital Asset
►
►
Definition of “capital asset” to be amended w.e.f April 1,
2014 to include any land (including agricultural land)
situated within distance from :
►
2 kilometers of any municipality or cantonment board and which
has a population of more than 10,000 (not exceeding 1 lakh); or
►
6 kilometers of any municipality or cantonment board and which
has a population of more than 1 lakh (but not exceeding 10 lakh);
or
►
8 kilometers of any municipality or cantonment board and which
has a population of more than 10 lakh.
The distance to be measured aerially.
February 2013
Page 11
Budget 2013
Dividend Distribution Tax
►
Tax on income distribution by mutual funds
►
Tax on distribution of income by mutual funds (other than equity
oriented funds) to individuals or HUFs to be increased from
12.5% to 25%
►
Tax on income distributed by infrastructure debt funds set up as
mutual funds to be reduced to 5% for parity with infrastructure
debt funds set up as NBFCs
February 2013
Page 12
Budget 2013
Key International Tax proposals
►
Tax Residency Certificate
►
Submission of tax residency certificate a necessary but not a
sufficient condition for claiming benefits under tax treaty
►
Amendment to take effect from FY 2012-13
The Finance Minister has post budget clarified in a press conference
that “In order to claim treaty benefit, two conditions need to be satisfied
viz. residence and beneficial ownership. TRC is sufficient to prove only
‘residence’ criteria and not ‘beneficial ownership’
February 2013
Page 13
Budget 2013
Key International Tax proposals
►
Royalty and fees for technical services
►
Tax on royalty and fees for technical services earned by non
resident taxpayers increased from 10% to 25%, as applicable
under domestic law
►
Above rate applicable to all agreements entered post 31 March
1976
►
Tax treaty protection available
However, majority of the tax treaties are likely to have a rate of
10% to 15%
February 2013
Page 14
Budget 2013
Widening of tax net
►
Business income on transfer of immoveable property
►
Higher of stamp duty value or consideration received or accruing
on transfer of land and/ or building (not being capital assets) to be
taken as full value of consideration
►
In case of difference between date of agreement and date of
registration, stamp duty value as on date of agreement to be
considered
►
►
Applicable only if consideration (in non-cash mode) is paid on or
before date of such agreement
Buyer to withhold tax at the rate of 1% in case of transfer of
immovable property (other than agricultural land) to a
resident where sale consideration exceeds INR 50 Lacs
February 2013
Page 15
Budget 2013
Widening of tax net
►
Additional income-tax on buyback of shares
►
Effective 1 June 2013, unlisted company liable to pay additional
income-tax of 20% on distribution of income through buyback of its
shares
►
Tax payable on difference between consideration paid on buyback
of shares and amount received by company at the time of issue of
such shares
►
Consideration received by shareholder is exempt from further
income-tax
►
No deduction allowed on the distribution tax paid by the company
February 2013
Page 16
Budget 2013
Widening of tax net
►Taxability
of immovable property received for inadequate
consideration
►
Where an Individual or HUF receives immovable property for
consideration less than stamp duty value of property, then the
differential amount will be subject to tax in the hands of individual or
HUF
►
Stamp duty value will be considered as on date of agreement fixing the
amount of consideration as long as the consideration, or part thereof,
has been paid by any mode other than cash on or before date of
agreement
►
Otherwise, the date of registration of agreement will be considered for
computing stamp duty value
February 2013
Page 17
Budget 2013
General Anti Avoidance Rules (GAAR)
►
Certain recommendations of the Expert Committee accepted with
modifications
►
GAAR to be deferred to FY 2015-16
►
Only arrangements which have the main purpose (as opposed to
one of the main purposes) of obtaining tax benefit would be
covered by GAAR
►
Treaty override provisions applicable in case GAAR is invoked
►
The Commissioner of Income-tax to issue a notice to the taxpayer
setting out the reasons and basis of invoking GAAR and the
taxpayer to be given an opportunity to prove that obtaining tax
benefit is not the main purpose of the arrangement
►
Directions of the Approving Panel to be binding on the taxpayer as
well as the Income-tax authorities
February 2013
Page 18
Budget 2013
GAAR
►
Following conditions relevant though not sufficient to determine
whether an arrangement is an Impermissible Avoidance
Arrangement
►
Period of time for which an arrangement exists
►
Payment of taxes, directly or indirectly, under the arrangement
►
Availability of exit route under the arrangement
►
An arrangement shall also be considered to be lacking commercial
substance, if it does not have a significant effect upon business
risks, or net cash flows apart from the tax benefit
►
Term of the Approving Panel to be one year (extendable to three
years)
►
Definition of “associated person” and “connected person”
combined under an inclusive definition of “connected person”
►
Central Board of Direct Taxes empowered to make rules in relation to
GAAR provisions and matters relating to Approving Panel
February 2013
Page 19
Budget 2013
Exemptions and deductions
Deduction in respect of generation, distribution and
transmission of power
►
Sunset clause extended to 31 March 2014
Additional investment allowance for manufacturing
companies investing INR 100 Crores in specified new
assets between 1 April 2013 and 31 March 2015
►
15% of the actual cost of specified new assets acquired between
1 April 2013 and 31 March 2014 in assessment year 2014-15; and
►
15% of the actual cost of specified new assets acquired between
1 April 2013 and 31 March 2015 in assessment year 2015-16, as
reduced by the amount of deduction allowed, if any in assessment
year 2014-15
February 2013
Page 20
Budget 2013
Exemptions and deductions
Deduction of wages to workmen (100 or more) to be
restricted to Indian companies deriving profits from
manufacture of goods in factories only
►
Deduction would not be available if the factory is hived off,
transferred or acquired by amalgamation with another company
Deduction of health insurance premium payments up to
INR 15,000 extended to other Central and State
Government Health schemes (to be notified) similar to
the existing Central Government Health Scheme (CGHS)
February 2013
Page 21
Budget 2013
Exemptions and deductions
►
Deduction of investment made under equity savings
scheme subject to lower of 50% of investment or INR
25,000
►
►
►
February 2013
Extended to listed equity oriented fund units
Made applicable for resident individuals with gross total
income not exceeding INR 12 Lacs
Deduction available for three consecutive years beginning
with the year of investment
Page 22
Budget 2013
Exemptions and deductions
►
Exemption under section 10(10D) not available to any
sum received under keyman insurance policy
►
►
Keyman insurance policy assigned to any person with or without
consideration during its term now to be treated as a keyman
insurance policy
Deduction of contribution to National Children’s
Fund to be increased from 50% to 100% of the
amount donated
February 2013
Page 23
Budget 2013
Exemptions and deductions
►
New Section 80EE to be introduced to provide for additional
deduction of INR 100,000 for interest on housing loan from any
financial institution provided
►
individual does not own any residential house property on the date of
sanction
►
the loan is sanctioned between 1 April 2013 and 31 March 2014
►
loan amount is not exceeding INR 25 Lacs
►
value of house property is not exceeding INR 40 Lacs
►
Unutilized deduction to be carried forward till 31 March 2015
February 2013
Page 24
Budget 2013
Assessments, appeals and other provisions
►
Liability of directors of private company in liquidation
►
Definition of ‘tax due’ from directors of a private company in
liquidation expanded to include penalty, interest or any other sum
payable under the Act
►
Seized assets not to be allowed to be adjusted against advance tax
liability
►
Return filed without payment of tax (along with interest, if any) to be
regarded as defective return
►
Scope of direction for special audit to be extended to include
parameters like volume of accounts, correctness of accounts,
multiplicity of transactions and specialized nature of business activity
of the taxpayer
►
In case of payments to non resident individuals exceeding INR 1
Crore, rate of TDS to be increased by a 10% surcharge
February 2013
Page 25
Budget 2013
Questions?
February 2013
Page 26
Budget 2013
Thank You
February 2013
Page 27
Budget 2013