INDIAN BUDGET 2012
BY CA A. K.
JAIN
The budget expectations from the Finance Minister Dr. Pranab
Mukherjee were probably unrealistic and impractical. Market expectations were
suggesting that, Finance Minister will have a solution for everyone's problem
and his budget proposals will re-generate the enthusiasm in the economy. No one
probably understood and appreciated his limitations and compulsions. Indian
economy is undergoing one of the most awful period.
High inflation, falling growth rates, increasing unemployment,
international economic failures, growing labour unrest, weakening central
political system, civic moments in the country restrained the Finance
Minister from taking any bold initiative. He has taken a very cautious approach
and completed his official formality . But what is most baffling is the Finance
Minister's total stillness to solve the problem of Indian money stacked in
foreign accounts and creation of system of accountability in public
expenditure.
We can not blame any single individual for this frame of mind. Our
economic and political system is really unique and it is really intricate to
change the settled mind sets of the multiple decision makers. In last 60 years,
when most of the countries have prospered, we are still internationally branded
as one of the most difficult destination to deal with. International Corporate
only look at India as market of 120 crores of half fed population. We offer the
largest market in the world for every possible product and service, whether
that be, food, electronic, automobile, chemical, capital goods, defence
products etc. etc. We are also the largest fund borrowers at highest possible
commercial rates from the developed world. A major portion of our revenue goes
towards the interest payments to international funding agencies.
We definitely need to change the inert policies and programmes and
replace them with vibrant ideas without apprehensions of reactions from the old
souls. We have to replace the 100-300 years old Income Tax Act and other civil
and economic laws of Greek and Egyptian era. We need a dynamic leadership to
take the country forward with confidence and clarity. We need disciplined
implementation of our plans and programmes and application of resources with
care and control. The policing in governance has to be reduced to develop
healthy individuals and institutions.
I am sure some day our Hon'ble Finance Minister will offer us a
budget which will put India in a enviable state and make every individual proud
to have taken birth on this holy soil.
KEY FEATURES OF FINANCE MINISTER’S BUDGET 2012-2013
OVERVIEW OF
THE ECONOMY
GDP growth estimated at 6.9 per cent in real terms in 2011-12.
Slowdown in comparison to preceding two years is primarily due to deceleration
in industrial growth. Headline inflation expected to moderate further in next
few months and remain stable thereafter. Steps taken to bridge gaps in
distribution, storage and marketing systems have helped in more effective
management of inflation. Developments in India’s external trade in the first
half of current year have been encouraging. Diversification in export and
import market achieved. Current account deficit at 3.6 per cent of GDP for 2011-12
and reduced net capital inflow in the 2nd and 3rd quarters put pressure on
exchange rate. India’s GDP growth in 2012-13 expected to be 7.6 per cent +/-
0.25 per cent. Deterioration in fiscal balance in 2011-12 due to slippages in
direct tax revenue and increased subsidies.
1. No
change in peak customs duty.
2. Customs duty reduced from 7.5% to 2.5% for iron ore equipment.
3. LCD and LED panels exempted from custom duty.
4. Automated shuttle looms exempted from customs duty.
5. Mobile phone parts exempted from basic customs duty.
6. Cuts customs duty on rail equipment to 7.5% from 10%.
7. Customs duty on some gold and platinum products increased.
8. Import of aircraft parts exempt from basic customs duty.
9. Customs duty on refined gold doubled.
10. Full exemption on customs duty on coal.
11. LNG out of customs duty.
12. 5% customs duty exempted on equipment for fertilizer plants.
13. Thermal power companies exempted from customs duty for 2 years.
14. Duty on large cars to go up to 27 percent.
15. Reduce basic custom duty on Cigarettes.
16. Waste paper is being fully exempted from basic custom duty.
17. The duty free allowance under the baggage rules is being increased from Rs. 25,000 to Rs. 35,000 for adult passengers of Indian origin and from Rs. 10,000 to Rs. 15,000 for children upto 10 years of age.
18. Basic custom duty on flat rolled products (HR and CR) of non-alloy steel is being increased from 5% to 7.5%.
19. Full exemption from basic custom duty, CVD and SAD is being extended to equipment imported for road construction projects awarded by Metropolitan Development Authorities.
20. Equipments for setting up of solar thermal projects are being fully exempted from SAD.
21. Cenvat Credit of special additional duty (SAD) of 4% can be transferred from one unit to other unit of same manufacturer [Rule 10A of Cenvat Credit Rules w.e.f. 1-4-2012].
Introduction of amendments to the FRBM Act as part of Finance Bill,
2012. Concept of “Effective Revenue Deficit” and “Medium Term Expenditure
Framework” statement are two important features of amendment 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. This will
help in reducing consumptive component of revenue deficit and create space for
increased capital spending. “Medium-term Expenditure Framework” statement will
set forth a three-year rolling target for expenditure indicators.
Recommendations of the Expert Committees to streamline and reduce the number of
centrally sponsored schemes and to address plan and non-plan classification to
be kept in view while implementing Twelfth Plan. Central Plan Scheme Monitoring
System to be expanded for better tracking and utilisation of funds.
SUBSIDIES
SUBSIDIES
Some subsidies, while
being inevitable, may become undesirable if they compromise the macroeconomic
fundamentals of economy. Subsidies related to administering the Food Security
Act will be fully provided for. Endeavour to keep central subsidies under 2 per
cent of GDP in 2012-13. Over next 3 year, to be further brought down to 1.75
per cent of GDP. Based on recommendation of task force headed by Shri Nandan
Nilekani, a mobile-based Fertilizer Management System has been designed to
provide end to-end information on movement of fertilisers and subsidies.
Nation-wide roll out during 2012. All 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 Aadhaar enabled payments
for various government schemes in atleast 50 districts within next 6 months.
TAX REFORMS
TAX REFORMS
DTC Bill to be enacted
at the earliest after expeditious examination of the report of the
Parliamentary Standing Committee. Drafting of model legislation for the Centre
and State GST in concert with States is under progress. GST network to be set up as a National
Information Utility and to become operational by August 2012.
DISINVESTMENT POLICY
Government has
further evolved its approach to divestment of Central Public Sector Enterprises
by allowing them a level playing field vis-à-vis the private sector in respect
of practices like buy backs and listing at stock exchanges. For 2012-13, 30,000
crore to be raised through disinvestment. At least 51 per cent ownership and
management control to remain with Government.
STRENGTHENING
INVESTMENT ENVIRONMENT
Efforts to
arrive at a broad based consensus in consultation with the State Governments in
respect of decision to allow FDI in multi-brand retail up to 51 per cent.
Provision regarding implementation of Advance Pricing Agreement to be
introduced in Finance Bill, 2012. Rajiv Gandhi Equity Saving Scheme to allow
for income tax deduction of 50 per cent to new retail investors, who invest
upto 50,000 directly in equities and whose annual income is below 10 lakh to be
introduced. The scheme will have a lock-in period of 3 years. Various steps
proposed to be taken for deepening the reforms in the Capital markets,
including simplifying process of IPOs, allowing QFIs to access Indian Bond
Market etc. Official amendment to “The Pension Fund Regulatory and Development
Authority Bill, 2011”, “The Banking Laws (Amendment) Bill, 2011” and “The
Insurance Law (Amendment) Bill, 2008” to be moved in this session. Various
Bills proposed to be moved in the Budget session of the Parliament to take
forward the process of financial sector legislative reforms. To protect the
financial health of Public Sector Banks and Financial Institutions, 15,888
crore proposed to be provided for capitalisation. Possibility of creating a
financial holding company to raise resources to meet the capital requirements
of PSU Banks under examination. A central “Know Your Customer” depository to be
developed in 2012-13 to avoid multiplicity of registration and data upkeep.
Revised guidelines on priority sector lending to be issued after stakeholder
consultation. Out of 73,000 identified habitations that were to be covered
under “Swabhimaan” campaign by March, 2012, about 70,000 habitations have been
covered. Rest likely to be covered by March 31, 2012. As a next step, Ultra
Small Branches are being set up at these habitations. In 2012-13, “Swabhimaan”
campaign to be extended to more habitations. Out of 82 RRBs in India, 81 have
successfully migrated to Core Banking Solutions and have also joined the
National Electronic Fund Transfer system. Proposal to extend the scheme of
capitalisation of weak RRBs by another 2 years to enable States to contribute
their share.
INFRASTRUCTURE AND INDUSTRIAL DEVELOPMENT
INFRASTRUCTURE AND INDUSTRIAL DEVELOPMENT
During Twelfth Plan period, investment in infrastructure to go up to 50 lakh
crore with half of this, expected from private sector. More sectors added as
eligible sectors for Viability Gap Funding under the scheme “Support to PPP in
infrastructure”. Government has approved guidelines for establishing joint
venture companies by defence PSUs in PPP mode. First Infrastructure Debt Fund
with an initial size of 8,000 crore launched earlier this month. Tax free bonds
of 60,000 crore to be allowed for financing infrastructure projects in 2012-13.
A harmonised master list of infrastructure sector approved by the Government.
IIFCL has put in place a structure for credit enhancement and take-out finance
for easing access of credit to infrastructure projects. National Manufacturing
Policy announced with the objective of raising, within a decade, the share of
manufacturing in GDP to 25 per cent and creating of 10 crore jobs. Coal India
Limited advised to sign fuel supply agreements with power plants, having
long-term PPAs with DISCOMs and getting commissioned on or before March 31,
2015. External Commercial Borrowings (ECB) to be allowed to part finance Rupee
debt of existing power projects. Target of covering a length of 8,800 kilometre
under NHDP next year.
Allocation of
the Road Transport and Highways Ministry enhanced by 14 per cent to 25,360
crore. ECB proposed to be allowed for capital expenditure on the maintenance
and operations of toll systems for roads and highways, if they are part of
original project. Direct import of Aviation Turbine Fuel permitted for Indian
Carriers as actual users. ECB to be permitted for working capital requirement
of airline industry for a period of one year, subject to a total ceiling of US
$ 1 billion. Proposal to allow foreign airlines to participate upto 49 per cent
in the equity of an air transport undertaking under active consideration of the
government. In September 2011 central assistance of 18,500 crore spread over 5 years
approved. US $ 4.5 billion as Japanese participation in the project. Various
proposals to address the shortage of housing for low income groups in major
cities and towns including allowing ECB for low cost housing projects and
setting up of a credit guarantee trust fund etc. Government has taken steps to
finalise pricing and investment policies for urea to reduce India’s import
dependence in urea. Government has announced a financial package of 3,884 crore
for waiver of loans of handloom weavers and their cooperative societies. Two
more mega handloom clusters, one to cover Prakasam and Guntur districts in
Andhra Pradesh and another for Godda and neighbouring districts in Jharkhand to
be set up. Three Weaver’s Service Centres one each in Mizoram, Nagaland and
Jharkhand to be set up for providing technical support to poor handloom
weavers. 500 crore pilot scheme announced for promotion and application of
Geo-textiles in the North Eastern Region. A powerloom mega cluster to be set up
in Ichalkaranji in Maharashtra with a budget allocation of 70 crore. 5,000
crore India Opportunities Venture Fund to be set up with SIDBI. To enable
greater access to finance by Small and Medium Enterprises (SME), two SME
exchanges launched in Mumbai recently. Policy requiring Ministries and CPSEs to
make a minimum of 20 per cent of their annual purchases from MSEs approved. Of
this, 4 per cent earmarked for procurement from MSEs owned by SC/ST
entrepreneurs.
AGRICULTURE
AGRICULTURE
Plan Outlay for Department of Agriculture and Co-operation
increased by 18 per cent. Outlay for Rashtriya Krishi Vikas Yojana (RKVY)
increased to 9,217 crore in 2012-13. Initiative of Bringing Green Revolution to
Eastern India (BGREI) has resulted in increased production and productivity of
paddy. Allocation for the scheme increased to 1,000 crore in 2012-13 from 400
crore in 2011-12. 300 crore to Vidarbha Intensified Irrigation Development
Programme under RKVY. 2,242 crore project launched with World Bank assistance
to improve productivity in the dairy sector. 500 crore provided to broaden
scope of production of fish to coastal aquaculture. Target for agricultural
credit raised by 1,00,000 crore to 5,75,000 crore in 2012-13. Interest
subvention scheme for providing short term crop loans to farmers at 7 per cent
interest per annum to be continued in 2012-13. Additional subvention of 3 per
cent available for prompt paying farmers. Short term RRB credit refinance fund
being set up to enhance the capacity of RRBs to disburse short term crop loans
to small and marginal farmers. Kisan Credit Card (KCC) Scheme to be modified to
make KCC a smart card which could be used at ATMs. A sum of 200 crore set aside
for incentivising research with rewards. Structural changes in Accelerated
Irrigation Benefit Programme (AIBP) being made to maximise flow of benefit from
investments in irrigation projects. Allocation for AIBP in 2012-13 stepped up
by 13 per cent to 14,242 crore. Irrigation and Water Resource Finance Company
being operationalised to mobilise large resources to fund irrigation projects. A
flood management project approved by Ganga Flood Control Commission at a cost
of 439 crore for Kandi sub-division of Murshidabad District. A new centrally
sponsored scheme titled “National Mission on Food Processing” to be started in
2012-13 in co-operation with State Governments.
INCLUSION
Allocation for Scheduled Castes Sub Plan at 37,113 crore in BE 2012-13 represents an increase of 18 per cent over BE 2011-12. Allocation for Tribal Sub Plan at 21,710 crore in BE 2012-13 represents an increase of 17.6 per cent. National Food Security Bill, 2011 is before Parliamentary Standing Committee. A national information utility for computerisation of PDS is being created. To become operational by December, 2012. A multi-sectoral programme to address maternal and child malnutrition in selected 200 high burden districts is being rolled out during 2012-13. Allocation of 15,850 crore made for Integrated Child Development Service (ICDS) scheme, representing an increase of 58 per cent over BE 2011-12. 11,937 crore allocated for National Programme of Mid Day Meals in schools. An allocation of 750 crore proposed for Rajiv Gandhi Scheme for Empowerment of Adolescent Girls, SABLA. Budgetary allocation for rural drinking water and sanitation increased from 11,000 crore to 14,000 crore representing an increase of over 27 per cent. Allocation for PMGSY increased by 20 per cent to Rs.24,000 crore to improve connectivity. Major initiative proposed to strengthen Panchayats through Rajiv Gandhi Panchayat Sashaktikaran Abhiyan. Backward Regions Grant Fund scheme to continue in twelfth plan with enhanced allocation of 12,040 crore in 2012-13, representing an increase of 22 per cent over the BE 2011-12. Allocation under RIDF enhanced to 20,000 crore. 5,000 crore earmarked exclusively for creating warehousing facilities.
For 2012-13,
25,555 crore provided for RTE-SSA representing an increase of 21.7 per cent
over 2011-12. 6,000 schools proposed to be set up at block level as model
schools in Twelfth Plan. 3,124 crore provided for Rashtriya Madhyamik Shiksha
Abhiyan (RMSA) representing an increase of 29 per cent over BE 2011-12. To
ensure better flow of credit to students, a Credit Guarantee Fund proposed to
be set up.
HEALTH
HEALTH
Allocation for NRHM proposed to be increased from 18,115 crore in 2011-12 to 20,822 crore in 2012-13. National Urban Health Mission is being launched. Pradhan Mantri Swasthya Suraksha Yojana being expanded to cover upgradation of 7 more Government medical colleges.
EMPLOYMENT AND
SKILL DEVELOPMENT
MGNREGA has had
a positive impact on livelihood security. Need to bring about greater
synergy between MGNREGA and agriculture and allied rural livelihoods.
Allocation of 3915 crore made for National Rural Livelihood Mission
representing an increase of 34 per cent. To ease access to bank credit, corpus
for ‘Women’s SHG’s Development Fund’ enlarged. Proposal to establish Bharat
Livelihoods Foundation of India through Aajeevika scheme. Allocation for Prime
Minister’s Employment Generation Programme increased by 23 per cent to 1,276
crore in 2012-13. Projects approved by National Skill Development Corporation
expected to train 6.2 crore persons at the end of 10 years. 1,000 crore
allocated for National Skill Development Fund in 2012-13. To improve the flow
of institutional credit for skill development, a separate Credit Guarantee Fund
to be set up. Himayat” scheme introduced in J & K to provide skill
training to 1 lakh youth in next 5 years. Entire cost to be borne by Centre.
SOCIAL SECURITY AND THE NEEDS OF WEAKER SECTIONS
Allocation under NSAP raised by 37 per cent to 8,447 crore in 2012-13. In the
ongoing Indira Gandhi National Widow Pension Scheme and Indira Gandhi National
Disability Pension Scheme for BPL beneficiaries, pension amount to be raised
from 200 to 300 per month. Lump sum grant on the death of primary breadwinner
of a BPL family, in the age group 18-64 years, doubled to 20,000. To enhance
access under SWAVALAMBAN scheme, LIC appointed as an Aggregator and all Public
Sector Banks appointed as Points of Presence (PoP) and Aggregators. Special
grant provided to various universities and academic instiutions. A provision of
1,93,407 crore made for Defence services including 79,579 crore for capital
expenditure. Any further requirement to be met. 1,185 crore proposed to be
allocated for construction of nearly 4,000 residential quarters for Central
Armed Police Forces. 3,280 crore proposed to be allocated for construction of
office building of Central Armed Police Forces. Scheme to create National
Population Register likely to be completed within next 2 years.
GOVERNANCE
Enrolment of 20 crore persons completed under UID mission. Adequate funds to be allocated to complete enrolment of another 40 crore persons. Proposal to lay a White Paper on Black Money in current session of Parliament. Bill regarding Public Procurement Legislation to be introduced in the Budget Session of the Parliament. Legislative measures for strengthening anti-corruption framework are at various stages of enactment.
GOVERNANCE
Enrolment of 20 crore persons completed under UID mission. Adequate funds to be allocated to complete enrolment of another 40 crore persons. Proposal to lay a White Paper on Black Money in current session of Parliament. Bill regarding Public Procurement Legislation to be introduced in the Budget Session of the Parliament. Legislative measures for strengthening anti-corruption framework are at various stages of enactment.
| ( All Figures are in Crores ) | 2010-2011 | 2011-2012 | 2011-2012 | 2012-2013 | ||
| Actuals @ | Budget | Revised | Budget | |||
| Estimates | Estimates | Estimates | ||||
| 1 | Revenue Receipts | 788471 | 789892 | 766989 | 935685 | |
| 2 | Tax Revenue (net to centre) | 569869 | 664457 | 642252 | 771071 | |
| 3 | Non-Tax Revenue | 218602 | 125435 | 124737 | 164614 | |
| 4 | Capital Receipts (5+6+7)$ | 408857 | 467837 | 551730 | 555241 | |
| 5 | Recoveries of Loans | 12420 | 15020 | 14258 | 11650 | |
| 6 | Other Receipts | 22846 | 40000 | 15493 | 30000 | |
| 7 | Borrowings and other liabilities * | 373591 | 412817 | 521980 | 513590 | |
| 8 | Total Receipts (1+4)$ | 1197328 | 1257729 | 1318720 | 1490925 | |
| 9 | Non-Plan Expenditure | 818299 | 816182 | 892116 | 969900 | |
| 10 | On Revenue Account | 726491 | 733558 | 815740 | 865596 | |
| of which, | ||||||
| 11 | Interest Payments | 234022 | 267986 | 275618 | 319759 | |
| 12 | On Capital Account | 91808 | 82624 | 76376 | 104304 | |
| 13 | Plan Expenditure | 379029 | 441547 | 426604 | 521025 | |
| 14 | On Revenue Account | 314232 | 363604 | 346201 | 420513 | |
| 15 | On Capital Account | 64797 | 77943 | 80404 | 100512 | |
| 16 | Total Expenditure (9+13) | 1197328 | 1257729 | 1318720 | 1490925 | |
| 17 | Revenue Expenditure (10+14) | 1040723 | 1097162 | 1161940 | 1286109 | |
| 18 | Of Which, Grants for creation of Capital Assets | 87487 | 146853 | 137505 | 164672 | |
| 19 | Capital Expenditure (12+15) | 156605 | 160567 | 156780 | 204816 | |
| 20 | Revenue Deficit (17-1) | 252252 | 307270 | 394951 | 350424 | |
| -3.3 | -3.4 | -4.4 | -3.4 | |||
| 21 | Effective Revenue Deficit (20-18) | 164765 | 160417 | 257446 | 185752 | |
| -2.1 | -1.8 | -2.9 | -1.8 | |||
| 22 | Fiscal Deficit {16-(1+5+6)} | 373591 | 412817 | 521980 | 513590 | |
| -4.9 | -4.6 | -5.9 | -5.1 | |||
| 23 | Primary Deficit (22-11) | 139569 | 144831 | 246362 | 193831 | |
| -1.8 | -1.6 | -2.8 | -1.9 | |||
TAX PROPOSALS -
DIRECT TAXES
1. Exemption
limit for the general category of individual taxpayers enhanced from 1,80,000
to 2,00,000 giving tax relief of 2,000.
2. Upper limit of 20 per cent tax slab raised from 8 lakh to 10 lakh.
3. Unexplained credits, money, investment, expenditure etc. shall be taxed at a rate of 30%.
4. Allow individual tax payers, a deduction of up to 10,000 for interest from savings bank accounts.
5. Allow deduction of up to 5,000 for preventive health check up.
6. Senior citizens not having income from business exempted from payment of advance tax.
7. To provide low cost funds to stressed infrastructure sectors, rate of withholding tax on external commercial borrowings reduced from 20% to 5% for power, airlines, roads, bridges, affordable houses and fertiliser sectors.
8. Restriction on Venture Capital Funds to invest only in 9 specified sectors removed.
9. Continue to allow repatriation of dividends from foreign subsidiaries of Indian companies at a lower tax rate of 15 per cent up to 31.3.2013.
10. Investment link deduction of capital expenditure for certain businesses to be provided at the enhanced rate of 150 per cent.
11. Extend weighted deduction of 200 per cent for R& D expenditure in an in-house facility for a further period of 5 years beyond March 31, 2012.
12. Provide weighted deduction of 150 per cent on expenditure incurred for agri-extension services.
13. Extend the sunset date for setting up power sector undertakings by one year for claiming 100 per cent deduction of profits for 10 years.
14. Turnover limit for compulsory tax audit of account and presumptive taxation of SMEs to be raised from 60 lakh to 1 crore and for professional from Rs. 15 lakh to Rs. 25 lakh.
15. New section 54GB w.e.f. 2013-14 inserted for providing exemption from Capital Gains tax on sale of residential property, if sale consideration is used for subscription in equity of a new start up manufacturing SME company (more than 50% shares to be held) for purchase of new plant and machinery.
16. Provide weighted deduction at 150 per cent of expenditure incurred on skill development in manufacturing sector.
17. Reduction in securities transaction tax by 20 per cent i.e. from 0.125% to 0.10% on cash delivery transactions.
18. Provision of Alternate Minimum Tax (AMT) extended to cover any person other than a company who has claimed deduction under any section (other than section 80P) included in chapter VI- A under the heading "C- Deduction in respect of certain incomes" or under section 10AA, shall be liable to pay AMT @ 18.5% if the adjusted total income of such person more than 20 lakh. Tax credit shall be available for 10 assessment years. 19. Introduce General Anti Avoidance Rule to counter aggressive tax avoidance scheme.
20. TDS will be deducted on director remuneration @ 10% which in not in the nature of salary.
21. TCS @ 1% of the sale consideration to be collected by seller on sale of bullion & jewellary more than Rs. 2 Lakh sale in cash.
22. TDS on transfer of immovable properties other than agricultural land will be deducted @ 1%, if the consideration exceeds Rs. 50 Lakhs in urban areas and Rs. 20 Lakhs in other areas. TAN not required.
23. Any payment more than Rs. 10,000 shall only be allowed as deduction under section 80G and 80GGA if such sum is paid by any mode other than cash.
24. New Section 56(2) -Any consideration received by a closely held company for issue of shares which is in excess of their FMV shall be chargeable under the head "Income from other sources".
25. Amendment to Section 68 - The source of funds in the hands of the resident shareholders to be explain by the investee closely held company in addition to the existing requirement to disclose the nature and source of any sum credited in its books.
26. Re-opening of tax assessments up to 16 years in case of overseas assets.
27. Mandatory ITR filing for resident having any asset abroad or signing authority in any account located outside India.
28. With respect to any search or seizure conducted after 01/07/2012, if undisclosed income is admitted during the course of search then the tax payer will be liable for penalty @ 10% of undisclosed income. If undisclosed income is disclosed in the return of income filed after the search then the tax payer will be liable for penalty @ 20% of undisclosed income. If the income is not disclosed in the above given cases then the tax payer will be liable for penalty @ ranging from 30 to 90 % of undisclosed income.
29. Any sum or property received without consideration or for inadequate consideration by HUF from its members would be excluded from taxation under section 56(2).
30. Cascading effect of DDT in multi-layer corporate structure removed.
31. Exemption for Insurance Policies issued on or after 1st April,2012 would only be available for policies where the premium payable for any of the year during the term of the policy does not exceed 10% of the actual capital sum assured (as against existing 20%).
32. Exemption in respect of any income of foreign company received in India in Indian currency on account of sale of crude oil to any person in India subject to some conditions.
33. Assessment of charitable organisations in case commercial receipts exceed the specified threshold i.e. Rs. 25 lakh.
34. Extending benefit of initial depreciation to the power sector.
35. The time limits for completion of assessments and re-assessments shall respectively be increased by 3 months.
36. Processing of return will not be necessary in the case where where notice u/s 143(2) has already been issued for scrutiny of the return.
37. Due date of furnishing audit report in case of international transactions extended from 30th September to 30th November of the assessment year.
38. If the aggregate amount of interest on debentures paid during the financial year does not exceed Rs. 5000/- and the payment is made by account payee cheque then no deduction of tax (TDS) should be made.
39. Threshold limit for TDS on compensation or consideration for compulsory acquisition increased from Rs. 1 lakh to Rs. 2 lakh.
40. Extension of time for passing an order u/s 201 in certain cases extended from 4 years to 6 years.
41. TCS on sale of certain minerals shall be collected @ 1% by the seller (Section 206C).
42. Fee and penalty for delay in furnishing of TDS/TCS statements increase from Rs 100 per day to Rs 200 per day in addition to the said fee, penalty ranging from Rs 10000/- to Rs 1 lakh shall also be levied.
43. Where a person has received any income without deduction or collection of tax, he shall be liable to pay advance tax in respect of such income.
44. It is proposed to provide General Anti Avoidance Rule in the income tax Act to deal with aggressive tax planning.
TAX PROPOSALS -
INDIRECT TAXES
SERVICE TAX
1. Service tax confronts challenges of its share being below its potential, complexity in tax law, and need to bring it closer to Central Excise Law for eventual transition to GST.
2. Service
tax up from 10% to 12%.
3. Tax
all services except those in the negative list comprising of 17 heads.
4. Service
tax law to be shorter by nearly 40 per cent.
5. Number
of alignment made to harmonise Central Excise and Service Tax. A common
simplified registration form and a common return comprising of one page are
steps in this direction.
6. Revision
Application Authority and Settlement Commission being introduced in Service Tax
for dispute resolution.
7. Utilization
of input tax credit permitted in number of services to reduce cascading of
taxes.
8.
Place of Supply Rules for determining the location of service to be put in
public domain for stakeholders’ comments.
9. Rules
pertaining to point of taxation are being rationalised.
10. The
option of deferred payment is being allowed for all service providers rather
than for specific services. The facility will be available only to individuals
and partnership firms up to a turnover of taxable services of Rs. 50 lakh
subject to the condition that their turnover of taxable services in the
previous year was below Rs. 50 lakh.
11. One
year time limit for issuance of show cause notice for demand of service tax
being increased to 18 months.
12. Service tax on air transport payable @ 12% on 40%, subject to condition of non-availment of Cenvat credit on inputs or capital goods.
13. Rule 7
for input service distributors is being amended to provide that credit of
service used wholly in a unit shall be distributed only to that unit and that
the credit of service tax attributable to service used in more than one unit
shall be distributed pro rata on the basis of the turnover of the concern unit
to the sum total of the turnover of all the units to which the service relates.
14. Rule 9(1)(e) is being amended to allow availment of credit on the tax payment challan in case payment of service tax by the service receiver on reverse charge basis.
15. Section 68(2) of the Finance Act, 1994 has been amended to put the onus of payment of service tax on reverse charge basis partly on service provider and partly on service receiver. The scheme is proposed to be made applicable on three specific services i.e. hiring of means of transport, construction and man power supply.
EXCISE
1. 12% excise duty imposed on branded retail garments.
2. Standard excise duty hiked from 10% to 12%.
3. A common simplified registration form and a common return for Central Excise and Service Tax, to be named EST-1. This common return will comprise only one page, which will be a significant reduction from the 15 pages of the two returns at present.
4. Enhance the duty from 22 per cent to 24 per cent on large cars.
5. Branded silver jewellery fully exempted from excise duty.
6. Section 9 provides that cases of evasion in which the duty leviable exceeds Rs. 1 lakh shall be punishable with a term of imprisonment extending to seven years and with fine. The section is being amended to subsitute Rs. 1 lakh with Rs. 30 lakh.
7. Concessional rate of excise duty of 5% on non-petroleum products is being increased to 6%.
8. The lower rate of 1% on non-petroleum products is being increased to 2%. However, precious metal jewellery, coal and fertilizers would remain at 1%.
9. Full exemption from excise duty is being provided to food preparations containing fruits and vegetables falling under Chapter 20, which are prepared in a hotel, restaurant or a retail outlet, whether or not such food is consumed in such hotels/restaurants/retail outlets.
10. Exemption from excise duty is being restored on ocular lens.
11. Excise duty is being reduced from 10% to 6% on Matches manufactured by semi-mechanised units and processed food products of soya.
CUSTOM
1. No
change in peak customs duty.
2. Customs duty reduced from 7.5% to 2.5% for iron ore equipment.
3. LCD and LED panels exempted from custom duty.
4. Automated shuttle looms exempted from customs duty.
5. Mobile phone parts exempted from basic customs duty.
6. Cuts customs duty on rail equipment to 7.5% from 10%.
7. Customs duty on some gold and platinum products increased.
8. Import of aircraft parts exempt from basic customs duty.
9. Customs duty on refined gold doubled.
10. Full exemption on customs duty on coal.
11. LNG out of customs duty.
12. 5% customs duty exempted on equipment for fertilizer plants.
13. Thermal power companies exempted from customs duty for 2 years.
14. Duty on large cars to go up to 27 percent.
15. Reduce basic custom duty on Cigarettes.
16. Waste paper is being fully exempted from basic custom duty.
17. The duty free allowance under the baggage rules is being increased from Rs. 25,000 to Rs. 35,000 for adult passengers of Indian origin and from Rs. 10,000 to Rs. 15,000 for children upto 10 years of age.
18. Basic custom duty on flat rolled products (HR and CR) of non-alloy steel is being increased from 5% to 7.5%.
19. Full exemption from basic custom duty, CVD and SAD is being extended to equipment imported for road construction projects awarded by Metropolitan Development Authorities.
20. Equipments for setting up of solar thermal projects are being fully exempted from SAD.
21. Cenvat Credit of special additional duty (SAD) of 4% can be transferred from one unit to other unit of same manufacturer [Rule 10A of Cenvat Credit Rules w.e.f. 1-4-2012].
Queries
& Discussions Welcome
Note: The
purpose of this note is to provide a brief overview of the key announcements
pertaining to the Union Budget 2012- 13. It does not seek to critically examine
the various provisions nor is it meant to a complete elaboration of all its
provisions. It is possible that some provisions of the Union Budget 2012- 13
could be altered in some respect at the time of enactment of the final
legislation. We recommend that advice be sought before taking any action on
specific issues.
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