indian budget 2012-13_skp

8/2/2019 Indian Budget 2012-13_SKP

http://slidepdf.com/reader/full/indian-budget-2012-13skp 1/25



Budget 2012

2 | P a g e

Table of ContentsForeword .......................................................................................................................................... 3

Key Policy Announcements of the Union Budget 2012-13 .............................................................. 4

General ......................................................................................................................................... 4

Tax Structure ................................................................................................................................ 5

Social Sector reform schemes ...................................................................................................... 5

Agricultural Sector ....................................................................................................................... 6

Financial Sector ............................................................................................................................ 6

Direct Tax Proposals ......................................................................................................................... 7

Tax Rates and Slabs ...................................................................................................................... 7

Business income ........................................................................................................................... 7Capital Gains ................................................................................................................................ 9

Exemptions / Deductions ............................................................................................................. 9

Transfer Pricing .......................................................................................................................... 10

General Anti- Avoidance Rules (‘GAAR’) ..................................................................................... 11

Withholding Tax Provisions ........................................................................................................ 12

Tax Collection at Source ............................................................................................................. 13

International Tax and amendments ........................................................................................... 13

Minimum Alternate Tax (MAT) and Alternate Minimum Tax (AMT) ......................................... 14

Dividend Distribution Tax ........................................................................................................... 15

Venture Capital Funds ................................................................................................................ 15

Presumptive taxation under Tonnage Tax Scheme ................................................................... 15

Penalties ..................................................................................................................................... 16

Reassessment of income in relation to any asset located outside India ................................... 16

Extension of time for completion of assessments and reassessments ..................................... 16

Other Miscellaneous Provisions ................................................................................................. 17

Indirect Tax Proposals .................................................................................................................... 19

Customs Duty ............................................................................................................................. 19

Excise .......................................................................................................................................... 20

Service Tax ................................................................................................................................. 22



Budget 2012

4 | P a g e

Also, the Govt has handed over a nuclear weapon to the tax administrators in form of General

Anti Avoidance Regulations (GAAR). The message again is whatever the tax payer wants to do it

can do but the Govt would treat it the way it wants for collecting taxes and will ultimately collect

the taxes.

Transfer Pricing is going to be an area which witnesses maximum action with the introduction of

APAs, enhanced powers of the TPO and stretching of TP provision to even domestic related

party transactions. Intangible property is included in the scope of international transaction,

maximum safe harbor is at 3% - forget the safe harbour provisions which were promised 2 years

back - and TP penalties are made more dynamic.

To mollify the poor, token soak-the-rich taxes have been imposed on large cars (excise up and

also customs), gold and platinum. Sin taxes are up on cigarettes and bidis. But it is the budgetarithmetic that will go up in smoke.

The FM also promised strict action for black money and also promised to bring in white paper on

black money. Amongst the provisions introduced to check this is a 16 year window to reopen

assessments.

The promises made earlier to introduce Direct Tax Code (DTC) and Goods and Service Tax (GST)

were repeated again. To make them look realistic the FM promised GST Network and the IT

infrastructure, to be set up and operationalized by August 2012. This IT infrastructure definitelymust be state of art since the Govt by doing away import and export of service rules now

expects the foreign companies to pay service tax on services rendered and Govt to catch them in

case they don’t.

The FM ended his speech with the following words “Whether or not today’s announcements

make tomorrow morning’s headlines matters little, as long as they help in shaping the headlines

that describe India a decade from now.” While none of the announcement in the budget speech

is worth the headlines, the fine print in the budget document is sure to make the headlines and

is sure to create an image of an arm twisting and bullying Govt for the honest tax payers.

Key Policy Announcements of the Union Budget 2012-13

General

Budget identifies five objectives relating to growth recovery, private investment, supplybottlenecks, malnutrition and governance matters.

GDP growth to be 7.6 per cent during 2012-13.

Central subsidies to be kept under 2 per cent of GDP; to be further brought down to 1.75per cent of GDP over the next 3 years.

Efforts to reach broadbased consensus on FDI in multi-brand retail.



Budget 2012

5 | P a g e

Proposed: Mobile based fertilizer management system; LPG transparency portal; scaling upand rolling out of Aadhar enabled payment for government schemes in at least 50 districts.

Investment in 12th Plan in infrastructure to go upto Rs. 50,00,000 crore; half of this isexpected from private sector.

Rs. 30,000 crore to be raised through disinvestment.

White Paper on Black Money to be laid in the current session of Parliament.

All services to attract service tax except those in the negative list.

Total expenditure budgeted at Rs. 14,90,925 crore; plan expenditure at Rs. 5,21,025 crore ?18 per cent higher than 2011 -12 budget; non plan expenditure at Rs. 9,69,900 crore.

Fiscal deficit targeted at 5.1 per cent of GDP, as against 5.9 per cent in revised estimates for2011-12.

Central Government debt at 45.5 per cent of GDP as compared to Thirteenth Finance

Commission target of 50.5 per cent.Medium-term Expenditure Framework Statement to be introduced; will set forth 3-yearrolling target for expenditure indicators.

General Anti Avoidance Rule being introduced to counter aggressive tax avoidance.

Tax Structure

Net gain of Rs.41,440 crore due to taxation proposals.

Tax proposals mark progress in the direction of movement towards DTC and GST.

Investment linked deduction of capital expenditure enhanced for certain businesses; newsectors eligible for investment linked deduction.

Central Excise and Service Tax being harmonized.

Standard rate of excise duty raised from 10 per cent to 12 per cent; service tax rates raisedfrom 10 per cent to 12 per cent; no change in peak customs duty of 10 per cent on non-agricultural goods.

Proposes to raise tax on all services except those in the negative list comprising 17 items.

Relief in indirect taxes to sectors under stress; agriculture, infrastructure, mining, railways,roads, civil aviation, manufacturing, health and nutrition, and environment get duty relief.

Social Sector reform schemes

Provisions under rural housing fund increased to Rs. 4,000 crore from Rs. 3,000 crore

4,000 residential quarters to be constructed for Central Armed Police Forces

National Urban Health Mission is being launched

34 per cent increase in allocation to National Rural Livelihood Mission, to Rs. 3915 crore

Bharat Livelihood Foundation to be established to support livelihood interventions

particularly in tribal areasGrant on death of primary breadwinner of a BPL family in the age group 18-64 yearsdoubled to Rs. 20,000



Budget 2012

6 | P a g e

Defence services get Rs. 193,407 crore; any further requirement to be met

Swabhimaan: remaining habitations to be covered; to be extended to more habitations;ultra small branches to be set up in Swabhimaan habitations.

Financial package of Rs. 3,884 crore for waiver of loans to handloom weavers and theircooperative societies; mega handloom clusters in Andhra, Jharkhand; weaver servicecentres in Mizoram, Nagaland and Jharkhand; powerloom mega cluster in Maharashtra; Rs.500 crore pilot schemes for geo-textiles in North-Eastern region.

Rural drinking water and sanitation gets 27 per cent rise in allocation to Rs. 14,000 crore;PMGSY gets 20 per cent rise to Rs. 24,000 crore.

Projects covering length of 8,800 km to be awarded under NHDP against 7,300 km during2011-12.

UID-Aadhar to get adequate funds for enrolment of 40 crore persons, in addition to the 20crore persons already enrolled

Agricultural Sector

Target for agricultural credit raised to Rs. 5,75,000 crore.

Interest subvention for short-term crop loans to farmers at 7 per cent interest continues;additional 3 per cent for prompt paying farmers.

Rs. 200 crore for awards to incentivise agricultural research.

Financial Sector

Rajiv Gandhi Equity Saving Scheme: to allow income tax deduction to retail investors oninvesting in equities

Rs. 15,888 crore to be provided for capitalization of public sector banks and financialinstitutions

A central "Know Your Customer" depository to be developed

Tax Free Bonds of Rs. 60,000 crore to be allowed for financial infrastructure projects

Allocation of Road Transport and Highways Ministry enhanced by 14 per cent to Rs. 25,360crore

Rs. 5,000 crore India Opportunities Venture Fund to help small enterprises



Budget 2012

8 | P a g e

Weighted deduction of 150% is proposed to be allowed for the capital expenditure incurredfor the following businesses:

Business of setting up and operating Cold chain facility,

Warehousing facility for storage of agricultural produce,Building and operating, anywhere in India, or a hospital with at least one hundred bedsfor patients,

Developing and building a housing project under a scheme for affordable housingframed by the Central Government or a State Government

Production of fertilizer in India

This amendment is proposed to be introduced from AY 2013-14

An owner of hotel of two-star or above category continues to be eligible for the 100%deduction even if he, while continuing to own the hotel, transfers the operation of such

hotel to another person. This amendment is proposed to be introduced with retrospectiveeffect from 1st April 2011.

It is proposed to allow weighted deduction of 150% of capital expenditure incurred by anassessee for any expenditure on agricultural extension project or on any skill developmentproject to be notified by the CBDT. However, in case of skill development project, weighteddeduction will not be allowed for cost of land and building. This amendment is proposed tobe introduced from AY 2013-14.

The coverage of related parties under section 40A(2) of the Act is proposed to be widened.Where any company has substantial interest in the assessee, at present, such a company isconsidered as a related party. It is proposed that where such a company (i.e. the company

which has substantial interest in the assessee) has substantial interest in any other companycarrying on business or profession, then such other company will also be considered asrelated party of the assessee company. This amendment is proposed to be introduced fromAY 2013-14.

The threshold limit of total sales, turnover or gross receipts for getting accounts audited, hasincreased from Rs. 60 lacs to Rs. 1 crore in the case of persons carrying on business andfrom Rs. 15 lacs to Rs. 25 lacs in the case of persons carrying on profession. Thisamendment is proposed to be introduced from AY 2013-14. The due date for furnishing taxaudit report in case of all assesses to whom transfer pricing provisions are applicable is 30 th November. This amendment is proposed to be introduced from AY 2012.

The turnover limit for applicability of presumptive taxation has been increased from Rs. 60lacs to Rs. 1 crore. This amendment is proposed to be introduced from AY 2013-14.

The presumptive scheme of taxation is not applicable to the following persons:

A person carrying on profession referred to in section 44AA(1),

A person earning income in the nature of commission or brokerage

A person carrying any agency business

This amendment is proposed to be introduced with retrospective effect from 1 st April 2011.



Budget 2012

9 | P a g e

Capital Gains

Condition of issue of shares not to apply in case of amalgamation or demerger betweenholding and subsidiary company.

Where an asset has been transferred to a company during conversion of a soleproprietorship or a partnership firm into a company it is not regarded as transfersubject to certain conditions. It is now clarified that in such case cost of the assetreceived by the company will be the cost of the sole proprietorship or partnership firm.This clause is retrospectively amended from 1st April, 1999.

Where it is not possible to determine the sale consideration for the purpose of calculation of capital gains, fair market value of the said asset as on the date of transferwill be considered as Sale consideration.

Benefit of exemption from the capital gains arising on account of transfer of an agriculturalland if the sale proceeds are reinvested in another agricultural land in next two years, isnow also extended where the land was used for agricultural purposes by an HUF.

Long term capital gain arising on transfer of residential property being a house or a plot of land by individual or HUF is not liable to tax subject to the following conditions –

The net consideration on such transfer is utilized within the due date of filling thereturn, for subscription in the equity shares of a Small or Medium Size company (‘SMC’)

The assessee should hold more than 50% share capital or voting rights of the SMC. Theshareholding of 50% will be calculated after the assessee has acquired shares in theSMC.

The SMC in turn has utilized such consideration for purchase of new assets being plant

and machinery (other than office appliances or other specified assets) within one yearfrom the date of such subscription.

The SMC must be incorporated during the period from the first day of the financial yearin which transfer took place till the due date of filing the return of income for thetransferor

The SMC should be engaged in the business of manufacturing of an article or thing

The equity shares of the SMC and the new plant and machinery acquired should not besold up to 5 years.

The relief would be available for any transfer of property that takes place on or before

31st March, 2017.Currently, the assessing officer can refer to the valuation officer only if he is of the opinionthat the value declared by the assessee is the less than the fair market value. Now, theassessing officer will be able to refer to the valuation officer even if he is of the opinion thatthe value declared by the assessee as on 1 st April 1981 is more than FMV.

Exemptions / Deductions

Deduction under section 80C for life insurance premium is proposed to be reduced from20% to 10% of the ‘actual’ capital sum assured.

The scope of deduction under section 80D is proposed to be enlarged to include amountcontributed for preventive health check-up of the assessee, his spouse, dependant childrenor dependent parents. The deduction will be restricted to actual amount of expenditure



Budget 2012

10 | P a g e

incurred or Rs. 5,000/- whichever is lower. However the overall limit of deduction remainsunchanged.

Section 80-IA provides for 100% deduction for profits derived by power sector undertakingssubject to certain conditions. The power sector undertakings were required to commenceoperations by 31st March 2012. It is now proposed to extend the time limit forcommencement of operations by one more year upto 31st March 2013. The followingundertakings will be covered by this extension of time limit:

Undertakings set up for the generation and distribution of power,

Undertakings set up for transmission or distribution by laying a network of newtransmission or distribution lines,

Undertakings carrying out substantial renovation and modernization of existing networkof transmission or distribution lines,

A new section 80TTA is proposed to be introduced to provide a deduction for interest

earned by an individual or an HUF on saving deposits with a bank, co-operative society orPost Office upto Rs 10,000.

Transfer Pricing

Gamut of transfer pricing provisions proposed to be widened, now applicable to specifieddomestic transactions if aggregate amount of all such domestic transactions exceeds Rs. 5crore in a year w.e.f 1 st April 2012.

Specified domestic transactions means:

any expenditure in respect of which payment has been made or is to be made topersons specified under section 40A(2)(b);

where goods or services of eligible business are transferred to any other businesscarried on by the assessee and vice-versa u/s. 80-IA;

where it appears to the assessing officer that owing to the close connection betweenthe assessee carrying on eligible business u/s. 80-IA and any other person and vice-versa.

Assessee claiming the benefit of tax deduction in respect of STP unit, EOU unit and SEZunit where there can be instances of the pricing in case of domestic transaction beinginfluenced due to the enterprises / concerns being associated with each other.

Definition of “international transaction” widened to include transaction of intangibleproperty, business restructuring etc.

Variation in arm’s length price (ALP) within 5% is not a standard deduction . This is madeapplicable w.e.f 1st October 2009. Further, the above 5% variation is now proposed to becapped at 3% w.e.f 1 st April 2012.

Power of Transfer Pricing Officers (TPOs) enhanced to look into any other internationaltransactions which are not reported in Form 3CEB. (Retrospective w.e.f 1st June 2002).

Assessing Officer can file appeal against the order passed by Dispute Resolution Panel (DRP)w.e.f 1st July 2012.

It is clarified that DRP has power to enhance the transfer pricing adjustment. Thisamendment is made effective retrospectively w.e.f 1st April 2009 and will accordingly applyto AY 2009-10 and subsequent assessment years.



Budget 2012

11 | P a g e

Failure to report any international transaction which is required to be reported or tomaintain prescribed documents or information or maintaining or furnishing of any incorrectinformation or documents may lead to penalty of 2% of the value of internationaltransaction w.e.f 1st July 2012.

Non reporting of an international transaction or non-filing of report or otherwise by notincluding such transaction in Form 3CEB would attract reopening u/s. 147 of the Act.

Time limit for filing return of income extended to 30th November even for non-corporateassessee where transfer pricing provisions are applicable. This would have a retrospectiveeffect from AY 2012-13.

Time limit for completion of assessment in case of transfer pricing assessment enhancedfrom 21 months to 24 months.

Advance Pricing Agreements introduced in Budget 2012-13

New sections 92CC & 92CD are proposed to be inserted in the Act (effective from July 1,

2012).Advance Pricing Agreement (APA’s) is an agreement between taxpayer and the taxauthorities.

Tax authorities may enter in to an APA with the taxpayer to determine ALP or specifythe manner in which it is to be determined.

Methods used may be those referred u/s 92CA (1) or any other method with suitableadjustments.

Agreement shall be valid for five consecutive years.

Modified return may be filed within a period of 3 months to give effect t o the APA’s in

case the return u/s 139 has already been filed.

Additional time of 12 months has been provided to complete the assessments involvingAPA’s.

General Anti- Avoidance Rules (‘GAAR’)

Any arrangement may be declared as an Impermissible Avoidance Arrangement (‘IAA’)which means an arrangement, the main purpose or one of the main purposes of which is toobtain tax benefit and it

creates rights/ obligations, which are not ordinarily created between unrelated persons;results in misuse or abuse of provisions of ITA;

lacks commercial substance in whole or in part; or

is entered into in a manner which is not ordinarily employed for bona fide purposes;

An arrangement may be IAA even if the main purpose of a step or part of it is to obtain taxbenefit

Onus on the tax payer to prove that an arrangement is not an IAA

Consequences would be denial of tax benefit and would include:

Disregarding, combining, recharacterising steps or parts of the IAATreating the IAA as not been entered into



Budget 2012

12 | P a g e

Disregarding any accommodating party

Deeming connected persons to be one & the same

Reallocating/ recharacterising any accrual, receipt, expenditure or relief among the

partiesTreating any other place/ location as place of residence or situs of the asset

Disregarding the corporate structure

Recharacterising debt financing as equity or vice versa

Recharacterising a capital accrual/ receipt as revenue or vice versa

Invoking of GAAR to be done at 2 levels of authority viz. CIT & Approving Panel

GAAR provisions to override Tax Treaty

Certificate to be obtained, in the prescribed form, from the overseas Government for

claiming Treaty relief This provision shall be applicable with effect from 1 st April, 2012

Withholding Tax Provisions

Threshold limit for applicability of withholding tax on interest on debentures, includingunlisted debentures, issued by a company in which public are substantially interested isproposed to be increased from Rs. 2,500/- to Rs. 5,000/-. This provision shall be applicablewith effect from 1 st July, 2012.

The withholding tax rate in respect of payments to a non-resident sportsman who is not a

citizen of India and non-resident sports association or institution is increased from 10% to20%. It is also proposed to extend the scope of this section to the non-resident entertainers.This provision shall be applicable with effect from 1 st July, 2012.

Payments to the independent directors, whether by way of remuneration or fees orcommission is proposed to be brought within the purview of Section 194J and liable forwithholding tax at 10%. This provision shall be applicable with effect from 1st July, 2012.

The threshold limit for withholding tax in respect of payment of compensation or enhancedcompensation on compulsory acquisition of the immovable property is proposed to beincreased from Rs. 1 lac to Rs. 2 lacs. This provision shall be applicable with effect from 1 st July, 2012.

A new Section 194LAA is proposed to be inserted to provide for TDS on consideration paidfor purchase of immovable property, (i.e. land or building) other than agricultural land. Thebuyer will have to make TDS at 1% of the consideration paid to seller. The requirement of TDS would apply if the consideration paid exceeds:

Rs. 50 lacs if the property is situated in the urban agglomeration of Greater Mumbai,Delhi, Kolkata, Chennai, Hyderabad, Bengaluru, Ahmedabad, Faridabad, Gurgaon,Gautum Budh Nagar, Ghaziabad, Gandhinagar and Secunderabad

Rs. 20 lacs in other places

This provision is applicable with effect from 1 st October, 2012.

The following aspects should be noted:



Budget 2012

13 | P a g e

Where the consideration paid is less than the Stamp Duty value, the TDS shall be madeby considering the Stamp Duty Value as the amount of consideration

At the time of registration of documents of title to the property, the buyer will berequired to furnish to the Registering Officer a proof of deduction and payment of TDS.If such a proof is not furnished, the Registering Officer will not register the property.

The requirement of TDS will not apply for purchase of agricultural land situated beyondthe local limits of any municipality, municipal corporation etc. or beyond 8 km of thelocal limits.

The buyer will not be required to obtain a Tax Deduction Account Numb er (‘TAN’).

Certain persons or classes of persons as notified by CBDT, before making any paymentto a non-resident are required to make an application to the Assessing Officer todetermine the income chargeable to tax in India out of the payment made to the non-resident and the amount of TDS thereon.

Failure to deduct TDS makes the deductor liable for interest on the amount of TDS. TheFinance Bill now provides that where the deductor is not considered as ‘assessee in default’as per the above provision, the interest for non deduction of tax will be payable by thedeductor from the date on which the tax was deductible till the date of filing of Return of Income by the deductee.

The time limit for treating an assessee in default is extended from 4 years to 6 years.

Delay in filing TDS and TCS statements will now attract a fee of Rs. 200/- per day of delay,up to the amount of TDS or TCS concerned. This fee will be in addition to penalties for delayin filing the statement and should be paid before filing the TDS / TCS statement . Thisprovision is applicable from 1st July 2012 .

Both residents & non-resident to comply with withholding tax provisions on payment tonon-resident, irrespective of presence in India

Intimation generated after processing of TDS statement would be rectifiable and also anappealable order.

Tax Collection at Source

Purchase of coal, lignite and iron ore to attract TCS at 1% with effect from 1st July 2012.TCS will not be attracted if these minerals are purchased for personal consumption from a

retailer or the buyer declares that these minerals are to be utilized for the purposes of manufacturing, processing or producing articles or things.

The seller of bullion and jewellery shall collect tax at the rate of 1% of sale considerationfrom every buyer of bullion and jewellery if sale consideration exceeds Rs. 2 lacs and thesale consideration is received in cash. This provision is applicable with effect from 1st July,2012.

International Tax and amendments

Deeming provision for income accrual in India proposed to be amended by retrospective

explanations added with effect 1st

April 1962 for taxation of:Indirect transfer of Indian company shares by deeming situs of foreign share in India if value of such share is derived substantially from the Indian assets



Budget 2012

14 | P a g e

Payments for software and payments for satellite transmission by treating as ‘Royalty’.

Retrospective amendment to definitions

‘Capital asset’ to include any rights including rights of management or control, in or in

relation to, an Indian company.‘Transfer’ to cover international transfers of shares which results into disposing of orparting with any asset or interest in asset, situated in India directly or indirectly .

Special exemption provided to income of foreign company from sale of crude oil to anyperson in India, provided

Agreement is approved by Central Government

Agreement notified by Central Government

Foreign company not engaged in any other activity in India

This provision shall be applicable with effect from 1st April, 2012

Dividends declared, distributed or paid by a subsidiary foreign company to the Indian parentcompany shall be continued to be taxed @15% of such gross dividend income instead of thenormal corporate tax rates for one more year i.e. till 31 st March 2013. The objective of continuing this section is to incentivize the repatriation of funds in India in the form of dividends.

Interest received on foreign currency loan by a non-resident from specified businesses shallbe subject to a lower withholding tax of 5%.

Power generation/transmission/distribution, Operation of aircraft, production of fertilizers,

construction of roads, port, dam, etc. covered under specified businesses. This provisionshall be applicable with effect from 1 st July, 2012.

Validation clause inserted for validation of demands raised under the ITA in respect of income from indirect transfer of a capital asset situate in India. The clause would be validnotwithstanding judgment, decree, order of any court

Minimum Alternate Tax (MAT) and Alternate Minimum Tax (AMT)

It is proposed to apply the provisions of MAT to Banking, Insurance and Electricitycompanies . These companies are now required to compute MAT as per the Profit and LossAccount prepared by them under the laws applicable to them. This provision shall beapplicable with effect from AY 2013-14.

The computation mechanism of MAT is proposed to be modified. The amount standing tothe credit of revaluation reserve is required to be added to net profit if the asset in respectof which the revaluation reserve was created is retired or disposed off.

The scheme of alternative taxation based on book profit is extended to all non-corporateassessees. All assessees, other than companies, will now have to calculate AlternateMinimum Tax (‘AMT’) calculated at 18.5% of ‘adjusted total income’. AMT is appli cable tothe assessees claiming deduction under section 10AA or Chapter VI-A.

The ‘adjusted total income’ is the total income as per the provisions of the Act as increasedby deductions under Chapter VI-A and section 10AA. The tax calculated at 18.5% of adjusted total income will be compared to the normal income-tax and higher of the twoamounts will have to be paid.



Budget 2012

16 | P a g e

Penalties

At present, under search proceedings, if the assessee accepts any income asundisclosed income in the course of the search, explains the source of such income and

pays tax thereon with applicable interest, no penalty is levied on the assessee. In allother cases, the penalty was 10% of the undisclosed income. It is now proposed to levypenalty on additions to income where search is initiated after 1 st July 2012 as under:

If the assessee admits the undisclosed income during search proceedings , specifies themanner in which such income has been derived and pays tax thereon with applicableinterest, the penalty would be 10% of undisclosed income

If the assessee does not admit the undisclosed income during search proceedings , butdiscloses the same in the return of income filed after the search and pays tax thereonwith applicable interest, the penalty would be 20% of undisclosed income.

In all other cases, the penalty would be 30% to 90% of undisclosed income

A new section 271H is proposed to be inserted to provide for penalty where a personfails to file the TDS / TCS returns or furnishes incorrect information in the TDS / TCSreturns. The penalty levied could be Rs. 10,000/- to Rs. 100,000/-.

Penalty will not be levied if the person deposits the TDS / TCS with applicable interestand fee (as provided by the newly inserted section 234E) and files the TDS / TCS returnswithin 1 year from their due dates. However, this provision covers only the cases of non-filing of TDS / TCS returns. It does not cover cases of furnishing incorrectinformation in the TDS returns. These provisions would apply for the TDS / TCS returnswhich are to be filed after 1 st July 2012.

However, penalty shall not be levied if the deductor proves that there is a reasonablecause for default.

Reassessment of income in relation to any asset located outside India

The time limit for reassessment has been increased from 6 years to 16 years if a personis found to have any asset (including financial interest in any entity) located outsideIndia

Corresponding amendments also made in Wealth-tax Act.

Further, in all cases where it is found that an international transaction has not beenreported either by non-filing of report or otherwise by not including such transaction inthe report mentioned in section 92E then such non-reporting would be considered as acase of deemed escapement of income and such a case can be reopened.

Extension of time for completion of assessments and reassessments

The time limits for completion of assessments and reassessments will be increased by 3months as given in the table below.



Budget 2012

17 | P a g e

Proceedingsunder section

Current time allowed ProposedPeriod

143 21 months from the end of the A.Y. 24 months

143 and 92CA 33 months from the end of the A.Y 36 months

148 9 months from the end of the F.Y. inwhich notice issued

12 months

148 and 92CA 21 months from the end of the F.Y. inwhich notice issued

24 months

250 or 254 or 263or 264

9 months from the end of the F.Y. inwhich order received

12 months

250 or 254 or 263,and 92CA or 264

21 months from the end of the F.Y. inwhich order received

24 months

Consequential amendments have been made in the provisions of section 17A of theWealth-tax Act for increasing the time limit by three months for completion of assessment/reassessment proceedings. These amendments will take effect from the 1stday of July, 2012.

Other Miscellaneous Provisions

Age Limit of senior citizens proposed to be reduced from 65 years to 60 years.Cash Donations exceeding Rs. 10,000/- will not be eligible for deduction under section 80G.Similarly, contributions paid in cash exceeding Rs. 10,000/- for scientific research or ruraldevelopment will not be eligible for deduction under section 80GGA.

Under the existing law, where a person fails to deduct tax at source, he could be regarded asassessee in default. The Finance Bill proposes to provide that failure to make TDS will notmake the deductor an assessee in default if the following conditions are met:

The deductee has filed his return of income

The income paid by the deductor is included in computation of total income of thedeductee

The deductee has duly paid the taxes on such income.

The deductor is required to furnish a certificate certifying the above facts from aChartered Accountant.

Resident assessees above 60 years of age are not required to pay advance tax if they do nothave any income from business or profession.

Person receiving any income without deduction or collection of tax shall be liable to payadvance tax.

Unexplained cash credit, money, investment, expenditure etc, will be taxed at a flat rate of

tax of 30%, irrespective of the slab limits. The assessee will not be allowed deduction of anyexpenditure or allowance against the above income. This provision shall be applicable witheffect from AY 2013-14.



Budget 2012

18 | P a g e

Irrespective of whether a resident has taxable income or not, furnishing return of incomehas been made mandatory for residents, having any asset (including financial interest in anyentity) located outside India or signing authority in any account located outside India. Thisamendment will be effective from 01st April 2012 and thus apply for FY 2012-13 onwards.

Processing of return of income under section 143(1) will not be necessary in a case wherenotice for scrutiny assessment has already been issued to the tax payer. This amendmentwill take effect from the 1st day of July, 2012.

A trust or institution would not be eligible for exemption if its receipts from commercialactivities exceed the specified threshold. This amendment will take effect retrospectivelyfrom 1st April, 2009 and thus apply for FY 2008-09 onwards.

Gift received by a HUF from its member will be treated as a gift received from the relativesand will not be liable for tax. This clause is amended with retrospective effect from 1stOctober, 2009.

Where a company in which public are not substantially interested, receives anyconsideration as share premium and aggregate of face value and share premium exceedsthe fair market value of the shares, then such excess amount received will be treated astaxable income in the hands of the company as income from other sources.

The CBDT would prescribe the manner in which the Fair Market Value shall becomputed. The above will not be applicable in case where ‘venture capital undertaking’receives any amount from t he ‘venture capital fund’ and ‘venture capital company’.

If a company not being a company in which public are substantially interested receives anyamount in the form of share application money or share capital or share premium or by anyother name then such amount can be taxed as income of the company unless

The company provide the identity of such person in whose name such credit is recordedand,

Such person offers the explanation for the nature and source of such amount socredited.

The above will not be applicable in case where the money is received from `venture capitalfund’ and ‘venture capital company’.



Budget 2012

20 | P a g e

Procedural Changes

The following changes shall be effective on enactment of the Finance Bill:

Specified importers shall be eligible to pay Customs Duty electronically.

Limit for Duty-free imports under the Baggage Rules increased from Rs.25,000 to Rs.35,000for adult passengers of Indian origin and for children upto the age of 10 years the limitincreased from Rs.12,000 to Rs. 15,000.

Serving of notice / order issued by Department through courier shall be considered as validintimation.

The following change shall be effective from 1 st April, 2012:

Unutilized SAD credit lying in balance at the end of each quarter can be transferred to otherregistered premises of the same manufacturer.

The following change shall be effective from 1st May, 2012:

Full exemption from SAD on specified products available if importer declares:

The State of destination of sale

Value Added Tax registration number in that State

Excise

Policy level announcements

Rate of Central Excise duty increased from 10% to 12%. Effective rate to be 12.36%.

1% / 5% excise duty applicable on 131 items which were introduced for excise levy inFinance Bill 2011, increased to 2% / 6% respectively with few exceptions.

Full exemption from excise duty is provided on articles of goldsmith and silversmith waresof precious metals or of metals coated with precious metals, not bearing a brand name.

Gold coins of purity 99.5% and above and silver coins of purity 99.9% and above exemptfrom excise duty.

For the purpose of charging excise duty on ready-made garments bearing a brand name orsold under a brand name, the rate of abatement from the retail sale price (RSP) is increasedfrom 55% to 70%.



Budget 2012

21 | P a g e

Key Changes in Rate of Duty

Sr.

No.

Tariff Description Existing

Rate

New Rate Impact

1 Specified life saving drugs 10% Nil

2 Gold bars, other than tola bars (refinedgold)

1.50% 3%

3 Plain gold jewellery manufactured by EOU( DTA Clearance )

5% 10%

4 (i) Petrol driven motor vehicles lengthexceeding 4000mm and engine capacityunder 1200 cc

22% 24%

(ii) Petrol driven motor length exceeding

4000mm and engine capacity exceeding1500 cc

22%

+15000

27%

5(i) Diesel driven motor vehicles lengthexceeding 4000mm and engine capacitynot exceeding 1500 cc

22% 24%

(ii) Diesel driven motor length exceeding4000mm and engine capacity exceeding1500 cc

22%+15000

27%

6 Parts and components required formanufacture, repair and overhauling of aircraft falling under chapter heading 8802

10% Nil

7 Parts and components required formanufacture of blood pressure monitorsand blood glucose monitoring

10% 6%

Procedural Changes

The term “Interconnected undertakings” is defined in detail as part of the Act.

An assessee shall be punishable for an offences relating to any excisable goods, if the dutyleviable thereon exceeds rupees thirty lakhs (previously one lakh rupees), with an

imprisonment for a term which may extent to seven years and with fine.Assessee has to provide additional information related to ‘CENVAT credit taken from inter -unit transf er of credit’ into Excise Return (ER -1) to be submitted to Government.

The manufacturer who intends to avail of the benefit of a notification issued by CentralGovernment shall submit a quarterly return (previously monthly return) in Return atAnnexure-II to the said Assistant Commissioner or Deputy Commissioner by the tenth day of the following month.



Budget 2012

22 | P a g e

Service Tax

Change in rate of tax with effect from 1st April, 2012

Description ExistingRate

New Rate Impact

Service Tax 10.3% 12.36%

Works Contract Service 4% 4.8%

Life Insurance Companies 1.5% 3% - First Year1.5% -Subsequent

yearsMoney Changing 10.3% Proportionateincrease by 20%

Reversal of Cenvat Credit of exempted services

5% 6%

Negative List of Services (Will be notified after the enactment of Finance Bill)

Negative list is introduced to include 17 specified services on which no service tax shall beleviable. The list of these services is reproduced below:

Services by Government or a local authority excluding certain specified services.

Services by the Reserve Bank of India

Services by a foreign diplomatic mission located in India

Specified services relating to agriculture

Trading of goods

Any process amounting to manufacture or production of goods

Selling of space or time slots for advertisements other than advertisements broadcast byradio or television

Service by way of access to a road or a bridge on payment of toll charges

Betting, gambling or lottery

Admission to entertainment events or access to amusement facilities

Transmission or distribution of electricity by an electricity transmission or distributionutility.

Specified services in the field of education.

Services by way of renting of residential dwelling for use as residence;

Services by way of –

(i) extending deposits, loans or advances where consideration is received by way of interest or discount;



Budget 2012

24 | P a g e

Amendments in Cenvat Credit Rules, 2004

Proposed Changes

Simplified procedure for claiming refund of unutilized input credit in case of exporters. For the banking and financial sector, it is proposed to change the calculation of reversal of credit on actual basis from existing reversal upto 50%.

The following change shall be effective from 1 st April, 2012:

Cenvat Credit shall be available on Motor Vehicles, car insurance, hiring of cars and motorcar repairs subject to specified conditions

Credit of insurance and service station is allowed to insurance companies in respect of motor vehicles and manufacturers of motor vehicles

Credit on goods can now be taken for goods, without bringing them into the premises

subject to due documentation regarding their delivery and location by the service provider. Calculation of credit in case of Input service distributor has been changed to pro-rata basisof the turnover of the concerned unit to the sum total of the turnover of all the units towhich the service relates.

Interest on loans to be considered as exempted services. This will require reversal of creditsused for earning such income.

Amendments in Point of Taxation Rules, 2011(Effective from 1 st April, 2012)

In case of Export of Services, the point of taxation shall be date of payment.

The time limit for collection of export proceeds has been brought in line with RBI guidelines.In case of a new levy, no tax is chargeable on services where payment has been receivedand invoice issued within a period of 14 days of the date of levy.

Place of Provision of Service Rules, 2012

Place of Provision of Service Rules 2012’ has been released for comments and feedbacks.The same shall come into effect after the enactment of Finance Bill 2012.

Introduction of Place of Provision of Service Rules, 2012 shall replace the existing Export of Service Rules and Import of Service Rules.

The above mention changes have been proposed in the light of introduction of GST.

Under the aforesaid rules, exemption from service tax shall be available in case of export of service under the below specified conditions:-

Service Provider is located in taxable territory

Service Recipient is located outside India

Service provided is a service other than in negative list

Place of provision of service is outside India

Payment is received in convertible foreign exchange



Budget 2012

Other Major Amendments

Definition of service has been introduced in Finance Act, 1994.

Provisions relating to Settlement Commission is brought under service tax

Various provisions under service tax like time limit for filing of appeal, provisional relating tospecial audit, etc. have been brought in line with excise law.

Time limit for issuance of notice in case of short-levy, short paid or erroneously refundedhas been increased from one year to eighteen months (effective from enactment of FinanceBill)

In case of service being provided from outside India, the onus of payment of service taxunder reverse charge basis shall be partly in the hands of service provider and partly in thehands of service receiver. This shall be applicable on three specified services viz. hiring of means of transport, construction and man power supply. (Effective from the date to benotified)

Proposed Amendments relating to Abatements:

Sr.No.

Service Existingtaxableportion

Proposedtaxableportion

Cenvat credits

1 Convention center ormandap with catering

60% 70% All credits, except on inputs, of chapter 1 to 22, will now beavailable.

2 Pandal or Shamiana withcatering.

70% 70% All credits, except on inputs, of chapter 1 to 22, will now beavailable.

3 Coastal shipping 75% 50% No credits as at present.

4 Accommodation in hoteletc.

50% 60% Credits on input services allowed

5 Railways: goods 30% 30% All credits will be allowed

6 Railways: passengers New levy 30 % All credits will be allowed

7 Transport of passengers

by air service

New levy 60% Duty on inputs or capital goods used

for providing such taxable servicewill not be allowed

indian budget 2012-13_skp

Documents