Budget 2012 - Direct Taxes

This article provides a brief overview of budget proposals 2012 and its implications. 

Individual Tax Payers

Basic exemption limit extended by Rs.20,000 to Rs.2,00,000.  For women exemption limit extended by Rs.10,000 to Rs.2,00,000.  No increase for senior citizens to remain at Rs.2,50,000.

Tax slabs have been slightly changed to extend the rate of 20% upto Rs.10 lacs.  The revised rate slab is as follows.

           Upto Rs.2,00,000 - Nil

           Rs.2,00,001 to Rs.5,00,000 - 10%

           Rs.5,00,001 to Rs.10,00,000 - 20%

           Rs.10,00,001 and above - 30%

80C - There is no change 

80D - In addition to the current benefits expense upto to Rs.5,000 on Medical Preventive Health check-up is allowed

80DDB - Senior Citizen age reduced to 60 years from current definition of 65 years

80TTA - Interest received from Savings Bank Account exempt upto a value of Rs.10,000

A new condition has been introduced in 80C as regards insurance premium.  Deduction under section 80C for insurance is allowed only to an extent of 10% of the capital sum assured.

Section 80CCF - infrastructure bond has been withdrawn from tax deduction

Corporate Tax Payers

No change in corporate rate of 30% for domestic companies and 40% for foreign companies. 

No change in Dividend Distribution tax (DDT) rates, remains @ 15% + 7.5% surcharge + 3% Cess (effective rate 16.60875%)

No change in MAT rate of 18.5%

Section 115JC - AMT (Alternate Minimum Tax) of 18.5% applicable to a person other than a company.

Major Tax Proposals in Union Budget 2011

1. Personal income tax exemption limit increased from Rs.1.6 lacs to Rs.1.8 lacs
2. For senior citizens from 60 years upto 80 years exemption upto Rs.2.5 lacs
3. For senior citizens beyond 80 years exemption upto Rs.5 lacs
4. Surcharge on Corporate income tax reduced to 5% from 7.5%
5. MAT - Minimum Alternate Tax increased from 18% to 18.5% of book profits
6. Dividend Distribution Tax u/s 115o will be reduced because of reduction in surcharge to 5% from 7.5%
7. No change in Excise Duty Rates
8. No change in Service Tax Rates
9. CST to remian at 2% - no roadmap provided for reducing / scrapping of this 2%
10. Rates of customs duties retained
11. 15% tax on foreign company dividend

Union Budget 2011

This year budget promised / set road map for 4 major legislations.

1. Direct tax code - to be implemented from April 2012
2. GST - Draft bill to be prepared. Constitutional Amendments to be placed in Parliment during this budget session
3. New Companis bill to be introduced in this session of Parliment
4. Standards of Weights and Measures Act to be replaced with Legal Metrology Act

 This is positive development albeit with its own delays. All the four are landmark legislations and will significantly impact the way corporates carry on their business.

Changes in TDS rates - Budget 2009-10

In budget 2009 TDS rates are sought to be amended from 1.10.2009

Section 194C – Payment to Subcontractor
1% in case of Individual or HUF & 2% in case of others.

Section 194I – Rent
2% in case of machinery and 10% in case of land or building.

New Section – 206AA
A new section 206AA is being inserted to ensure PAN compliance.

It provides that any person who is entitled to receive any sum or income or amount on which tax is deductible under Chapter XVIIB shall furnish his PAN to the person responsible for deducting such tax.

If there is a failure, then tax has to be deducted at the higher of the following rates:

(i) At the rate specified in the relevant provisions of this Act; or
(ii) At the rate or rates in force; or
(iii) At the rate of 20%.

So PAN is being made mandatory independently.

Now the question is on payment to foreign companies for whom TDS may be payable, if they do not have PAN should we deduct TDS at the highest rates? Most of them will not have PAN, so what will be the implications? Should they go in for PAN?

Indian Union Budget 2009-10 Significant Changes

1. Personal Income tax rates have gone down by 3% (10% surcharge removed), so tax will be lower by Rs.10,000 per month (GBP 140 per month)

2. Income tax exemption limit increased by Rs.25,000 for senior citizens and by Rs.10,000 for all others

3. Deduction under section 80-DD in respect of maintenance, including medical treatment, of a dependent who is a person with severe disability being raised from the present limit of Rs.75,000 to Rs.1 lakh.

4. No change in corporate tax rates

5. Wealth tax exemption limit increased from Rs.15 lacs to Rs.30 lacs from 1.4.2010

6. Uniform GST (Goods and service tax) will be introduced from 1.4.2010 – so one tax all over India (simplification?)

7. No change in excise or customs duties – so no change in price of products at the moment – some small cosmetic changes (corrections) have been carried out

8. FBT abolished (Fringe Benefit Tax) – but to see from when this has been removed. We have paid advance tax in June – how to get refund?

9. Service tax unchanged – Service tax levied introduced on movement of goods through rail, inland waterways, Legal advice & consultancy (from a firm & not individual practisioners), Cosmetic and Plastic surgeries

10. MAT – Minimum Alternate tax increased from 10% to 15% - there are companies which show profit in the books, but show loss to the taxman – due to various exemptions, these companies are taxed using this MAT. Companies are crying hoarse on this as their tax goes up.