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CA Sandesh Mundra

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Summary of Direct Tax Provisions - Budget 2013

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  • 1. UNION BUDGET 2013-14 -DIRECT TAX Prepared By- Arvind Rathi (Article Assistant) Sandesh Mundra & Associates.
  • 2. SURCHARGE A surcharge of 10 % on persons whose taxable income exceeded 1 cr Rs.Applicable to individuals, HUFs , firms and entities.Increase of the surcharge from 5 % to 10 % on the domestic companies,whose taxable income exceeded 10 cr Rs.In case of the foreign companies, there would be an increase of surcharge from 2 % to 5 %. Prepared By- Arvind Rathi (Article Assistant),Sandesh Mundra & Associates.
  • 3. RELIEF & WELFARE MEASURES Rebate of Rs 2000 for individuals having total income up to Rs 5 lakh. Raising the limit of percentage of eligible premium for life insurance policies of person with disability or disease. Deduction for contribution to health schemes similar to CGHS. One hundred percent deduction for donation to National Children’s Fund. Prepared By- Arvind Rathi (Article Assistant),Sandesh Mundra & Associates.
  • 4. SECURITIES TRANSACTION TAXS.NO NATURE OF PAYABLE BY EXISTING PROPOSED TAXABLE ST RATES(IN %) RATES(IN %)1. Delivery based Purchaser 0.1 Nil purchase of units of an equity oriented fund entered into in a recognised stock exchange.2. Delivery based sale Seller 0.1 0.001 of units of an equity oriented fund entered into in a recognised stock exchange.3. Sale of a futures in Seller 0.017 0.01 securities.4. Sale of a unitof an Seller 0.25 0.001 equity oriented fund the mutual Prepared By- Arvind Rathi fund. (Article Assistant),Sandesh Mundra & Associates.
  • 5. KEY MAN INSURANCE POLICY “Keyman insurance”, - insurance against the death of a key person of the company. During the term, the company “assigns” the policy to the employee Collects the “surrender value” from the key employee. Employee pays subsequent premiums, and gets proceeds at maturity. Normally, proceeds are taxable in the hands of whoever gets it. Employee argues that it was not a keyman insurance policy any more. And thus, the proceeds were tax free. It is now stated that if a keyman insurance policy is assigned, proceeds will be fully taxed. The change works for any assignment done or proceeds received after April 1, 2013. The lesson to learn is: Don’t screw with the Income Tax Dept. Delhi Hc- Rajan Nanda Prepared By- Arvind Rathi (Article Assistant),Sandesh Mundra & Associates.
  • 6. PENALTY- U/S 271FASECTION Nature of Authority who can levy Quantum of Penalty Failure/Default penaltySection 271FA Failure to furnish Prescribed Income Tax Rs. 100/- for every day annual information authority. during which failure return required u/s. continues. 285BA or failure to furnish such return within the time prescribed.This AmendmentWill TakeEffect From1st April,2014. Prepared By- Arvind Rathi (Article Assistant),Sandesh Mundra & Associates.
  • 7. GENERAL ANTI AVOIDANCE RULES (GAAR) The GAAR objective was to "counter aggressive tax avoidance schemes." It empowers officials to deny the tax benefits on transactions or arrangements. The GAAR proceedings has to be approved by a pannel. The directions issued by the Approving Panel shall be binding on the taxpayer as well as the income-tax authorities. No appeal can be made against such directions. The Assessing Officer can send a reference to the GAAR panel for one or more assessment years. Prepared By- Arvind Rathi (Article Assistant),Sandesh Mundra & Associates.
  • 8. APPLICABILITY OF SURCHARGE ON TDS PROVISIONPARTICULARS PROPOSED RATE (%)Non Resident Other Than Company- 10Having total income exceeding Rs 1 Cr.Foreign Company-Having total income 2exceeding Rs 1 Cr but less than 10 Cr.Others-Having total income exceeding Rs 10 5Cr. Prepared By- Arvind Rathi (Article Assistant),Sandesh Mundra & Associates.
  • 9. INVESTMENT IN NEW PLANT OR MACHINERY (SEC-32AC)o Section 32AC shall be effective from the 1st April 2013.o A manufacturer or producer of any article acquires or installs a new asset between April 1, 2013 to March 31, 2015 & the aggregate cost of the assets exceeds INR 100 cr, then deduction shall be allowed as under,A.Y. 2014-15 – 15% of the actual cost of new asset where,asset acquired & installed between April 1,2013 to March 31,2014 & the aggregate cost of the new assets exceeds INR 100 cr.A.Y. 2015-16 – 15% of the actual cost of new asset where,asset acquired & installed between April 1,2013 to March 31,2015 after subtracting the amount deducted in AY 2014-15. Prepared By- Arvind Rathi (Article Assistant),Sandesh Mundra & Associates.
  • 10. TAXABILITY ON BUY BACK OF SHARES• When a company purchase its own shares in accordance with the provisions of Sec 77A of the Companies Act, 1956.• In relation to buy-back of shares of an unlisted company.Such additional income-tax is payable at the rate of 20% on the distributed income.• The tax paid by the company on distribution of income in accordance with the buy-back of shares will be the final tax• No credit of taxes shall be available either to the company or to the shareholder In Armstrong World Industries Mauritius Prepared By- Arvind Rathi Multiconsult Ltd. (Article Assistant),Sandesh Mundra & Associates.
  • 11. INCOME TAX RATES• No Changes In The Slab Rates.• Slab Rate,For Individuals, Hindu Undivided Families, Association of Persons and Body of Individuals INCOME (INR)* RATE (%)^@ 0-2,00,000 Nil 2,00,001-5,00,000 10 5,00,001-10,00,000 20 10,00,000 & Above [email protected] Surcharge of 10% is levied if the total income exceeds INR 1 crore.^ Education cess of 2% and Secondary Education cess of 1% is leviable on the amount of income-tax.*The exemption limits are as follow- INR 2,50,000for resident individuals of the age of 60 yearsor more INR 5,00,000 for Very Senior Citizens of the age of 80 years or more. Prepared By- Arvind Rathi (Article Assistant),Sandesh Mundra & Associates.
  • 12. STAMP DUTY VALUATION FORCOMPUTATION OF INCOME UNER HEAD “ BUSINESS INCOME”-43CAStamp-duty valuation will be considered as full value consideration in caseswhere agreed consideration is less.It is only applicable were immovable property is a capital asset and notstock-in-trade. The date of an agreement fixing the value of consideration for the transferof the property and the date of registration of the transfer of the property arenot the same.The stamp duty value may be taken as on the date of the agreement fortransfer provided the consideration, in a mode other than cash. Prepared By- Arvind Rathi (Article Assistant),Sandesh Mundra & Associates.
  • 13. TDS ON TRANSFER OF IMMOVABALE PROPERTY Section 194-IA has been introduced to provide that in case of transfer of immoveable property,other than agricultural land, by a resident. The transferee shall deduct tax at the rate of 1% thereof. No deduction is required to be made in case the consideration for transfer of immoveable property is less than fifty lakhs rupees. Allahbad KAN construction Prepared By- Arvind Rathi (Article Assistant),Sandesh Mundra & Associates.
  • 14. AGRICULTURE LAND SEC 2(1)A A land shall not be treated as an agriculture land, if suchland is situated within the distance measured aerially whichshould not be more than: REGARDING DISTANCE BEYOND (KMs) 10,000 – 1,00,000 2 1,00,000 – 10,00,000 6 > 10,00,000 8Any Would Be Rural CIT v. LalMuncipality. Agriculture Land. Singh Prepared By- Arvind Rathi (Article Assistant),Sandesh Mundra & Associates.
  • 15. LIFE INSURANCE POLICY SEC 10(10D) If the premium payable for any of the years during the term of thepolicy does not exceed 15% (earlier 10%) of the actual capital sumassured, will be Exempt for the Insurance on the life of any personwho is-I. A a person with disability or a person with severe disability as referred to in section 80U.II. Suffering from disease or ailment as specified in the rules made under section 80DDB. Prepared By- Arvind Rathi (Article Assistant),Sandesh Mundra & Associates.
  • 16. MEDICAL SCHEME SEC 80DFinace Bill, 2013 proposes to expand the scope of deduction undersection 80D by expanding the eligible schemes onwhich deduction shall be available by amending section 80D witheffect from 1.04.2014 which provides as under: In section 80D of the Income-tax Act, in sub-section (2), in clause (a), after the words “Central Government Health Scheme”, the words “or such other scheme as may be notified by the Central Government in this behalf” shall be inserted with effect from the 1st day of April, 2014.’ Prepared By- Arvind Rathi (Article Assistant),Sandesh Mundra & Associates.
  • 17. RAJIV GANDHI EQUITY SCHEME Continued because of prestige behind the name.To enable first time investors to park funds in MFs and listed shares and extendedtax benefits to three successive years.The limit for investors wanting to invest in RGESS has been raised to Rs 12 lakh fromRs 10 lakh earlier.Under the scheme, an individual with an income of less than Rs 12 lakh would gettax incentives for investing up to Rs 50,000 in the stock market.The RGESS, which was originally announced in the Budget for 2012-13, seeks toprovide tax benefits to first-time investors in stock markets. Prepared By- Arvind Rathi (Article Assistant),Sandesh Mundra & Associates.
  • 18. AMENDMENT IN SEC 80-IA(4)Finance Bill 2012 proposes for the words, figures and letters "the 31st day ofMarch, 2012" in section 80-IA(4)(iv) the words, figures and letters "the 31stday of March, 2013" shall be substituted.This amendment will takeeffect from 1st April, 2013and will, accordingly, applyin relation to assessment Analysis/Conclusion-year 2013-14 and subsequent As per the proposed amendment, theassessment years. eligibility cut-off for carrying out the aforesaid activities has been extended by a period of one year i.e., up to 31 March 2013. Prepared By- Arvind Rathi (Article Assistant),Sandesh Mundra & Associates.
  • 19. SPECIAL AUDIT SEC 142(2A)The powers of the AO to direct special audit have beenwidened. The AO can now order a special audit not only due tothe reason of nature and complexity of accounts but he cannow order a special audit in the following additionalcircumstances:a) The volume of the accounts;b) Doubts about the correctness of accounts;c) Multiplicity of transactions in the accounts;d) Specialized nature of business activity of assessee. Delhi Development Authority v. Union of India Prepared By- Arvind Rathi (Article Assistant),Sandesh Mundra & Associates.
  • 20. DEFECTIVE RETURN SEC 139(9) Filling return without paying self assessment tax, Now it will be treated as Defective return. If AO gives notice- Rectify in 15 days otherwise, return would be invalid.Note- The tax together with interest, if any,payable in accordance with the provisions ofsection 140A, has been paid on or before thedate of furnishing of the return. Prepared By- Arvind Rathi (Article Assistant),Sandesh Mundra & Associates.
  • 21. BAD DEBTS SEC 36(1)(Vii)In case of Banks and Financial Institutions. The amount of deduction in respect of the bad debts. Actually written off under section 36(1)(vii) shall belimited to the amount by which such bad debts exceeds thecredit balance in the provision without any distinctionbetween rural advances and other advances. DCIT v. Karnataka Bank Ltd Prepared By- Arvind Rathi (Article Assistant),Sandesh Mundra & Associates.
  • 22. IMMOVABLE PROPERTY RECEIVED FOR INADEQUATECONSIDERATION SEC 56(2) (Vii) (b)Where any immovable property is received for a consideration which is less than thestamp duty value of the property by an amount exceeding Rs. 50,000. The stamp duty value of such property as exceeds such consideration, shall bechargeable to tax in the hands of the individual or HUF as income from other sources.The existing provisions provide that where any immovable property is received by anindividual or HUF without consideration.The stamp duty value of which exceeds fifty thousand rupees, the stamp duty value ofsuch property would be charged to tax as income from other sources.The existing provision does not cover a situation where the immovable property hasbeen received by an individual or HUF for inadequate consideration. Prepared By- Arvind Rathi In CIT v. Khoobsurat Resorts (Article Assistant),Sandesh (P.) Ltd Mundra & Associates.
  • 23. COMMODITIES TRANSACTION TAXS.NO TAXABLE RATE PAYABLE BY COMMODITIES TRANSACTION1. Sale Of Commodity 0.01 Percent Seller Derivative The Tax is proposed to be levied at the rate, given in the table above. Prepared By- Arvind Rathi (Article Assistant), Prepared By- Arvind Rathi (Article Assistant),Sandesh MundraAssociates. Sandesh Mundra & & Associates.
  • 24. ROYALTY/ FTS TO NON-RESIDENT SEC 115AAgreement after1/6/2005=10%.Argument bydepartment- Most of Question arises- We havethe DTA the rate is DTAA with 84 countries,more than 10% . but what about other countries????ex- US/UK=15%Now the rate standsincreased to 25%. Prepared By- Arvind Rathi (Article Assistant),Sandesh Mundra & Associates.
  • 25. CASE LAW- GUJARAT HC V. MAGANBHAI PATEL 167C/1791. Director liable for tax due if Company has not paid as well as Partners of LLP.2.Unless He proves fault not breach of trust.3.The word tax due has changed- even the Penalty & Interest will also calculated. Prepared By- Arvind Rathi (Article Assistant),Sandesh Mundra & Associates.
  • 26. TAX RESIDENCY CETIFICATE (TRC) TRC containing prescribed particulars was a necessary but not sufficient condition for availing benefits of DTAA. This provision was for those coming from jurisdictions other than Mauritius, depending on provisions of treaties with those nations. This provision was in the explanatory memorandum to the Finance Act, 2012. In this Budget, however, the provision was added to the Finance Bill itself. The ministry clarified that TRC would be taken as a proof of residence for these jurisdictions. For beneficial ownership, however may check other documents as well. Prepared By- Arvind Rathi (Article Assistant),Sandesh Mundra & Associates.
  • 27. APPROVAL FROM JOINT CIT IS NOT MANDATORY IF APPROVAL FROM CIT IS OBTAINED FOR ASSESSMENT IN SEARCH CASES.A. With a view to remove the procedural ambiguity, the proposed proviso makes it clear that section 153D shall not apply requiring approval by Joint CIT.B. where the assessment / reassessment order is passed by the Assessing Officer with the prior approval of the Commissioner under sub-section (12) of section 144BA.C. It is because an order passed under Section 144BA(12) is with the approval of an authority higher than the JCIT. Akil Gulamali Somji v. ITO Prepared By- Arvind Rathi (Article Assistant),Sandesh Mundra & Associates.
  • 28. SEIZED ASSETS ARE NO LONGERAVAILABLE FOR ADJUSTMENT TOWARDS ADVANCE TAX LIABILITY"Existing liability" does not include advance tax payable inaccordance with the provisions of the Act.Various Courts have taken a view that the term "existing liability"includes advance tax liability of the assessee.In some of the cases, it was held that amount of cash seized fromassessee in search proceedings under section 132 can be adjustedagainst his advance tax liability. Prepared By- Arvind Rathi (Article Assistant),Sandesh Mundra & Associates.
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    CA Sandesh Mundra, Consultant – Management Audit and Indirect Taxation - Chartered Accountant, Diploma in Information System Audit, Diploma in Insurance & Risk Management , Certificate from ICAI on International Financial Reporting Standards. Actively associated with clients in the industrial construction sector since last 9 years.He possesses special skills in structuring the indirect tax component of the works contracts and as management auditor, has visited several construction sites in various states like Orissa, Rajasthan, Gujarat, Maharasthra, Madhya Pradesh etc. During the course of said visits he has been to very large industrial complexes, refineries, power plants etc


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