snk budget analysis 2013

7/29/2019 SNK Budget Analysis 2013

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CONTENT

1 HIGHLIGHTS

A. INCOME TAX .... 01-12

B. SERVICE TAX..... 13-15

C. CENTRAL EXCISE .. 16-19

D. CUSTOMS ... 20-21

2 ANALYSIS OF BUDGET, 2013

A. INCOME TAX . 22-48

B. SERVICE TAX .. 49-55

3 MAJORSECTORIAL IMPACTS.. 56-60

4

ECONOMIC SURVEY HIGHLIGHTS ..61-63

5 KEY FEATURES OF BUDGET, 2013-2014.. 64-74

6 MICRO ECONOMIC VIEW 75

7 BUDGET AT GLANCE 76-79

8

GRAPH SHOWING SOURCES AND APPLICATION OF

RUPEE 81

9 STATEMENT OF REVENUE FOREGONE 82

10 ANALYSIS OF TAX AND NON-TAX REVENUE RECEIPTS 83

11 TRENDS IN EXPENDITURE .. 84

12 DEBT POSITION OF THE GOVERNMENT OF INDIA 85


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H I G H L I G H T S - I N C O M E T A X FINANCE BILL, 2013

Change in Basic Tax Rates :

Basic exemption l imit for super senior citizen, senior citizen and

others continues to be same at Rs. 5,00,000/-, 2,50,000/- and

2,00,000/- respectively.

However, tax rebate of Rs. 2,000/- or tax payable, whichever is less,

wil l be given to the individuals having total income upto Rs.

5,00,000/-. Consequently any individual having income upto Rs.

2,20,000/- wil l not be required to pay any tax.

There is no change in tax rate of company, fi rm, AOP, BOI, Co-

operative society, local authority and artif icial juridical person

except surcharge.

Change in Surcharge :

Part iculars Ex ist ing

Rate

Proposed

Rate

Individual/HUF/AOP/BOI/Co-operative society/Fi rm / Local authori ty/Art i fic ial jur idical person

- Having total income exceeding Rs. 1 crore Ni l 10%Domest ic Company

- Having total income exceeding Rs. 1 crore butless than 10 crore

5% 5%

- Having total income exceeding Rs. 10 crore 5% 10%

Foreign Company


2% 2%


The above rates of surcharge wil l also be applicable for MAT, AMT,

DDT & IDT provis ions.

Applicability of Surcharge on TDS provisions :

Part iculars Proposed

Rate

Non Resident Other than Company

- Having total income exceeding Rs. 1 crore 10%

Foreign Company

- Having total income exceeding Rs.1 Crore but less than 10

Crores

2%

- Having total income exceeding Rs. 10 crore 5%


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Education Cess:

No change in 2% Education Cess and 1% Secondary and Higher

Education Cess.

Definitions:

Agricultural Income and Agricultural Land [Section 2(1A)(c)(ii)(B)

and Section 2(14)]

I t is proposed to amend the definition of capital asset so as to

include agricultural land s i tuated in any area -

- within two ki lometers from the local l imits of any municipality or

cantonment board and which has a population of more than ten

thousand but not exceeding one lakh; or

- within s ix ki lometers from the local l imits of any municipality or

cantonment board and which has a population of more than one

lakh but not exceeding ten lakh; or

- within eight ki lometers from the local l imits of any municipality or


lakh,

and accordingly, i f the same is transferred then provis ions of capital

gain would be attracted. Similarly, income derived from any building

on or in the immediate vicinity of the above mentioned land wil l not be

considered as agricultural income.

(w.e.f. A.Y.2014-2015)

Exemptions :

Life Insurance Policy [Section 10(10D)]

Any sum including the sum allocated by way of bonus received

under an insurance policy issued on or after 01.04.2013 for the

insurance on the l i fe of any person who is -

a person with disabil ity or a person with severe disabil ity as

referred to in section 80U, or


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suffering from disease or ai lment as specified in the rules made

under section 80DDB,

shall be exempt if the premium payable for any of the years during

the term of the policy does not exceed 15% (earl ier 10%) of the

actual capital sum assured.

(w.e.f. A.Y.2014-2015)

Keyman Insurance Policy [(Section 10(10D)]

Any keyman insurance policy which has been assigned to a person

during its term with or without consideration shall be taxable in the

hands of assignee at the time of its maturity.

(w.e.f. A.Y.2014-2015)

Income of securitization trust from the activity of securitization

[(Section 10(23DA)]

Any income of securitization trust from the activity of securitization is

exempt from tax.

(w.e.f. A.Y.2014-2015)

Income from depositary of Investor Protection Fund [(Section

10(23ED)]

Any income by way of contributions received from a depository of

Investor Protection Fund set up in accordance with the regulations

prescribed by SEBI wil l not be included while computing the total

income of the fund.

(w.e.f. A.Y.2014-2015)

Definition of Venture Capital company, Venture Capital fund and

Venture capital undertaking [(Proposed Explanation 1 to clause

Section 10(23FB)]

New definition has been provided for Venture Capital

Company/Venture Capital Fund/Venture Capital Undertaking.

(w.e.f. A.Y.2014-2015)


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Income to shareholder on account of Buyback of shares [(Section

10(34A)]

Any income aris ing to an assessee being a shareholder on account

of buyback of shares of a company not being l isted on recognized

stock exchange is exempt from tax.

(w.e.f. A.Y.2014-2015)

Income by way of distributed income by any person from the

Securitization Trust [(Section10(35A)]

Any income of the investor received by way of distr ibuted income

from a securitization trust is exempt from tax.

(w.e.f. A.Y.2014-2015)

Income of National Financial Holdings Company Limited

[(Section10(49)]

Any income of National Financial Holdings Company Limited, being

a company set up by the Central Government is exempt from tax.

(w.e.f. A.Y.2014-2015)

Business Income:

Deduction for investment in new plant & machinery (Section 32AC)

Incentive proposed in the form of deduction to a company is as

fol lows:

Assessee

el igible

for

deduction

Business Condit ions Minimum

Investment

in new

asset

Incentive/ Deduction

A.Y.2014-

15

A.Y.2015-16

Company Manufacture

of an art icle

or th ing

Acquires and

instal l s new

assets after 31-03-13 but

before

01-04-15

Above Rs.

100 crore

15% of the

actual

cost of thenew assets

acquired

15% of the

actual cost of

new assetsacquired from

01-04-13 to 31-

03-15 as

reduced bydeduct ion

claimed under

th is sect ion in

A.Y.2014-15


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I f the company transfers the new asset within a period of 5 years

from the date of its instal lation, the amount of deduction claimed

under this section shall be deemed to be the income of the previous

year in which such new asset is transferred under the head Profits

and Gains of Business or Profession.

However this restriction shall not apply in case of amalgamation or

de-mergers.

(w.e.f. A.Y.2014-2015)

Amount eligible as deduction as bad debts in case of banks (Section

36)

I t is proposed to al low deduction in respect of bad debts actually

written off in excess of the credit balance in the provis ion of bad

and doubtful debts without any distinction between provis ion for

bad and doubtful debts provided on rural or other advances.

(w.e.f. A.Y.2014-2015)

Amount not allowed as deduction in case of State Government

Undertakings (Section 40)

I t is proposed to provide that any amount paid by way of royalty,

l icense fee, service fee, privi lege fee, service charge etc or any

amount appropriated, by the State Government undertaking to the

State Government, shall not be allowed as deduction from business

income of the State Government undertaking.

(w.e.f. A.Y.2014-2015)

Special Provision for full value of consideration for transfer of asset

other than capital assets in certain cases (Section 43CA)

The provis ions of Section 50C is applicable to immovable property

held as capital asset and not to immovable property held as stock in

trade. It is proposed u/s 43CA to make provis ions of Section 50C

applicable on transfer of immovable property held as stock in trade.

The stamp duty value to be adopted for the same wil l be the stamp

duty value as on the date of agreement for transfer and not as on

the date of registration of such transfer provided consideration

received before or on the date of agreement of transfer is by way of


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any mode other than cash.

(w.e.f. A.Y.2014-2015)

Income from other sources

Deemed Income in the hands of purchaser (individual & HUF) ofimmovable property (Section 56)

Type of

property

Consideration Value of taxable Income u/s 56 in

the hands of purchaser ( Indiv idual &

HUF)

Immovable

Property

Without Considerat ion

(and stamp duty

value of property

exceeds Rs. 50,000/-)

The stamp duty value of such

property.

(Stamp Duty Value to be adopted is

the value as on the date ofagreement for t ransfer and not as

on the date of registrat ion of such

transfer provided consideration

received before or on the date of

agreement of transfer is by way of

any mode other than cash).

Immovable

Property

For a Considerat ion

less than the stamp

duty value of the

property by an

amount exceeding Rs

50,000/-

Stamp duty value of such property

as exceeds such considerat ion.


the value as on the date of

agreement for t ransfer and not ason the date of registrat ion of such




any mode other than cash.)

(w.e.f. A.Y.2014-2015)

Deduction u/s. 80C

The amount of deduction for payment of Life Insurance premium other

than deferred annuity plan shall be al lowable upto 15% (presently 10%)

of the actual sum assured on policies issued after 01-04-2013; in case of

fol lowing persons

- a person with disabil ity or a person with severe disabil ity as referred

to in section 80U,

- suffering from disease or ai lment as specified in the rules made

under section 80DDB.

(w.e.f. A.Y.2014-2015)


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Rajiv Gandhi Equity Saving Scheme u/s. 80CCG

The incentive available for investment in capital markets by the new

retail investors under RGESS shall also be available in case of

investment in l isted units of an equity oriented fund. Further, the said

deduction shall be available for 3 consecutive assessment years as

against the present provis ions of 1 year.

The deduction earl ier al lowable in case of gross total income upto Rs

10 lakhs is proposed to amended to be allowed in case of gross total

income upto Rs 12 lakhs.

(w.e.f. A.Y.2014-2015)

Amendment of Section 80D in respect of Health Insurance premia

Any payment or contribution made by the assessee to Health schemes

as may be notif ied by the Central Government shall also be available

u/s 80D, subject to overall monetary l imit.

(w.e.f. A.Y.2014-2015)

Deduction in respect of interest on loan taken for residential house

property

A new section 80EE has been proposed to be introduced to provide

that in computing the total income of an individual, interest payable

on loan taken by him from any financial institution for the purpose of

acquisit ion of a residential house property shall be deducted subject to

fol lowing conditions

- The deduction shall not exceed one lakh rupees,

- In a case where the interest payable for the previous year is less

than one lakh rupees, the balance amount shall be al lowed in the

assessment year beginning on 1st Apri l , 2015,

- The loan should be sanctioned by the financial institution during the

period beginning on 1st Apri l , 2013 and ending on 31st March, 2014,

- The amount of loan sanctioned for acquisit ion of the residential

house property does not exceed twenty-five lakh rupees,

- The value of the residential house property does not exceed fortylakh rupees,


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- The assessee does not own any residential house property on the

date of sanction of the loan.

- Where a deduction under this section is al lowed for any assessment

year, in respect of interest on housing loan, deduction shall not be

allowed in respect of such interest under any other provis ions of the

Income-tax Act for the same or any other assessment year.

Presently deduction in respect of interest on home loan is al lowable

u/s. 24(b) subject to maximum of Rs. 1,50,000/-. However, the condition

of fi rst house or value of the house or amount of loan is not prescribed

under this section.

(w.e.f. A.Y.2014-2015)

Deductions for contribution made to National Childrens Fund

Deduction u/s. 80G of donation made to National Childrens Fund shall

be al lowed at 100% as against present deduction of 50 %.

(w.e.f. A.Y.2014-2015)

Contribution made to political parties or an electoral trust

Contribution made to polit ical parties or an electoral trust by any

assessee, except a local authority and every artif icial juridical person

shall not be allowable as deduction u/s. 80GGB / 80GGC if the

contribution is made in cash. (w.e.f. A.Y.2014-2015)

Deduction under Section 80IA to power sector

With a view to provide further time to the undertakings to commence

the el igible activity, sunset date under section 80IA for the power

sector to avail the tax incentive, is proposed to be extended by a

further period of one year i .e. up to 31st March, 2014.

Deduction under Section 80JJAA

The tax incentive under section 80JJAA equal to thirty per cent of

additional wages paid to the new regular workmen shall hence forth be

allowable only on employment of persons employed in factories and

not to other employees. It is also proposed that the deduction shall not

be available if the factory is hived off or transferred from another

existing entity or acquired by the assessee company as a result of

amalgamation with another company. (w.e.f. A.Y.2014-2015)


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Tax Credit U/s 87A

With a view to provide tax rel ief to the res ident individual tax payers

having income above Rs. 2,00,000 but not exceeding Rs. 5,00,000/- shall

get a tax rel ief of Rs. 2000/-

The rebate shall be equal to the amount of income-tax payable on the

total income for any assessment year or an amount of two thousand

rupees, whichever is less.

(w.e.f. A.Y.2014-2015)

Clarif icatory & Other Amendments

I t is clarif ied that submission of a tax residency certif icate (TRC) is

necessary but submission of the TRC would not be a sufficient

condition for claiming benefits under the agreements referred to in

sections 90 and 90A.

(w.e.f. A.Y.2014-2015)

I t is proposed to amend section 115A to provide that income earned

by non-resident taxpayer by way of royalty and fees for technical

services be increased from 10% to 25%.

(w.e.f. A.Y. 2014-2015)

Beneficial provis ions of section 115BBD of Income-tax Act providing

for taxation of gross dividends @ 15% received by an Indian

company from a specified foreign company (in which it has

shareholding of 26% or more) if such dividend is included in the total

income of the Indian company, is proposed to be extended for one

more year, i .e. the same would be applicable for A.Y. 2014-15 also.

I t is proposed to amend section 115-O in order to remove cascading

effect whereby the tax on dividends received from the foreign

subsidiary (i .e. the foreign company in which domestic company

holds more than 50% of equity share capital) is payable under

section 115BBD by the holding domestic company then, any

dividend distr ibuted by the holding company in the same year, to

the extent of such dividends, shall not be subject to Dividend

Distribution Tax under section 115-O of the Income-tax Act.


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(w.e.f. 1s t June, 2013)

I t is proposed to insert a new section 115QA to provide that any

distr ibution of income to a shareholder by a domestic unl isted

company on buy-back of shares shall be chargeable to additional

income-tax @20% on the distr ibuted income, i .e. consideration paid

by the company on buy-back of shares as reduced by the amount

received by the company for issuance of such shares. Such receipt

would be exempt in the hands of shareholders.

(w.e.f. 1s t June, 2013)

I t is proposed to amend section 115R to provide uniform taxation for

al l types of funds, other than equity oriented fund, by increasing

rate of tax on distr ibuted income from 12.5% to 25% in al l cases

where distr ibution is made to an individual or a HUF. Further, in

respect of income distr ibuted by a Mutual Fund under an

Infrastructure Debt Fund (IDF) scheme to a non-resident Investor is

proposed to be taxed @ 5%.

(w.e.f. 1s t June, 2013)

I t is proposed to insert Chapter XII-EA consisting of sections 115TA,

115TB and 115TC to provide a special tax regime in respect of

taxation of income & distr ibution of income of securitisation entities,

set up as a trust from the activity of securit ization.

(w.e.f. 1s t June, 2013)

Rate of tax of Securities Transaction Tax (STT) is proposed to be

reduced and new provis ions related to Commodities Transaction Tax

(CTT) is proposed to be inserted on sale of commodity derivatives,

other than agricultural commodities, traded in recognised

associations.

(w.e.f. A.Y. 2014-2015)

General Anti Avoidance Rules

Provis ions of GAAR in Chapter X-A and Section 144BA is proposed to be

modified replacing old provis ions.

(w.e.f. 1s t

Apri l 2016)


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Application of seized assets under section 132B

The assets seized during the course of search or requis it ion pursuant to

search may be adjusted against the existing l iabil ity which has been

due on account of assessments pursuant to search but not against the

advance tax l iabil ity payable by the assessee.

(w.e.f. 1 s t June, 2013)

Defective return u/s. 139(9)

Where the return is f i led without payment of self assessment tax along

with the interest, the return shall be treated as a defective return by

assessing officer.

(w.e.f. 1 s t June, 2013)

Direction for special audit u/s. 142 (2A) and exclusion of time incomputing the period of l imitation for completion of assessments and

reassessments

The reasons for which the Assessing Officer may direct special audit

of accounts of the assessee is elaborately explained by the words

the nature and complexity of the accounts, volume of the

accounts, doubts about the correctness of the accounts, multipl icity

of transactions in the accounts or special ised nature of business

activity of the assessee.

Where the Assessing Officer directs for special audit u/s. 142(2A),

and whereas such direction is challenged before a court, ending

with the date on which the order setting aside such direction is

received by the Commissioner, shall be excluded in computing the

period of l imitation for the purposes of section 153.

(w.e.f. 1st June, 2013)

Clarif ication of the phrase tax due for the purposes of recovery incertain cases

Section 167C and Section 179 provides that where the tax due from LLP

or a private company as the case may be is i rrecoverable from such

LLP or company, then the partner/ director shall be jointly and severally

l iable for payment of such tax.

An explanation has been inserted to widen the definition of tax due

so as to cover penalty, interest and other sum payable under the Act.

(w.e.f. 1st June, 2013)


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Provisions pertaining to TDS:

Under proposed new section 194IA, Tax at the rate of 1% to be

deducted by the purchaser of immovable property (other than

agricultural land) from the payment made to sel ler where

consideration is Rs. 50 lacs or more. (w.e.f. 1st June, 2013).

Proposed to amend section 194LC to provide that where a non-

resident uti l ize the money deposited in designated bank account for

subscription to a long-term infrastructure bond issue of an Indian

company, then, the borrowing by the company shall be deemed to

be in foreign currency & concessional rate of 5% TDS would be

applicable. (w.e.f. 1 s t June, 2013).

Penalty for non-fil l ing Annual Information Return (AIR):

I t is proposed to provide in u/s. 271FA that where a person fai ls to

furnish the return within the period specified in the notice u/s

285BA(5), shall pay a sum of Rs. 500/- instead of Rs. 100/- for every

day during which the fai lure continues by way of penalty from the

date of expiry of period mentioned in the notice

(w.e.f. 1st Apri l , 2014).


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H I G H L I G H T S -S E R V I C E T A X All changes wil l come in to effect on enactment of Finance Bi l l , 2013

unless stated otherwise.

No change in Rate of Service Tax

Following amendments are proposed to be made in the Finance Act,

1994:

(a) Proposed to change the definition of Approved Vocational

Education Course [Sec. 65B(11)] -

- to include courses run by an industrial training institute/ centre

affi l iated to State Council along with National Council for

Vocational Training

- to delete clause (i i i) dealing with courses run by an institute

affi l iated to the National Ski l l Development Corporation.

(b) Proposed to expand the definition of process amounting to

manufacture or production of goods [Sec. 65B(40)] to include

processes under the Medicinal and Toi let Preparations (Excise

Duties) Act, 1955

(c) Proposed to delete the word Seed u/s. 66D(d)(i) to al low the

benefit of non applicabil ity of service tax to al l other testing inrelation to agriculture or agricultural produce

(d) Proposed to insert new section 73(2A) that If a demand of Service

Tax made under extended period of l imitation is found to be

unsustainable by the Appellate authority/Tribunal/Court on

grounds of l imitation the tax l iabil ity for eighteen months (normal

period of l imitation) may be computed

(e) Proposed to substitute section 77(1)(a) to restrict the maximum

penalty to Rs. 10,000/- for fai lure to obtain registration.

(f) Proposed to insert new section 78A in order to impose penalty on

directors & officials of company for specified offences in cases of

wil l ful actions.


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(g) Proposed to amend section 86(5) to empower Appellate Tribunal

to extend operation of stay for a period of 185 days where the

delay is not attributable to the assessee. The stay order, however,

wil l stand vacated at the end of 365 days from the date of the

order.

(h) Proposed to amend section 89 and to insert new section 90 to

prescribe revised punishments for offences, make certain

offences cognizable/non cognizable & bailable.

(i ) Proposed to insert new section 91 to provide power to

commissioner to arrest a person for specified offences.

(j ) Proposed to insert new section 99 to provide retrospectiveexemption to the Indian Railways on the service tax leviable on

various taxable services provided.

Following amendments are notif ied:

(a) Abatement for construction of a complex, building, civi l

structures etc. is being reduced from the existing 75% to 70% for

construction other than residential unit having a carpet area up

to 2,000 sq ft or where the amount charged is less than Rs 1 cr.

(Effective rate of ST is 3.708%)

(w.e.f 1 s t March, 2013)

(vide noti f ication no. 2/2013 ST)

(b) Review of Exemptions

The fol lowing exemptions are being withdrawn:

- Services provided by an educational institution by way of

auxi l iary educational services or renting of immovable

property.

- Temporary transfer or permitting the use or enjoyment of a

copyright relating to cinematographic fi lms other than

exhibition of cinematograph fi lms in a cinema hall or a cinema

theatre.

- Services by way of vehicle parking to general public.


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- Services provided to Government, a local authority or a

governmental authority, by way of repair or maintenance of

aircraft.

The fol lowing exemptions are streamlined / rationalized:

- Exemption l imit of Rs. 25 lacs for charitable organizations,

providing service towards any other object of general public

uti l i ty would not be avai lable.

- Service tax wil l be leviable on taxable service provided in

restaurants with air-conditioning or central air heating in any

part of the establishment at any time during the year by

omitting condition regarding l icense to serve l iquor.

- Exemption to transport of goods by road and rai l/vessel is

rationalized.

(w.e.f 1 s t Apri l , 2013)

(vide noti f ication no. 3/2013 ST)

Advance Ruling [u/s. 96A(b)(i i i)]

Scope of advance rul ing is being extended to cover resident public

l imited companies.

(w.e.f 1 s t March, 2013)(vide noti f ication no. 4/2013 ST)

Service Tax Voluntary Compliance encouragement Scheme, 2013

(VCES):

To encourage voluntary compliance and broaden the tax base, it is

proposed to provide one time amnesty by way of -

(i ) waiver of interest and penalty; and

(i i) immunity from prosecution,

to stop fi lers, non-fi lers or non-registrants or service providers (who have

not disclosed true l iabil ity in the returns fi led by them during the period

from October 2007 to December 2012) who pay the "tax dues".


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H I G H L I G H T S - C E N T R A L E X C I S E

Following are the highlights of important amendments made in the Central

Excise Act, 1944 through the Finance Bi l l , 2013 and Central Excise

Notifications.

All changes come into effect immediately unless otherwise

specified .

No change in the basic rate of excise duty.

First Schedule is being amended to substitute the existing tariff rates for

various lengths of cigarettes and cigars of heading 2402 with the

enhanced rates.

Excise duty is being increase on-

- Sport Uti l i t ies Vehicles except SUVs used as taxis from 27% to 30%.

- Compounded levy on stainless steel "Patta Patti" from Rs 30,000 per

machine per month to Rs 40,000 per machine per month.

- mobile phones with retai l sale price exceeding Rs 2000/- from 1% to

6%

- cigarettes except cigarettes of length not exceeding 65 mm, cigars

and cigari l los has been increased to about 18%.

- marble ti les and slabs from Rs 30 per sq. mtr to Rs 60 per sq. mtr.

Excise duty is being reduced on-

- truck chass is (8706 00 42) from 14% to 13%.

Ful l exemption from excise duty has been provided in the fol lowing

cases:

- Hand made carpets and carpets and other texti le floor coverings of

coir or jute, whether or not handmade

- Intermediate goods manufactured and consumed captively by

exempted units under Area Based Exemption Scheme in Himachal

Pradesh and Uttarakhand.


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- tapioca sago (sabudana) and tapioca starch manufactured and

consumed captively in the manufacture of tapioca sago.

- henna powder or paste, not mixed with any other ingredient.

- ships and other vessels. Henceforth, no CVD on these ships and

vessels when imported.

Excise duty of 4% is being levied on si lver manufactured from zinc/lead

smelting.

I t is being clarif ied that the item "tr immed or untrimmed sheets or

circles of copper intended for use in the manufacture of handicrafts or

utensi ls" presently leviable to excise duty at Rs. 3500 per MT includes

copper and copper al loys including brass.

'Zero excise duty route', as existed prior to Budget 2011-12, is being

restored in respect of branded readymade garments and made ups. In

the case of cotton there wil l be zero duty at the fibre stage and, in the

case of spun yarn of man made fibres, there wil l be a duty of 12% at

the fibre stage. The 'Zero excise duty route' wil l be in addition to the

CENVAT route now available.

MRP based assessment with abatement of 35% from MRP applied to

Branded Ayurvedic medicaments and medicaments of Unani, Siddha,

Homeopathic or bio-chemic system.

Section 9 pertaining to punishment with term of imprisonment

extending to seven years along with fine has been l iberalised to apply

in cases where the evasion of duty leviable exceeds Rs 50 lakhs as

against the present l imit of Rs 30 lakhs.

Section 9A is being amended to propose that where the duty l iabil ity

exceeds Rs. 50 lakh, the offence for evasion of such duty shall be

cognizable and non-bailable and punishable under clause (b) or

clause (bbbb) of sub-section (1) of section 9 by way of imprisonment

upto seven years along with fine.

Section 11 is being amended so as to provide for recovery of money

due to the Government from any person other than from whom money

is due after giving a proper notice, if that other person holds money for

or on account of the first person.


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The person to whom such notice has been issued is bound to comply

with the same and in case of non-compliance; he shall face all the

consequences under this Act.

Section 11A is being amended to provide that subsequent to issue of

notice under this section if the officer provides a statement containing

details of duty not paid, short levied or erroneously refunded, the same

shall be deemed to be a service of notice.

Reference to sub-section (1) in section 11DDA is being omitted.

A person who is forwarded to a police office under section 20 may be

admitted for bail before magistrate only to offence which is non-

cognizable.

Section 21 is being amended so as to make the provis ions regarding

release of arrested person on bail or personal bond applicable only to

offence which is non-cognizable.

Definition of activity in Section 23A pertaining to advance rul ing is

proposed to be substituted by the fol lowing definition:

Activity means production or manufacture of goods and includes any

new business of production or manufacture proposed to be undertaken

by the existing producer or manufacturer, as the case may be;

Earl ier, definition was restricted to Activity means production or

manufacture of goods.

Section 23C pertaining to questions which may be referred for advance

rul ing has been proposed to be amended to include admissibi l i ty of

credit of service tax paid or deemed to have been paid on input

service or excise duty.

Section 35C is proposed to be amended to entitle the assessee to

make an application to the Tribunal for extending the stay for a further

period of 185 days where the delay in disposing the appeal is not

attributable to any reason on the part of the assessee and on expiry of

such further extension of stay if the appeal is being not disposed off the

stay shall stand vacated. These provis ions are made at par with the

provis ion under the Income Tax Act.


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Section 37C is being amended to specify additional modes of delivery

of specified documents i .e. by speed post with proof of delivery or

through courier approved by the Central Board of Excise & Customs.


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H I G H L I G H T S - C U S T O M S No change in the basic rate of Custom duty.

BCD increased on certain products such as:

Description of Goods Present Rate Proposed Rate

Cars/ Motor vehicles ( i r respective ofengine capacity) with CIF value > USD40000

75% 100%

Luxury Motor cycle with engine capacity of

800 cc or more60% 75%

Old cars 100% 125%

Raw Si lk 5% 15%

Set Top boxes 5% 10%

Steam coal Ni l 2%

BCD reduced on certain products such as:

Description of Goods Present Rate Proposed Rate

Specif ied text i le machinery and partsthereof

7.5% 5%

Specif ied machinery for use in theleather indust ry or footwear indust ry

7.5% 5%

Pre-forms of precious and semi-precious

stones

10% 2%

Bituminous coal 5% 2%

Export duty introduced on the fol lowing goods:

Description of Goods Effective Rate

Raw sugar, white or ref ined sugar Ni l

Bauxite 10%

I lmenite :

- Processed

- Unprocessed

10%

5%

Baggage Rules

Limit on duty free baggage allowance of Jewellery enhanced

Description of Goods Present

l imit

Proposed

l imit

E ither

An Indian passenger, who has been res id ingabroad for over one year

Or

A person who is t ransfer r ing his res idence to

India,

Gent leman passenger Rs 10,000 Rs 50,000Lady passenger Rs 20,000 Rs 1,00,000


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The CVD on steam coal is being raised from 1% to 2% while CVD on

bituminous coal is being reduced from 6 % to 2 %.

Exemption from BCD on l ithium ion automotive battery for manufacture

of l ithium ion battery packs for supply to manufacturers of hybrid and

electric vehicles.

Clarif ication has been provided that LCD and LED TV Panels and LCD

and LED TV Modules are one and the same thing for the purpose of

exemption under notif ication No 12/2012-Customs (S. No. 432)

The validity period of exemption granted to identif ied parts of hybrid

and electric vehicles is being extended by two more years up to 31st

March, 2015.


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A n a l y s i s - I N C O M E T A X Following is the analysis of the important proposals as recommended in

the Income Tax Act, 1961 by the F inance Bi l l , 2013.

CHANGE IN BASIC TAX RATES :

Basic exemption l imit for super senior citizen, senior citizen and

others continues to be same at Rs. 5,00,000/-, 2,50,000/- and

2,00,000/- respectively.

However, tax rebate of Rs. 2,000/- or tax payable, whichever is less,

wil l be given to the individuals having total income upto Rs.

5,00,000/-.

Consequently individual having income upto 2,20,000/- wil l not

required to pay any tax.

Impact of introduction of tax rebate on tax savings of Individuals

Part iculars Amount ( in Rs.)

Total Income 2,20,000 5,00,000 5,00,001

Current Tax (excluding cess) 2,000 30,000 30,001

Proposed Tax (excluding cess) Ni l 28,000 30,001

Savings in Tax 2,000 2,000 Ni l

There is no change in tax rate of company, fi rm, AOP, BOI, co-

operative society, local authority and artif icial juridical person

except surcharge.

CHANGE IN SURCHARGE :

Fol lowing table mention the change in rates of surcharges.


Rate

Proposed

Rate

Indiv idual/HUF/AOP/BOI/ Co-operat ive

society/Fi rm/Local authori ty/Art i f ic ial jur idical

person

- Having total income exceeding Rs. 1 crore Ni l 10%

Domest ic Company

- Having total income exceeding Rs. 1 crore but less

than 10 crore

5% 5%



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Rate

Proposed

Rate

Foreign Company

- Having total income exceeding Rs. 1 crore but lessthan 10 crore

2% 2%


Impact of introduction of New Surcharge on companies tax rate is as

under:


Rate

Proposed

Rate

Domest ic Company

- Having total income not exceeding Rs. 1 crore 30.90% 30.90%

- Having total income exceeding Rs. 1 crore but

less than 10 crore

32.45% 32.45%

- Having total income exceeding Rs. 10 crore 32.45% 33.99%

Foreign Company

- Having total income not exceeding Rs. 1 crore 41.20% 41.20%


42.02% 42.02%

- Having total income exceeding Rs. 10 crore 42.02% 43.26%

The proposed surcharge rates are also applicable for MAT, AMT, DDT

& IDT provis ions.

Impact of introduction of New Surcharge on companies effective

rate of MAT is as fol lows:


Rate

Proposed

Rate

Domest ic Company

- Having book prof i t not exceeding Rs. 1 crore 19.05% 19.05%

- Having book prof i t exceeding Rs. 1 crore but lessthan 10 crore

20.01% 20.01%

- Having book prof i t exceeding Rs. 10 crore 20.01% 20.96%

Foreign Company

- Having book prof i t not exceeding Rs. 1 crore 19.05% 19.05%

- Having book prof i t exceeding Rs. 1 crore but less

than 10 crore

19.44% 19.44%

- Having book prof i t exceeding Rs. 10 crore 19.44% 20.01%


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DEFINITIONS:

Agricultural Income and Agricultural Land [Section 2(1A)(c)(ii)(B)

and Section 2(14)]

I t is proposed to amend caluse (14) of Section 2 so as to amend the

definition of capital asset to include therein agricultural land

situated in any area -

- within two ki lometers from the local l imits of any municipality or



- within s ix ki lometers from the local l imits of any municipality or

cantonment board and which has a population of more than one

lakh but not exceeding ten lakh; or

- within eight ki lometers from the local l imits of any municipality or


lakh,

and accordingly, i f the same is transferred then provis ions of capital

gain would be attracted.

Similarly, It is proposed to amend item (B) of clause (i i) of proviso to

sub clause (c) of clause(1A) of Section 2 so as to provide income

derived from any building on or in the immediate vicinity of the

above mentioned land wil l not be considered as agricultural

income.

Consequential amendment has been made in the definition of urban

land in The Wealth Tax Act, 1957.

(w.e.f. A.Y.2014-2015)

EXEMPTIONS:

Life Insurance Policy [Section 10(10D)]

I t is proposed to insert new proviso in sub clause (d) of clause (10D)

so as to provide that any sum including the sum allocated by way of

bonus received under an insurance policy issued on or after01.04.2013 for the insurance on the l i fe of any person who is


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- a person with disabil ity or a person with severe disabil ity as

referred to in section 80U, or


under section 80DDB,

shall be exempt if the premium payable for any of the years during

the term of the policy does not exceed 15% (earl ier 10%) of the

actual capital sum assured.

Consequential amendment has been made in Section 80C in respect

of deduction of premium paid on insurance policy not exceeding

15% of the capital sum assured in case of the person suffering from

disabil ity/disease mention in Section 80U and 80DDB respectively.

The above proposed amendment is applicable in respect of policy

issued on or after 01.04.2013 for insurance of the l i fe of a person

referred to herein above.

(w.e.f. A.Y.2014-2015)

Keyman Insurance Policy [(Section 10(10D)]

I t is proposed to amend the Explanation to Sec. 10(10D) so as to

provide that any keyman insurance policy which has been assigned

to a person during its term with or without consideration shall be

taxable in the hands of assignee at the time of its maturity

The effect of the proposed change is explained herein below under

different s ituations through an example

i . X Ltd. takes keyman insurance policy in the name of its

keyman Mr. Y. The premium is paid by X Ltd. and the maturity

amount is also received by X Ltd.

Part iculars Tax Impact before

Proposed

Amendment

Tax Impact after

Proposed Amendment

Sum received

including bonus on

matur ity by X Ltd.

Taxable in the

hands of X Ltd.

Taxable in the hands

of X Ltd.


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i i . X Ltd. takes keyman insurance policy in the name of its

keyman Mr. Y. The premium is paid by X Ltd. Thereafter, the

policy is assigned in the mid-term to Mr. Y without any

consideration. Thereafter, Mr. Y pays the premium and on

maturity of the policy, the matured amount is received by Mr.

Y.


Proposed

Amendment

Tax Impact after

Proposed Amendment

**Sur render Value at

the t ime ofass ignment

**Taxable in the

hands of Mr. Y asperquis i te.

**Taxable in the hands

of Mr. Y as perquis i te.

Sum received

including bonus on

matur ity by Mr. Y

Not taxable in the

hands of Mr. Y.

Taxable in the hands of

Mr. Y (taxable amount

= matur i ty amount Sur render Value at the

t ime of ass ignment)

** There i s no specif ic provis ion in the Income Tax Act for taxabi l i ty on the

sur render value of the pol icy at the t ime of assignment and hence the

same remains a grey area.

i i i . X Ltd. takes keyman insurance policy in the name of its

keyman Mr. Y. The premium is paid by X Ltd. Thereafter, the

policy is assigned in the mid term to Mr. Y with consideration(Surrender Value). Thereafter, Mr. Y pays the premium and on

maturity of the policy, the matured amount is received by Mr.

Y.


Proposed

Amendment

Tax Impact after

Proposed Amendment

**Sur render Value at

the t ime ofass ignment

**Taxable in thehands of X Ltd.

**Taxable in the handsof X Ltd.

Sum received

including bonus onmatur ity by Mr. Y

Not taxable in the

hands of Mr. Y.

Taxable in the hands

of Mr. Y (taxable

amount = matur i ty

amount Sur render

Value paid by Mr. Y to

X Ltd. at the t ime ofass ignment)

** There i s no specif ic provis ion in the Income Tax Act for taxabi l i ty on the

sur render value of the pol icy at the t ime of assignment and hence the

same remains a grey area.

(w.e.f. A.Y.2014-2015)


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Income of securitization trust from the activity of securitization

[(Section 10(23DA)]

I t is proposed to insert new clause (23DA) to provide that any

income of securitization trust from the activity of securitization is

exempt from tax.

Further a new Chapter XII-EA has been inserted for providing special

tax regime, sal ient features of which are as fol lows:

(i) In case of securitization vehicles which are set up as a trust and

the activities of which are regulated by either SEBI or RBI, the

income from the activity of securitization of such trusts wil l be

exempt from taxation.

(i i) The securitization trust wil l be l iable to pay additional income-

tax on income distr ibuted to its investors on the l ine of

distr ibution tax levied in the case of mutual funds. The

additional income-tax shall be levied @ 25% in case of

distr ibution being made to investors who are individual and HUF

and @ 30% in other cases. No additional income tax shall be

payable if the income distr ibuted by the securitization trust isreceived by a person who is exempt from tax under the Act.

(i i i) Consequent to the levy of distr ibution tax, the distr ibuted

income received by the investor wil l be exempt from tax.

(iv) The securitisation trust wil l be l iable to pay interest @ 1 % for

every month or part of the month for default in payment of

additional income-tax ( Section 115TB).

(v ) Any person responsible for making payment of the income

distributed by the securitisation trust and the securitisation

trustdoes not pay the tax, then he or it shall be deemed to be

an assessee in default in respect of amount of tax payable and

all the provis ions of the Act relating to recovery and collection

of taxes shall apply (Section 115TC).

(w.e.f. A.Y.2014-2015)


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Income from depositary of Investor Protection Fund [(Section

10(23ED)]

Under the existing provis ions, section 10(23EA) provides that income

by way of contributions from a recognized stock exchange received

by a Investor Protection Fund set up by the recognized stock

exchange shall be exempt from taxation .

On similar l ines, it is proposed that income, by way of contribution

from a depository, of the Investor Protection Fund set up by the

depository in accordance with the regulations prescribed by SEBI wil l

not be included while computing the total income subject to same

conditions as are applicable in respect of exemption to an Investor

Protection Fund set up by recognized stock exchanges.

However, where any amount standing to the credit of the fund and

not charged to income-tax during any previous year is shared wholly

or partly with a depository, the amount so shared shall be deemed

to be the income of the previous year in which such amount is

shared.

(w.e.f. A.Y.2014-2015)

Definition of Venture Capital company, Venture Capital fund and

Venture capital undertaking [(Proposed Explanation 1 to clause

Section 10(23FB)]

I t is proposed to substitute explanation to clause (23FB) so as to

provide new definition for Venture Capital Company/Venture

Capital Fund/Venture Capital Undertaking.

The said amendment is made to give consequential effect post

replacement of SEBI (Venture Capital Fund) Regulations, 1996 (VCF

regulations) by The SEBI(Alternative Investment Funds) Regulations,

2012 (AIF regulations) from 21st May, 2012.

In order to provide benefit of pass through to s imilar venture capital

funds as are registered under new regulations and subject to same

conditions of investment restrictions in the context of investment in a

venture capital undertaking , it is proposed to amend section

10(23FB) to provide that


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(i ) The existing VCFs and VCCs (i .e. which have been registered

before 21/05/2012) and are regulated by the VCF regulations,

as they stood before repeal by AIF regulations, would continue

to avai l pass through status as currently avai lable.

(i i) In the context of AIF regulations, the Venture Capital

Company shall be defined as a company and Venture capital

fund shall be defined as a fund set up as a trust, which has

been granted a certif icate of registration as Venture Capital

Fund being a sub-category of Category I Alternative

Investment Fund and satisfies the fol lowing conditions:-

(a) That at least two-thirds of its investible funds are invested

in unl isted equity shares or equity l inked instruments of

venture capital undertaking.

(b) No investment has been made by such AIFs in a VCU

which is an associate company.

(c) Units of a trust set up as AIF or shares of a company set up

as AIF, are not l isted on a recognized stock exchange.

(i i i) In the context of AIF regulations, the Venture Capital

Undertaking shall be defined as it is defined in the Alternative

Investment Funds Regulations.

(w.e.f. A.Y.2014-2015)

Income to shareholder on account of Buyback of shares [(Section

10(34A)]

It is proposed to insert new clause (34A) so as to provide for

exemption in respect of any income aris ing to an assessee being

shareholder on account of buy back of shares (not being l isted on a

recognized stock exchange) by the company.

This amendment is consequential to insertion of new Chapter XII-DA

relating to special provis ions for tax on distr ibuted income of

domestic company for buy back of shares.

(w.e.f. A.Y.2014-2015)


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Income by way of distributed income by any person from the

Securitization Trust [(Section10(35A)]

I t is proposed to insert new clause (35A) in Section 10 so as to

provide for exemption in respect of any income received by investor

by way of distr ibuted income from a securitization trust.

This amendment is consequential to insertion of new Chapter XII-EA

for providing special tax regime for trust carrying on the activity of

securitization.

(w.e.f. A.Y.2014-2015)

Income of National Financial Holdings Company Limited

[(Section10(49)]

I t is proposed to insert new clause (49) in Section 10 to grant

exemption to National Financial Holdings Company Limited in

respect of its income accruing, aris ing or received on or before

March 31, 2014.

The said amendment is proposed to provide exemption on l ines of

SUUTI (The Specified Undertaking of Unit Trust of India) to National

Financial Holdings Company Limited incorporated on June 07, 2012post wounding up of SUUTI (The Specified Undertaking of Unit Trust of

India) which was created vide Unit Trust of India (transfer of

Undertaking and Repeal Act) Act, 2002 as successor of Unit Trust Of

India.

(w.e.f. A.Y.2014-2015)


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BUSINESS INCOME:

Deduction for investment in new plant & machinery (Section 32AC)

Incentive proposed in the form of deduction to a company is as

fol lows:

Assessee

el igible

for

deduction

Business Condit ions Minimum

Investment

in new

asset

Incentive/ Deduction

A.Y.2014-

15

A.Y.2015-16

Company Manufacture

of an art icle

or th ing

Acquires and

instal l s new

assets after

31-03-13 but

before

01-04-15(Meaning of

new asset

given below)

Above Rs.

100 crore

15% of the

actual

cost of the

new assets

acquired

15% of the

actual cost of

new assets

acquired from

01-04-13 to 31-

03-15 asreduced bydeduction

claimed under

th is sect ion in

A.Y.2014-15

The phrase new asset has been defined as new plant or machinery

but does not include

- any plant or machinery which before its instal lation by the

assessee was used either within or outside India by any other

person;

- any plant or machinery instal led in any office premises or any

residential accommodation, including accommodation in the

nature of a guest house;

- any office appliances including computers or computer software;

- any vehicle;

- ship or aircraft; or

- any plant or machinery, the whole of the actual cost of which is

al lowed as deduction (whether by way of depreciation or

otherwise) in computing the income chargeable under the head

Profits and gains of business or profession of any previous year.

If the company transfers the new asset within a period of 5 years

from the date of its instal lation, the amount of deduction claimed


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under this section shall be deemed to be the income of the previous

year in which such new asset is transferred under the head Profits

and Gains of Business or Profession.

Further, where the new asset is sold or otherwise transferred in

connection with the amalgamation or demerger within a period of

five years from the date of its instal lation, the provis ions of this

section shall apply to the amalgamated company or the resulting

company, as the case may be, as they would have applied to the

amalgamating company or the demerged company.



(Rs. in crores)

Par t iculars S i tuat ion 1 S i tuat ion 2 S i tuat ion 3 S i tuat ion 4

A.Y.

2014-

15

A.Y.

2015-

16

A.Y.

2014-

15

A.Y.

2015-

16

A.Y.

2014-

15

A.Y.

2015-

16

A.Y.

2014-

15

A.Y.

2015-

16

Investment

in new

asset

99 11 110 - - - - 110 105 50

Deduct ion

u/s 32AC

@15% of

cost

- - 16.5 16.5 16.5 - - 16.5 15.75 23.25

Less :

Deduct ion

claimed in

ear l ier

year

- - - - - - 16.5 - - - - - - 15.75

Avai lable

Deduct ion

16.5 16.5 -- -- 16.5 15.75 7.5

(w.e.f. A.Y.2014-2015)

Amount eligible as deduction as bad debts in case of banks (Section

36)

I t is proposed to insert an Explanation 2 to clause (vi i) of sub section

(1) of Section 36 so as to al low deduction in respect of bad debts

actually written off in excess of the credit balance in the provis ion of

bad and doubtful debts without any distinction between provis ion

for bad and doubtful debts provided on rural or other adv ances.

(w.e.f. A.Y.2014-2015)


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Amount eligible as deduction of Commodities Transaction Tax

(Section 36)

I t is proposed to amend section 36 of the Income-tax Act so as to

provide that an amount equal to the Commodities Transaction Tax

paid by the assessee in respect of the taxable commodities

transactions entered into in the course of his business during the

previous year shall be al lowable as deduction, if the income aris ing

from such taxable commodities transactions is included in the

income computed under the head Profits and gains of business or

profession.

This amendment is consequential in l ine with levy of new tax called

Commodities Transaction Tax on taxable commodities transactions

entered into in a recognized association.

(w.e.f. A.Y.2014-2015)

Amount not allowed as deduction in case of State Government

Undertakings (Section 40)

I t is proposed to amend Section 40 so as to provide that any amount

paid by way of royalty, l icense fee, service fee, privi lege fee, servicecharge etc or any amount appropriated, by the State Government

undertaking to the State Government, shall not be allowed as

deduction from business income of the State Government

undertaking.

This amendment has been proposed to resolve disputes that have

arisen in respect of income-tax assessment of some State

Government undertakings as to whether any sum paid by way ofprivi lege fee, l icense fee, royalty, etc. levied or charged by the

State Government exclusively on its undertakings are deductible or

not for the purposes of computation of income of such undertakings.

(w.e.f. A.Y.2014-2015)

Special Provision for full value of consideration for transfer of asset

other than capital assets in certain cases (Section 43CA)

The provis ions of Section 50C is applicable to immovable property

held as capital asset and not to immovable property held as stock in


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trade. It is proposed u/s 43CA to make provis ions of Section 50C

applicable on transfer of immovable property held as stock in trade.

The stamp duty value to be adopted for the same wil l be the stamp

duty value as on the date of agreement for transfer and not as on

the date of registration of such transfer provided consideration

received before or on the date of agreement of transfer is by way of

any mode other than cash.



Si tuat ions Tax Impact before

Proposed Amendment

Tax Impact after

Proposed Amendment

I f the seller sel l s

immovable property

held as capital asset at

a considerat ion less

than the value as per

stamp duty author i t ies

Provis ions of Sect ion

50C is appl icable to

the sel ler .

The di f ference

between the stamp

duty value and the

sales considerat ion

ment ioned in sa le

deed is charged totax in the hands of

the sel ler under the

head Income f rom

capital gains.

Provis ions of Section

50C is appl icable to

the sel ler .

The di f ference

between the stamp

duty value and the


ment ioned in sa le

deed is charged to taxin the hands of the

seller under the head

Income from capital

gains .

I f the seller sel l s

immovable property

held as Stock in trade

at a considerat ion less

than the value as per stamp duty author i t ies

Not Taxable in the

hands of sel ler

Provis ions of proposed

new sect ion 43CA is

appl icable to the

sel ler .

The di f ference

between the stamp

duty value and the


ment ioned in sa le

deed is charged to tax

in the hands of the

seller under the head

Profits and gains of

business or profession .

(w.e.f. A.Y.2014-2015)


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INCOME FROM OTHER SOURCES:

Deemed Income in the hands of purchaser (being individual & HUF)

of immovable property (Section 56)

Type ofproperty Consideration Value of taxable Income u/s 56 in thehands of purchaser ( individual & HUF)

Immovable

Property

Without

Consideration (andstamp duty value of

property exceeds

Rs. 50,000/-)

The stamp duty value of such

property.



agreement for transfer and not as on

the date of registrat ion of such




any mode other than cash).

Immovable

Property

For a Consideration

less than the stamp

duty value of the

property by an

amount exceedingRs 50,000/-

Stamp duty value of such property as

exceeds such considerat ion.



agreement for transfer and not as on

the date of registrat ion of such




any mode other than cash.)



Si tuat ions Tax Impact before

Proposed

Amendment

Tax Impact after

Proposed Amendment

Immovable Propertypurchased without

considerat ion (stamp dutyvalue is Rs. 10 lacs)

Taxable Income inthe hands of

purchaser = Rs. 10lacs

Taxable Income in thehands of purchaser =

Rs. 10 lacs

Immovable Property

purchased for Rs. 5 lacs

(stamp duty value is Rs. 10

lacs)

Taxable Income in

the hands of

purchaser = Ni l

Taxable Income in the

hands of purchaser =

Rs. 5 lacs (stamp duty

Rs 10 lacs Purchase

Pr ice Rs 5 lacs)

(w.e.f. A.Y.2014-2015)


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TAX INCENTIVES AND RELIEFS :

Deduction u/s. 80C for l ife in surance premia, etc. :

The amount of deduction for payment of Life Insurance premium

other than deferred annuity plan shall be al lowable upto 15%

(presently 10%) of the actual sum assured on policies issued after 01-

04-2013; in case of fol lowing persons

- a person with disabil ity or a person with severe disabil ity as

referred to in section 80U,


under section 80DDB.

(w.e.f. Assessment Year 2014-15)

Rajiv Gandhi Equity Saving Scheme u/s. 80CCG:

Rajiv Gandhi Equity Savings Scheme was introduced in last Budget,

wherein the deductions of 50% subject to maximum l imit of Rs

25,000/- was available for investment in equity shares of l isted

companies.

It is proposed to extend the deduction to investment in l isted units of

an equity oriented fund.

The deduction u/s 80CCG shall be available for 3 consecutive

assessment years as against the present provis ions of 1 year.

The deduction earl ier al lowable in case of gross total income upto

Rs 10 lakhs is proposed to amended to be allowed in case of gross

total income upto Rs 12 lakhs.

(w.e.f. A.Y.2014-2015)

Amendment of Section 80D in respect of Health Insurance premia:

The Central Government has introduced various health schemes

which were hitherto not covered under Section 80D. Hence, it is

proposed to cover any payment or contribution made by the

assessee to Health schemes as may be notif ied by the Central

Government u/s 80D, subject to overall monetary l imit.

(w.e.f. A.Y.2014-2015)


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Deduction in respect of interest on loan taken for residential house

property

At present, deduction U/s 24(b) on account of interest on home loan

upto maximum of Rs 1,50,000 /- p.a. is available under the head

Income from House Property.

As a boost to the housing industry, a new section 80EE has been

proposed to be introduced to provide that in computing the total

income of an individual, interest payable on loan taken by him from

any financial institution for the purpose of acquisit ion of a residential

house property shall be deducted subject to fol lowing conditions

- The deduction shall not exceed one lakh rupees,

- In a case where the interest payable for the previous year is less

than one lakh rupees, the balance amount shall be al lowed in

the assessment year beginning on 1st Apri l , 2015,

- The loan should be sanctioned by the financial institution during

the period beginning on 1st Apri l , 2013 and ending on 31st March,

2014,

- The amount of loan sanctioned for acquisit ion of the residential

house property does not exceed twenty-five lakh rupees,

- The value of the residential house property does not exceed forty

lakh rupees,

- The assessee does not own any residential house property on the

date of sanction of the loan.

- Where a deduction under this section is al lowed for any

assessment year, in respect of interest on housing loan, deduction

shall not be allowed in respect of such interest under any other

provis ions of the Income-tax Act for the same or any other

assessment year. However, the deduction under this section is in

addit ion to deduction u/s. 24(b) of the Act.

(w.e.f. A.Y.2014-2015)


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Deductions for contribution made to National Childrens Fund

Donation made to National Childrens Fund shall be entitled to

deduction u/s. 80G at 100% as against present deduction of 50%.

(w.e.f. A.Y.2014-2015)

Contribution made to political parties or an electoral trust

Contribution made to polit ical parties or an electoral trust by any

assessee, except a local authority or every artif icial juridical

person shall not be allowable as deduction u/s. 80GGB / 80GGC if

the contribution is made in cash.

(w.e.f. A.Y.2014-2015)

Deduction under Section 80IA to power sector

With a view to provide further time to the undertakings to

commence the el igible activity, sunset date under section 80IA

for the power sector to avail the tax incentive, is proposed to be

extended by a further period of one year i .e. up to 31st March,

2014.

(w.e.f. A.Y.2014-2015)

Deduction under Section 80JJAA

Presently, section 80JJAA provide for a deduction equal to thirty

per cent of additional wages paid to the new regular workmen

employed by an Indian company in its industrial undertaking

engaged in manufacture or production of art icle or thing.

The tax incentive was intended for employment of factory workers

in the manufacturing sector. In order to clarify the same, it is

proposed to amend the provis ions of section 80JJAA so as to

provide that the deduction shal l be avai lable to an Indian

Company for an amount equal to thirty per cent of additional

wages paid to the new regular workmen employed by the

assessee in such factory and not to other employees.


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I t is also proposed to provide that the deduction under this

section shall not be available if the factory is hived off or

transferred from another existing entity or acquired by the

assessee company as a result of amalgamation with another

company.

(w.e.f. A.Y.2014-2015)

Tax Credit U/s 87A

With a view to provide tax rel ief to the resident individual tax

payers having income above Rs. 2,00,000/- but not exceeding Rs.

5,00,000/- rebate of tax is proposed to be allowed for a sum not

exceeding Rs. 2,000/-.

(w.e.f. A.Y.2014-2015)

TAXATION OF INCOME BY WAY OF ROYALTY OR FEES FOR TECHNICAL

SERVICES:

Majority of tax treaties al lows India to levy tax on gross amount of

royalty at rates ranging from 10% to 25%, whereas the tax rate as per

section 115A is 10%. In some cases, this has resulted in taxation at a

lower rate of 10% even if the treaty al lows the income to be taxed at a

higher rate.

In order to correct this anomaly, the tax rate in case of non-resident

taxpayer, in respect of income by way of royalty and fees for technical

services as provided under section 115A, is proposed to be increased

from 10% to 25% to any agreement entered after 31.03.1976, which is

taxable under section 115A.

(w.e.f. A.Y.2014-2015)

LOWER RATE OF TAX ON DIVIDENDS RECEIVED FROM FOREIGN

COMPANIES:

I t is proposed to amend section 115BBD which provides for taxation of

gross dividends @ 15% received by an Indian Company from a specified

foreign company in which it has a share holding of 26% or more for the

financial year 2013-2014 which was previous ly f inancial year 2012-2013.

(w.e.f. A.Y. 2014-15)


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REMOVAL OF CASCADING EFFECT OF TAX ON DIVIDENDS RECEIVED FROM

FOREIGN COMPANIES:

I t is proposed to amend section 115-O in order to remove cascading

effect whereby the tax on dividends received from the foreign

subsidiary (i .e. the foreign company in which domestic company holds

more than 50% of equity share capital) is payable under section 115BBD

by the holding domestic company then, any dividend distr ibuted by

the holding company in the same year, to the extent of such dividends,

shall not be subject to Dividend Distr ibution Tax under section 115-O of

the Income-tax Act.

(w.e.f. 1st June, 2013)

ADDITIONAL INCOME-TAX ON DISTRIBUTED INCOME BY COMPANY FOR

BUY-BACK OF UNLISTED SHARES :

I t is proposed to insert a new section 115QA to provide that any

distr ibution of income to a shareholder by a domestic unl isted

company on buy-back of shares shall be chargeable to additional

income-tax @ 20% on the distr ibuted income, i .e. consideration paid by

the company on buy-back of shares as reduced by the amount

received by the company for issuance of such shares. Such receipt

would be exempt in the hands of shareholders.

It is also proposed to insert a new section 115QB to provide levy of

interest @ 1% per month or part thereof, for fai lure of payment of tax

within the prescribe time l imit.

It is further proposed to insert a new section 115QC to provide that in

case of fai lure on payment of tax, the principal officer of the companyand the company shall be deemed to be an assessee in default and all

the provis ions of the Act relating to recovery and collection of taxes

shall apply accordingly.

(w.e.f. 1st June, 2013)

RATIONALISATION OF TAX ON DISTRIBUTED INCOME BY THE MUTUAL

FUNDS:

I t is proposed to amend section 115R to provide uniform taxation for al l

types of funds, other than equity oriented fund, by increasing rate of


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tax on distr ibuted income from 12.5% to 25% in al l cases where

distr ibution is made to an individual or a HUF. Further, in respect of

income distr ibuted by a Mutual Fund under an Infrastructure Debt Fund

(IDF) scheme to a non-resident Investor is proposed to be taxed @ 5%.

Infrastructure debt fund scheme shall have the same meaning as

assigned to it in clause (1) of regulation 49L of the Securities and

Exchange Board of India (Mutual Funds) Regulations, 1996 made under

the Securit ies and Exchange Board of India Act, 1992.

(w.e.f. 1st June, 2013)

REDUCTION IN THE RATE OF SECURITY TRANSACTION TAX (STT )

The proposed new rates of STT are as under :

(w.e.f. 1st June, 2013)

Nature of taxable securit ies transaction Payable

by

Exist ing

Rates %

Proposed

Rates %

Del ivery based purchase of units of an

equity

or iented fund entered into in a recognisedstock exchange

Purchaser 0.1 Ni l

Del ivery based sale of units of an equity

or iented fund entered into in a recognisedstock exchange

Sel ler 0.1 0.001

Sale of a futures in secur i t ies Sel ler 0.017 0.01

Sale of a unit of an equity or iented fund tothe mutual fund

Sel ler 0.25 0.001

INTRODUCTION OF COMMODITIES TRANSACTION TAX:

A new tax called Commodities Transaction Tax (CTT) is proposed to be

levied on taxable commodities transactions entered into in a

recognised association.

It is proposed to define taxable commodities transaction to mean a

transaction of sale of commodity derivatives in respect of commodities,

other than agricultural commodities, traded in recognised associations.

The proposed rates of CTT are as under :

Nature of taxable securit ies transaction Payable by Proposed

Rate %

Sale of commodity der ivat ive Sel ler 0.01


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The provis ions with regard to collection and recovery of CTT, furnishing

of returns, assessment procedure, power of assessing officer,

chargeabil ity of interest, levy of penalty, institution of prosecution,

fi l ing of appeal, power to the Central Government, etc. have also been

proposed to be provided by insertion of Clause 105 to 124 in Chapter

VII of the Finance Bi l l , 2013, which wil l come into force by way of

notif ication in the Official Gazette by the Central Government.

Further, it is proposed to insert clause (xvi) in section 36 to provide that

an amount equal to the CTT paid by the assessee in respect of the

taxable commodities transactions entered into in the course of his

business during the previous year shall be al lowable as deduction, if

the income aris ing from such taxable commodities transactions is

included in the income computed under the head Profits and gains of

business or profession. (w.e.f. A.Y. 2014-15)

TAX RESIDENCE CERTIFICATE (TRC) FOR CLAIMING RELIEF UNDER DTAA :

I t is clarif ied that submission of a tax residency certif icate (TRC) is

necessary but submission of the TRC would not be a sufficient condition

for claiming benefits under the agreements referred to in sections 90

and 90A. It is imperative to note that treaty benefit can be claimed

after satisfying two separate conditions namely residency and

beneficial ownership. TRC satisfies only residence criteria and not

criteria of beneficial ownership. Thus, introduction of this clarif ication

may lead to l it igation related to claim of beneficial ownership even

though TRC is submitted.

(w.r.e.f. A.Y. 2013-14)

GENERAL ANTI AVOIDANCE RULES (GAAR):

The Finance Bi l l proposes to replace provis ions of Chapter X-A and

section 144BA and is proposed to be made applicable from Apri l 1,

2016 as against the current date of Apri l 1, 2014.

Fol lowing amendments have been made in the existing GAAR

provis ions:

- An arrangement, the main purpose of which is to obtain a tax

benefit, would be considered as an impermissible avoidance


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arrangement. The current provis ion of section 96 providing that it

should be the main purpose or one of the main purposes has been

proposed to be amended accordingly.

- The factors l ike, period or time for which the arrangement had

existed; the fact of payment of taxes by the assessee; and the fact

that an exit route was provided by the arrangement, would be

relevant but not sufficient to determine whether the arrangement is

an impermissible avoidance arrangement. The current provis ions of

section 97 which provided that these factors would not be relevant

has been proposed to be amended accordingly.

- An arrangement shall also be deemed to be lacking commercial

substance, if it does not have a significant effect upon the business

risks, or net cash flows of any party to the arrangement apart from

any effect attributable to the tax benefit that would be obtained

but for the appl ication of Chapter X-A. The current provis ions as

contained in section 97 are proposed to be amended to provide

that an arrangement shall also be deemed to lack commercial

substance if the condition provided above is satisfied.

- The directions issued by the Approving Panel shall be binding on the

assessee as well as the income-tax authorities and no appeal

against such directions can be made under the provis ions of the

Act. The current provis ions of section 144BA providing that the

direction of the Approving Panel wil l be binding only on the

Assessing Officer have been proposed to be amended accordingly.

Consequential amendments in other sections relating to procedural

matters have also been proposed.

APPLICATION OF SEIZED ASSETS UNDER SECTION 132B :

The amount of existing l iabil ity of tax, interest or penalty under the

Income-tax Act, Wealth-tax Act, the Expenditure-tax Act, the Gift-tax

Act and the Interest-tax Act determined on completion of assessments

pursuant to search is al lowed to be adjusted against the assets seized

during the course of search.

The amendment is proposed to clarify that the existing l iabil ity does not


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include advance tax payable in accordance with the provis ions of Part

C of Chapter XVI I of the Act.

(w.e.f. 1 s t June, 2013)

DEFECTIVE RETURN u/s. 139(9) :Where the return is f i led without payment of self assessment tax or

interest thereon, the return shall be treated as a defective return by

assessing officer.

(w.e.f. 1 s t June, 2013)

DIRECTION FOR SPECIAL AUDIT U/S. 142 (2A) AND EXCLUSION OF TIME IN

COMPUTING THE PERIOD OF LIMITATION FOR COMPLETION OF

ASSESSMENTS AND REASSESSMENTS :

The reasons for which the Assessing Officer may direct special audit

of accounts of the assessee is elaborately explained by the words

the nature and complexity of the accounts, volume of the

accounts, doubts about the correctness of the accounts, multipl icity

of transactions in the accounts or special ised nature of business

activity of the assessee.

Following period shall be excluded in computing the period ofl imitation for the purposes of section 153 / 153B:

- where the decision of the Assessing Officer for special audit u/s.

142(2A) is challenged before a court, the period for which the

matter is pending before the court (sub-clause (i i i) substituted

w.e.f. 1 s t June, 2013))

- period commencing from the date on which a reference or fi rst of

the references for exchange of information is made by an

authority competent under an agreement referred to in section

90 or section 90A and ending with the date on which the

information requested is last received by the Commissioner or a

period of one year, whichever is less (sub-clause (vi i i) substituted

w.e.f. 1 s t June, 2013))

- period commencing from the date on which a reference for

declaration of an arrangement to be an impermissible avoidance

arrangement is received by the Commissioner under section


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144BA(1) and ending on the date on which a direction under

subsection (3) or sub-section (6) or an order under sub-section (5)

of the said section is received by the Assessing Officer (sub-

clause (ix) substituted (w.e.f. A.Y. 2016-17)

CLARIFICATION OF THE PHRASE TAX DUE FOR THE PURPOSES OF

RECOVERY IN CERTAIN CASES :

Section 167C and Section 179 provides that where the tax due from LLP

or a private company as the case may be is i rrecoverable from such

LLP or company, then the partner/ director shall be jointly and severally

l iable for payment of such tax. .

An explanation has been inserted to widen the definition of tax due

so as to cover penalty, interest and other sum payable under the Act.

(w.e.f. 1st June, 2013)

PROVISIONS PERTAINING TO TDS/TCS:

TDS on transfer of certain immovable properties other than

agricultural land:

Applicability

I t is proposed to insert new section 194-IA according to which -

- I f any immovable property [other than agricultural land as

defined in section 2(14)(i i i)];

- is transferred;

- by any person (other than the person referred to in section 194LA

related to compulsory acquisit ion);

- to a resident transferor;

- for a consideration of Rs. 50 lacs and above;

- then the transferee shall deduct tax at source @ 1% of the

consideration;

- at the time of credit of such sum to the account of the transferor

or at the time of payment of such sum in cash or by issue of a

cheque or draft or by any other mode, whichever is earl ier;

(w.e.f. 1st June, 2013)


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Scope of TDS u/s 194-LC extended :

In order to facil itate subscription by a non-resident in the long term

infrastructure bonds issued by an Indian company in India (rupee

denominated bond), it is proposed to amend section 194LC of the

Income-tax Act so as to provide that where a non-resident deposits

foreign currency in a designated bank account and such money as

converted in rupees is uti l ised for subscription to a long-term

infrastructure bond issue of an Indian company, then, for the

purpose of this section, the borrowing by the company shall be

deemed to be in foreign currency.

The benefit of reduced rate of tax would, therefore, be available to

such non-resident in respect of the interest income aris ing on such

subscription subject to other conditions provided in the section.

The designated bank account should be solely for the purpose of

deposit of money in foreign currency and such money is to be used,

after conversion, for subscription to a rupee denominated long-term

infrastructure bond issue of an Indian company.

(w.e.f. 1st June, 2013)

PENALTY FOR NON FILLING ANNUAL INFORMATION RETURN (AIR):

It is proposed to amend section 271FA to provide that if a person who is

required to furnish an AIR, as required under section 285BA(1), fai ls to

furnish such return on or before 31 s t August as prescribed in section

285BA(2), then income-tax authority may direct that such person shall

pay, by way of penalty, a sum of Rs. 100/- for every day during which

the fai lure continues.

It is further proposed to provide that where such person fai ls to furnish

the return within the period specified in the notice under section

285BA(5), he shall pay, by way of penalty, a sum of Rs. 500/- instead of

Rs. 100/- for every day during which the fai lure continues, starting from

the day immediately fol lowing the day on which the time specified in

such notice for furnishing the return expires.

(w.e.f. A.Y. 2014-15)


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WEALTH TAX

Definition of urban land substituted :

Definition of urban land in clause (b) of Explanation 1 of section

2(ea) of Wealth Tax Act is proposed to be substituted in l ine withdefinition of Agricultural Land as proposed in Section 2(14) of the

Income Tax Act.

urban land means land situate -

(i i) in any area which is comprised within the jurisdiction of a

municipality (whether known as a municipality, municipal

corporation, notif ied area committee, town area committee,

town committee, or by any other name) or a cantonment boardand which has a population of not less than ten thousand; or

( i i i) in any area within the distance, measured aerial ly,

- not being more than two ki lometres, from the local l imits of

any municipality or cantonment board referred to in sub-

clause (i) and which has a population of more than ten


- not being more than six ki lometres, from the local l imits of


clause (i) and which has a population of more than one lakh

but not exceeding ten lakh; or

- not being more than eight ki lometres, from the local l imits of


clause (i) and which has a population of more than ten lakh,

but does not include land on which construction of a building is

not permissible under any law for the time being in force in the

area in which such land is s ituated or the land occupied by any

building which has been constructed with the approval of the

appropriate authority or any unused land held by the assessee

for industrial purposes for a period of two years from the date of

its acquisit ion by him or any land held by the assessee as stock-

in-trade for a period of ten years from the date of its acquisit ion

by him. (w.e.f. A.Y. 2014-15)


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