India: Budget Highlights

The Union Finance Minister Mr. P Chidambaram presented the Union Budget 2013-14 in the Lok Sabha on 28th February, 2013. The segment herein below highlights the proposals made in the Budget.

DIRECT TAXES

1. Slab rates

There is no change in the slabs or the rates of Personal Income tax. However, there is a relief of INR 2000/- to the individuals having total income upto INR 5,00,000/-. The relief is therefore given to the tax payers in the first Income bracket of INR 2,00,000/- to INR 5,00,000/.

2. Surcharge

  • Surcharge of 10% will be applicable for individuals having taxable incomes above INR 1,00,00,000/-.
  • The rate of surcharge is increased from 5% to 10% for domestic companies having taxable income above INR 10,00,00,000/-.
  • The rate of surcharge is increased from 2% to 5% for the foreign companies having taxable income above INR 10,00,00,000/-.
  • The rate of surcharge for all the other cases viz. Dividend Distribution Tax [DDT] or Tax on Distribution Income will increase from 5% to 10%.

3. Deductions

  • Akin to the Central Government Health Scheme, the contributions made to schemes of Central and State Governments will be eligible for deduction under Section 80D of the Income Tax Act, 1961.
  • The donations made to National Children Fund will be eligible for 100% deduction under Section 80G of Income Tax Act.

4. Relaxation of premium rate for disabled

The Relaxation in the eligibility conditions of Life Insurance Policies for persons suffering from disability or certain ailment has been proposed by increasing the premium rate from 10% to 15%

5. Investment allowance to Manufacturing Companies

An investment allowance at the rate of 15% has been proposed for the manufacturing companies who invest more than INR 100 Crore in plant and machinery during the period 1.4.2013 to 31.3.2015.

6. Concessional Tax

The concessional tax on dividend received by an Indian company from its foreign subsidiary shall continue at the rate of 15 per cent for one more year.

7. Exemption of Securitisation Trust from Income Tax

The Securitisation Trust will be exempted from the purview of Income Tax. The tax, at the specified rates) will be levied only at the time of distribution of income for companies or individual or HUF as the case may be. The tax rates shall be 30% in the case of companies and 25% in the case of individual or HUF.

8. Extension of date for power sector projects

For the purpose of availing benefit under Section 80-IA, the Eligible Date for the projects in the power sector has been extended from 31.3.2013 to 31.3.2014.

9. Tax Deductible at Source

The levy of Tax Deductible at Source has been proposed at the rate of 1 % on the value of the transfer of immovable property where the consideration exceeds INR 50,00,000/-. However, for this purpose, the agricultural land will be exempt.

10. Withholding Tax

It has been proposed to levy final withholding tax at the rate of 20% on profits distributed by unlisted companies to shareholders through buy-back of shares. The whole motive behind this is to eliminate the practice adopted by the unlisted companies who avoid dividend distribution tax by arrangements involving buyback of shares.

11. Increase in Royalty and Fee for Technical Services

Proposal has been made for increase in the rate of tax on payments by way of royalty and fees for technical services to non-residents from 10 percent to 25 percent.

12. Commodity Transaction Tax

Union Budget 2013-14 has introduced the Commodity Transaction Tax [CTT]. This new levy proposed in the Finance Bill, 2013 aims at augmenting the financial resources. The finance minister in his budget speech said that there is no distinction between derivative trading in the securities market and derivative trading in the commodities market as only the underlying asset is different. Accordingly, it has been proposed to levy CTT on non-agricultural commodities futures contracts at the rate of 0.01% of the price of the trade.

13. Service Tax

  • The activities relating to training and testing in relation to agricultural produce will be included in the negative list for service tax thereby exempted from the levy of service tax.
  • The courses in designated trades offered by the Industrial Training Institute or Industrial Training Center being affiliated to State Council of Vocational Training will be covered under the negative list.
  • The copyright on cinematography limited to films exhibited in cinema halls will be exempted from the purview of Service Tax.
  • The Voluntary Compliance Encouragement Scheme, 2013 (VCES) has been introduced in order to encourage the voluntary compliance and broaden the tax base. Under this scheme, one time reprieve will be given by way of (i) waiver of interest and penalty and (ii) immunity from prosecution to the stop filers, non-filers or non-registrants or service providers.
  • All the restaurants with air-conditioning/ central air heating (including restaurants not serving liquor as well) in any part of the establishment at any time during the year been covered within the purview of service tax.
  • Any person collecting service tax exceeding INR 50 lakh, but fails to deposit the same to the Central Government within 6 months, shall be punishable with imprisonment for a term which may extend to 7 years but not less than 6 months.
  • The exemption limit of INR 25 lakh will not be available in case of charitable organizations
  • The below mentioned exemptions are withdrawn:
    • The services which are provided by an educational institution by way of renting of immovable property or education auxiliary service.
    • Earlier, the temporary transfer or permitting the use or enjoyment of a copyright relating to cinematographic films was fully exempt. This will now be restricted to exhibition of cinematograph films in a cinema hall or a cinema theatre.
    • Services by way of parking of vehicle to general public.
    • Services provided to Government, a local authority or a governmental authority, by way of repair or maintenance of aircraft

14. Customs

  • Duty free gold limit increased to Rs 50,000 in case of male passenger and Rs 1,00,000 in case of a female passenger subject to conditions.
  • The period of concession available for specified part of electric and hybrid vehicles will be extended upto 31.03.2015.
  • Basic customs duty will be enhanced on the following goods:-
    • Yachts and motor vehicles
    • Raw silk from 5% to 15%.
    • Set top boxes from 5% to10%.
    • Luxury cars (duty enhanced from 75% to 100%)
    • pre-forms precious and semi-precious stones will be reduced from 10% to 2%.
  • The speed post with proof of delivery or courier approved by the Central Board of Excise & Customs would also be the prescribed modes of delivery for any decision or order or any summons or notices

15. Excise duty

  • Excise duty on following goods enhanced:-
    • Mobile phones of retail sale price exceeding Rs 2000/-.
    • Cigarettes
    • Marble tiles and slabs
  • Full exemption has been granted on ships and other vessels. Thus there will be no CVD on import of the same.
  • In respect of branded readymade garments and made ups, Zero excise duty route has been restored
  • Specific excise duty has been increased on cigarettes by 18 percent.
  • The Excise duty has been increased from 27% to 30% on SUVs. This will however be, not applicable for SUVs registered as taxies.
  • The Duty on mobile phones priced more than INR 2000/- increased to 6%.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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