Union Budget 2013 - 14

Union Budget2013 - 14 Discipline : DIRECT TAXATION Presentation by: Govind Rai Garg

Procedure for budget speech • Firstly, Finance Minister visits Finance Ministry to carry budget papers • Then he moves to Rashtrapati Bhawan and submits them to cabinet for their acceptance • After this, budget speech is given by Finance Minister in two parts-A & B at exactly 11a.m. • TAX PROPOSALS are contained in part `B` of his speech • In 2001, the time of speech was 5p.m. which is London standard of budget speech but NDA after 54 years of independence changed it to 11 a.m. • P. Chidambaram presented union budget for the 8th time

Theme of Chidambaram’s proposal “Clarity in tax laws, a stable tax regime, a non-adversarial tax administration, a fair mechanism for dispute resolution, and an independent judiciary will provide great assurance”

Perception of P Chidambaram • There will be no less money for security of nation • Agricultural needs more investment • Appreciation of FDI is necessary • Many states are developing but few section of people like women and SC ST are lacking behind • Only China and Indonesia are better than India in present scenario but as per forecasters, only China will remain • In order to finance Current Account Deficit, India needs 75 billion USD • Personal savings have declined constantly • Indian share market is the most regulated share market in the whole world

What are Direct Taxes? • Direct tax generally means tax paid directly to the government by the persons on whom it is imposed • A direct tax is one which cannot be shifted by the taxpayer to someone else • Direct taxes are progressive in nature i.e. richer the assessee; higher is the tax • Example- Income Tax, Wealth Tax etc.

Relief to Tax Payers • Rates of personal income tax survived 4 Finance Ministers & 4 governments • Current slabs introduced only last year • No case to revise either rates or slabs • Moderate increase in level of threshold exemption will mean hundreds of thousands of taxpayers going out of tax net • Some relief to tax payers in first bracket of 2L to 5L i.e. tax credit of 2,000-section 87A. • 1.8 crore tax payers expected to benefit to value of 3,600 crores

How much you`ll shell out *With additional surcharge of 2% of tax liability as education cess and 1% as SHE cess

Surcharge on Super Rich • Fiscal consolidation cannot be effected only by cutting expenditure • Wherever possible, revenues must be augmented • Source: Those well placed in society • Only 42,800 people having taxable income exceeding 1 crore per year • Surcharge of 10% imposed on such persons • Persons include individuals, HUFs, firms & entities with similar status

Shockwaves on the RICHter scale CROREPATIS clubbed with a 10% surcharge blow; Tax credit for those in LOWER SLAB CROREPATIS clubbed with a 10% surcharge blow; Tax credit for those in LOWER SLAB REPATIS clubbed with a 10% surcharge blow; Tax credit for those in LOWER SLAB

Changes in surcharge • Increase from 5% to 10% on domestic companies having taxable income exceeding 10 crores per year • Increase from 2% to 5% on foreign companies paying higher rate of corporate tax • Increase from 5% to 10% in case of dividend distribution tax • Additional surcharges will be in force only for 1 year • “I believe there is a little bit of the spirit of Mr. Azim Premji in every affluent tax payer. I am confident that when I ask the relatively prosperous to bear a small burden for one year, just one year, they will do so cheerfully”

YOUR TAX BURDEN OVER THE YEARS *For income higher than Rs5L, Exemption limit is Rs 2L

Shelter for Aam Admi • Tax benefit to first home buyer who takes loan for an amount not exceeding 25,00,000 • Additional deduction of 1,00,000 allowed to such home buyers • If limit not exhausted, balance may be claimed in AY 2015-16 • This deduction over & above deduction of 1,50,000 allowed for self occupied houses allowed under section 24 of the Income-tax Act

PROPOSED SECTIONS IN INCOME TAX ACT, 1961 SECTION 194IA (earlier proposed as 194LAA) • APPLIES TO ALL BUYERS OF IMMOVABLE PROPOERTY OF VALUE MORE THAN 50 LAKH • BUYER HAS TO DO DEDUCT TAX AT SOURCE @ 1% OF ACTUAL TRANSACTION VALUE AT THE TIME OF PAYMENT OR CREDIT; WHICHEVER IS EARLIER • PROVISIONS OF SECTION 206AA ALSO APPLICABLE ON THIS SECTION

SECTION 32AC-INVESTMENT ALLOWANCE • 15% INVESTMENT ALLOWANCE ON FRESH P&M OTHER THAN AIRCRAFTS • VALUE SHOULD BE MRE THAN 100 CR • ALLOWED ONLY TO MANUFACTURING SECTOR • INVESTMENT VALID BETWEEN 1-4-2013 TO 31-3-15 SECTION 90(4) • INDIAN REVENUE AUTHORITY WILL NOT BE BOUND BY TAX RESIDENCE CERTIFICATE WHILE DOING ASSESSMENT OF NON RESIDENTS

SECTION 40 • ANY FEES GIVEN TO STATE GOVERNMENT BY PUBLIC SECTOR UNDERTAKING WILL NOT BE ALLOWED AS AN EXPENSE WHILE COMPUTING PROFIT & GAINS OF BUSSINESS & PROFESSION SECTION 10(10D) • AMOUNT RECEIVED ON MATURITY OF KEYMAN INSURANCE POLICY WILL BE TAXABLE IN HIS HANDS ALSO

OTHER PROVISIONS • SPECIAL AUDIT CAN BE ORDERED BY ASSESSING OFFICER IF: • VOLUME OF TRANSACTIONS IS LARGE • MULTIPLICITY OF TRANSACTIONS • DOUBT ON CORRECTNESS OF ACCOUNTING ENTRIES • INTERPRETATION OF ACCOUNTS IS COMPLEX FILLING OF RETURN WITHOUT PAYMENT OF SELF ASSESSMENT TAX WILL LEAD TO A DEFECTIVE RETURN U/S 139(9) OF INCOME TAX ACT, 1961 GAAR ARE POSTPONED TO ASSESSMENT YEAR 2016-17

FOR CLASSIFYING A LAND AS URBAN OR RURAL • OLD PROVISION: LAND IS URBAN IF IT FALLS IN • 8KM FROM THE URBAN MUNICIPALITY BY ROAD • NEW PROVISION:IT DEPENDS ON THE POPULATION OF THE AREA DURING LAST PREVIOUS YEAR` CENSUS AND THE DISTANCE WILL BE MEASURED ARIALLY

Budget impact on certain deductions • Eligibility conditions for Life insurance policies relaxed • Increase in permissible premium rate from 10% to 15% of sum assured • Contributionn made to Central Government Health Scheme eligible for deduction under Section 80D • Same benefit extended to similar schemes of Central & State Governments • Donations made to National Children’s Fund now eligible for 100% deduction • Investment allowance of 15 % to manufacturing companies investing more than 100 cr in plant and machinery during 1-4-13 to 31-3-15 • Eligibility date to avail benefit u/s 80-IA extended from 31-3-13 to 31-3-14

Long term infrastructure bonds • To attract investment in long term infrastructure bonds in foreign currency, the rate of tax on interest paid to non-resident investors reduced from 20% to 5 % last year • Same benefit extended to investment made through designated bank account in a rupee denominated long term infrastructure bond • 50,000 crores long term infrastructure bonds to be issued in FY 2013-14%

Direct Tax Code • Direct tax code is work in progress • It is not intended to be amended version of Income Tax Act, 1961 but a new code based on best international practices that will be compatible with needs of fast developing nation • Standing committee has submitted its report on introduction of direct taxes

Conclusion • Budget might be favourable keeping in mind the political attempt to win the ensuing elections • The provisions within the scope of my knowledge have been explained

THANK YOU SIR I would like to thank CA Gaurav Garg Sir for giving me this opportunity to understand the union budget 2013-14 and present it

Union Budget 2013 - 14