Direct Tax Impact on- Individuals, Corporates and Others

[CA Rachit Agarwal]

DIRECT TAX IMPACT

IMPACT ON INDIVIDUALS

1. Exemption Limit for the individuals other than women and senior citizens raised from Rs. 1,60,000 to Rs. 1,80,000.
2. Higher exemption limit has been provided for the very senior citizen exceeding age of 80 years for Rs . 5 Lacs.
3. For senior citizen, age for the purpose of claiming exemption has been reduced from 65 years to 60 years.
4. Benefit of Rs. 20,000 for investment in Long Term Infrastructure bonds extended for the financial year 2011-12.
5. In case of salaried class, they will not be required to file return of the income if the entire tax liability is discharged by employer and the said person does not have any income from other sources will be effective from June 1, 2011.

 IMPACT ON CORPORATE ENTITIES (DOMESTIC COMPANY)

1. Surcharge on the Income Tax reduced from 7.50% to 5% for domestic companies.
2. Rate of tax for dividends received by Indian Companies will be taxed @ 15% rather than 30% from foreign subsidiaries will be effective from April 1, 2011
3. Any sum paid to National Laboratory or a university or an IIT will be eligible for weighted average deduction @ 200% from 175%.

IMPACT ON CORPORATE ENTITIES (NON RESIDENTS)

1. 1.      Surcharge on the Income Tax reduced from 2.50% to 2% for foreign companies.
2. 2.     Interest received from Infrastructure Debt Fund will be taxable @ 5% pursuant to Section 115A.
3. 3.     TDS will be applicable @ 5% on the interest payment to non residents in respect of interest payments for Infrastructure Debt Fund pursuant to Section 194LB.
4. 4.     Foreign Companies having branch or liasoning offices are also required to file return of income which was not the requirement as per the existing provisions.
5. 5.     Section 285 has been introduced making mandatory  for filing of annual information  within 60 days from the end of the financial year

MINIMUM ALTERNATIVE TAX

1. MAT has been increased from 18% to 18.50%

IMPACT ON SPECIAL CATEGORIES ASSESSEES

1. POWER SECTOR- Sunset period has increased from 31.03.2011 to 31.03.2012. Henceforth assessee even if generates the power on or before 31.03.2012 can avail 100% deduction pursuant to Section 80IA.
2. B.   SEZ-
1. MAT will become payable by SEZ. Earlier SEZ assesses were exempted from MAT.
2. SEZ units will now not be allowed to claim deduction for 100% of its profit pursuant to Section 10AA with effect from AY 2012-13
3. Exemption from Dividend Distribution Tax will not be available for the payments after June 2011
4. Mutual Fund Houses- Pursuant to Section 115R, Mutual Funds will be required to pay additional tax @ 25% in case of income distribution to individuals and 30% in case of assesses other than individuals in case of money market mutual fund or liquid fund. In respect of other funds, 12.50% tax will be on distribution of income to Individuals/HUF and 30% in case of others.
5. EOU- With the non extension of Tax holding, benefit to EOU’s has come to an end.
6. Limited Liability Partnerships- MAT has been levied on LLP with the introduction of new Chapter XII-BA in the Income Tax Act.

GENERAL

1. Document Identification Number- Requirements for quoting of Document Identification Numbers has been omitted retrospectively form April 1, 2011
2. Collection of Informations by AO- Section 131(2) is proposed to be introduced relation to agreement u/s 90 and 90A. It shall be competent for any income tax authority not below the rank of Assistant Commissioner of Income Tax as notified by the Board in this behalf, to exercise the power currently conferred on the income tax authorities.