BUDGET HIGHLIGHTS OF INCOME TAX 2013-14

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BUDGET HIGHLIGHTS OF INCOME TAX 2013-14

				By: ajay singh
				March 13, 2013
All Articles by: ajay singh View Profile

Contents

DIRECT TAXES

PRESENT SLAB OR TAX RATES:-

TAX RATE	Current Slabs Rs.
Nil	Upto 200,000*
10%	200,001 to 500,000
20%	500,001 to 10,00,000
30%	Above 10,00,000

*Basic Exemption limit for senior citizens and very senior citizens is ‘ 250,000 and 500,000 respectively.
Surcharge proposed at the rate of 10% payable if Income exceeds Rs. 100 Lakhs.
Rebate Upto Rs. 2000 available to resident Individuals whose total Income does not exceed Rs. 5 Lakhs.
Additional Deduction:-

(a) Rs. 100,000(Over & above the existing Rs. 1.5 Lakhs) on interest on housing loan not exceeding ` 25 Lakhs and value of property not exceeding ` 40 Lakhs.

(b) Only for loans sanctioned during FY 2013-2014.

Rajeev Gandhi Equity Savings Scheme:-

(a) Deduction presently available to new retail investors for investment in equity share extended to include investment in equity oriented mutual fund.

(b) Eligible limit of gross total income of the investor for this purpose is proposed to be enhanced from Rs. 10 Lakhs to Rs. 12 Lakhs.

(c) Deduction available for three consecutive years.

Keyman Insurance Policy assigned to the ‘Keyman’ before its maturity will not enjoy the exemption available for a life insurance policy and will continue to be treated as a Keyman Insurance Policy.
Increase in surcharge for corporates.

Particulars	Below Rs. 1 crore		Above Rs. 1 crore Upto Rs. 10 crore		Above Rs. 10 crore
	Surcharge Rate	Effective Tax Rate	Surcharge Rate	Effective Tax Rate	Surcharge Rate	Effective Tax Rate
Domestic	Nil (Nil)	30.90% (30.90%)	5% (5%)	32.45% (32.45%)	10% (5%)	33.99% (32.45%)
Foreign	Nil (Nil)	41.20% (41.20%)	2% (2%)	42.02% (42.02%)	5% (2%)	43.26% (42.02%)

Note:

Figures in bracket refer to the current rates.
Education cess of 3% has been considered for determining the effective tax rates.
Surcharge at 10% to be payable on additional taxes levied on distribution of profits by domestic companies / mutual funds / securitization trusts and on buybacks.

Policy proposals

Direct tax code

DTC not an amended version of existing tax laws but a new code based on best international practices.
Ministry of Finance to consider Standing Committee recommendations and place the revised DTC Bill before the Parliament.

Circular on Development Centres

Circular covering tax matters of Development Centres based on based on Rangachary Committee recommendations to be issued shortly.

Safe Harbour

Rules on Safe Harbour to be issued after examining the Rangachary Committee recommendations.
Tax incentives and reliefs

Incentive for investment in specified plant or machinery

Applicable to a Company engaged in the manufacture of article or thing and which invests more than ` 100 crores in specified plant or machinery.
Investment to be done between 1 April 2013 to 31 March 2015.
Deduction of 15% on actual cost of plant or machinery acquired and installed.
Assets to be held for a period of 5 years, failing which deduction availed shall be treated as income.

Extension of Sunset Clause for Power Sector:-

sunset date for the power sector to commence eligible activity extended from 31 March 2013 to 31 March 2014.

Deduction for employment of new workmen

Presently, deduction available for additional wages paid to new regular workmen employed in manufacturing or production activities.
Amendment proposed to restrict the deduction only in respect of workmen employed in manufacturing activities carried out in a factory.

Concessional rate of withholding tax on interest

Interest income for a non-resident from the rupee denominated long-term infrastructure bonds of an Indian company is eligible for lower rate of withholding tax @ 5% - Applicable from 1 June 2013.
Buyback of shares
Additional tax of 20% on distributed income in the course of buyback of shares by unlisted companies, payable by such company.
Distributed income is the consideration for buyback less issue price of the shares.

Buyback consideration exempt in the hands of the shareholder.
Rate of tax on royalty and fees for technical services payable to a non-resident
Rate of withholding on royalty and fees for technical services payable to a non-resident increased from 10% to 25%.
Lower rate as per tax treaty can be availed, subject to tax residency certificate.

Dividends from specified foreign company
Beneficial tax rate of 15% on dividend income from specified foreign company extended by 1 year till 31 March 2014.
Dividend distribution tax not payable on dividends payable out of dividends received from a specified foreign company being a subsidiary General Anti-avoidance Rules.

General Anti-avoidance Rules
GAAR provisions now applicable from 1 April 2016
Amendments proposed in line with the Shome Committee recommendations-

- Definition of Impermissible Avoidance Arrangement amended to restrict to arrangements, the main purpose of which is to obtain a tax benefit as against “the main purpose or one of the main purposes”.

- Constitution of an approving panel comprising three members being a judge of the high court, member of the Indian Revenue Service and member having specialized knowledge Transfer of immovable property.

Transfer of immovable property
Consideration for transfer of any immovable property of ` 50 Lakhs and above attracts withholding tax @ 1% - Applicable from 1 June 2013.
Sale consideration on the transfer of immovable property when held as stock in trade to be the higher of the stamp duty value or the actual consideration in computation of business profit.
Purchase of immovable property by individual or HUF for inadequate consideration (Consideration minus Stamp duty value > ` 50,000) taxable in the hands of the recipient.

Amendments in response to judicial precedents
Bad debts written off are deductible only if the same exceeds the credit balance in the provision for bad and doubtful debts account made under section 36(1)(viia) without any distinction between rural and other advances.
Amendment made in response to the Supreme Court decision in Catholic Syrian bank.

Others
Commodities transaction tax - Introduced at the rate of 0.01% on commodity derivatives (except agricultural commodities).
Securities transaction tax – Existing rates on taxable securities transactions reduced.
Tax Residency Certificate is necessary but not a sufficient condition for claiming the benefits under the treaty.
Income of Securitisation Trust to be exempt from income tax subject to conditions.