By CA Yogesh K.

Budget Analysis2013-14

Budget Analysis2013-14

Comparison of Tax Revenue of last five years

Particulars 2009-10 2010-11 2011-12 2012-13 # 2013-14 #

Corporation Tax 2,56,725 2,98,687 3,22,816 3,588,74 4,19,520

Taxes on Income 1,12,850 1,46,586 1,70,342 2,06,095 2,47,639

Wealth Tax 425 687 788 866 950

Customs 98,000 1,35,812 1,49,327 1,64,853 1,87,308

Union Excise Duties 1,06,477 1,38,299 1,45,607 1,71,996 1,97,553

Service Tax 65,000 71,015 97,508 1,32,697 1,80,141

Total tax revenue

6,39,477 7,91,086 8,86,388 10,35,381 12,33,111

In crores Rs.

# estimates

Black money in India

• In February 2012, the director of the Central Bureau of Investigation said that Indians have $500 billion of illegal funds in foreign , more than any other country. (equivalent to Rs. 27,50,000 crores)

- Wikipedia(public encyclopedia)

• In yet another 'expose' activist-turned-politician Arvind Kejriwal on Friday targeted the issue of black money and claimed to have access to some of the 700 names in a list of Indians who have accounts in HSBC's branch in Geneva.

• According to the statement of a former CBI official, there is Rs.25,000 lakh crores in black money stashed away in Swiss banks," said Kejriwal- DNA*- 9-nov-2012.

‘According Arvind Kejriwal to Economic times’

9-nov-2012

* http://www.dnaindia.com/india/commentary_complete-coverage-kejriwal-targets-ambanis-daburs-over-black-money_1762463

ANALYSIS OF IMPORTANT DIRECT TAX PROPOSALS

Rates of Income Tax for the Assessment Year 2014-15 of individuals

Income Slab(Rs.)

Rate of Tax(%)

Surcharge(%)

EC/SHEC(%)

Total Tax(%)

Increase in Tax(%)

Up to 200,000

Nil Nil Nil Nil Nil

200,001 to 500,000 @

10 Nil 3 10.30 Nil

500,001 to 1,000,000

20 Nil 3 20.60 Nil

1,000,001 to10,000,000

30 Nil 3 30.90 Nil

Above 10,000,000

30 10 3 33.99 3.09

@ Section 87A has been introduced to provide a tax rebate lower of tax payable or Rs. 2,000/- to resident individuals whose total income does not exceed Rs. 500,000/-

Tax Rates for Firm (Including Limited Liability Partnership)

Income Slab(Rs.)

Rate of Tax(%)

Surcharge(%)

EC/SHEC(%)

Total Tax(%)

Increase in Tax(%)

Upto 10,000,000

30 Nil 3 30.90 Nil

Above 10,000,000 *

30 10 3 33.99 3.09

* Surcharge is applicable on the entire tax payable however, marginal relief is available

Alternate Minimum Tax (AMT) for other than companies claiming specified

deductions

Income Slab(Rs.)

Rate of Tax(%)

Surcharge(%)

EC/SHEC(%)

Total Tax (%)

Increase in Tax (%)

Up to 10,000,000

18.5 Nil 3 19.055 Nil

Above 10,000,000 *

18.5 10 3 20.96 1.905

* Surcharge is applicable on the entire tax payable however, marginal relief is available

Tax Rates for Domestic Company

Income Slab(Rs.)

Rate of Tax(%)

Surcharge(%)

EC/SHEC(%)

Effective Rate of Tax (%)

Increase in Tax (%)

Up to 10,000,000

30 Nil 3 30.9 Nil

10,000,001 to100,000,000

30 5 3 32.445 Nil

Above100,000,000*

30 10 3 33.99 1.545

* Surcharge is applicable on the entire tax payable however, marginal relief is available

Minimum Alternate Tax (MAT) for companies

Book profit Slab(Rs.)

Rate of Tax(%)

Surcharge(%)

EC/SHEC(%)

Effective Rate of Tax (%)

Increase in Tax (%)

Up to 10,000,000

18.5 Nil 3 30.9 Nil

10,000,001 to100,000,000

18.5 5 3 32.445 Nil

Above100,000,000*

18.5 10 3 33.99 0.95275

Deduction for individuals in respect of interest on housing loan – Section 80EE

• One time additional deduction upto Rs. 1 lakh.– CONDITIONS:

– Sanctioned from 01-04-2013 to 31-04-2014.– Loan not exceeding Rs. 25 lakhs.– value of the residential house property does not exceed

Rs. 40 lakhs.– assessee does not own any residential house property

on the date of sanction of the loan.

• Tax Deduction at Source (TDS) on transfer of certain immovable properties (other than agricultural land) – Section 194IA

TDS to be deducted by the buyer at 1% on the consideration paid to a resident for acquiring immovableproperty.

However the provisions would not apply if the:

• consideration paid is less than Rs. 50 lakhs or• Immovable property is an agricultural land or• If the sum paid is on account of compulsory acquisition of any immovable property.

Investment Allowance – Section 32AC

• For boosting investment in new Plant and Machinery by a company engaged in the activity of manufacture or production of any article or thing, a deduction at the rate of 15% of the cost of new Plant and Machinery acquired and installed is proposed.

• The cost of new Plant and Machinery acquired and installed during the period 1st April, 2013 to 31st March, 2015 should exceed Rs. 100 Crores.

continue

Deduction would be available over a period of two years calculated in the following manner:

1. Deduction in AY 2014-2015 will be 15% of the total cost of the new Plant and Machinery acquired and installed during the year if it exceeds Rs. 100 Crores.

2. Deduction in AY 2015-2016 will be 15% of the total cost of the new Plant and Machinery acquired and installed in FY 2013-2014 and FY 2014-2015 as reduced by deduction allowed under clause (1) above. continue

• If the company sells or transfers (except in case of amalgamation or de-merger) any such asset within five years from the date of installation, then the amount of deduction availed in respect of such asset will be taxed in the year in which such asset is sold or transferred.

• In case of amalgamation or de-merger the amalgamated or resulting company has to hold such plant and machinery for the balance period.

• Plant and machinery would not include ship or aircraft, second hand local or imported plant and machinery, office appliances including computers or computer software, vehicle and plant and machinery which has been fully depreciated/otherwise allowed as deduction in any year.

The deduction mentioned above is in addition to depreciation and additional depreciation.

Capital assets-Section 2(14)

• Agricultural Land situated in an area within jurisdiction of a municipality or a cantonment board having population of over 10,000 according to preceding census

Or

• Agricultural Land situated in any area within such distance not exceeding 8 kilometres of such municipality as may be notified

• Distance of 2 kms from municipality or a cantonment board and having a population of more than 10,000 but not exceeding 100,000.

Or

• Distance of 6 kms from municipality or a cantonment board and having a population of more than 100,000 but not exceeding 1,000,000.

Or

• Distance of 8 kms from municipality or a cantonment board and having a population exceeding 1,000,000.

Present(2012-13) Budget(2013-14)

Agricultural land satisfying the following conditions is considered as capital asset.

Rajiv Gandhi Equity Savings Scheme- Section 80CCG

• Presently, a resident individual who is a new retail investor and has acquired listed equity shares, in accordance with the notified scheme is allowed a one time deduction of 50% of the amount invested subject to a limit of ` 25,000.

• The upper limit of Gross Total Income for eligibility of deduction is Rs.10 lakhs.

• It is proposed to grant the deduction on investment in listed units of an equity oriented fund also, which invests in eligible securities under Rajiv Gandhi Equity Savings Scheme.

• The deduction is proposed to be extended to 3 consecutive assessment years.

• The upper limit of Gross Total Income for eligibility of deduction is increased from Rs.10 lakhs to Rs.12 lakhs.

Present Budget

• Tax Deduction at Source (TDS) on transfer of certain immovable properties (other than agricultural land) – Section 194IA

TDS to be deducted by the buyer at 1% on the consideration paid to a resident for acquiring immovableproperty.

However the provisions would not apply if the:

• consideration paid is less than Rs. 50 lakhs or• Immovable property is an agricultural land or• If the sum paid is on account of compulsory acquisition of any immovable property.

Deduction in respect of employment of new workmen- Section 80JJAA

• Presently deduction of 30% of additional wages paid to new workmen is allowed from profits derived by Indian Companies from any industrial undertaking engaged in manufacture or production of article or thing.

• The deduction is allowed for 3 financial years including the year of employment of new workmen.

• It is now proposed that deduction will be allowed to an Indian company deriving profits from manufacture of goods in a factory as defined under the Factories Act, 1948.

present Budget

Transfer of immovable property without adequate consideration – Section 56(2)

(vii)

• Currently where an immovable property is received by an Individual or HUF without consideration and the stamp duty value of such property exceeds Rs. 50,000, the stamp duty value of such property is taxable in the hands of the recipient as income from other sources.

• This provision is proposed to be extended to cover a situation where an immovable property is received by an individual or HUF for inadequate consideration. Where the consideration which is less than the stamp duty value and where the difference exceeds Rs. 50,000, the stamp duty value of such property as reduced by the consideration received will be taxable in the hands of the recipient. continue

• Where the date of an agreement fixing the value of consideration for the transfer of the asset and the date of registration of the transfer of the asset are not the same, the stamp duty value would be taken as on the date of the agreement for transfer. However, this exception shall apply only in those cases where amount of consideration or a part thereof for the transfer has been received by any mode other than cash on or before the date of the agreement.

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Deferment of GAAR

• In order to curb avoidance of tax, GAAR was introduced by the then Finance Minister, Mr. Pranab Mukherjee in the Finance Act, 2012. A number of representations were submitted against these provisions.

• An Expert Committee, Shome Committee submitted its recommendations to the Government. Accordingly, GAAR along with all the relevant procedures has been postponed to AY 2016-17 instead of AY 2017-18 as recommended by the Shome Committee report.

General Anti Avoidance Rules

Liability of Directors of Private Company in liquidation – Section 179

• An explanation to Section 179 is inserted with effect from 1st June, 2013 so as to clarify that the expression “tax due” includes penalty, interest or any other sum payable under the Act.

ANALYSIS OF IMPORTANT

INDIRECT TAX PROPOSALS

Penalties and Prosecution

Nature of Offence Penalties Prosecution

Present Proposed * Present Proposed *

• Failure to obtain registration.

Rs. 200 per dayor Rs.10,000(whichever ishigher)

Discretionary- Maximum Rs.10,000 - -

* Effective from a date to be notified after enactment of Finance Bill 2013

AA For CompaniesFor Companies

Penalties and Prosecution

Nature of Offence Penalties Prosecution

Present Proposed * Present Proposed *

For evasion of Service Tax

-

Discretionary-

Maximumupto Rs.100,000

If amount exceeds 50 Lakhs –imprisonment of minimum 6 monthsand maximum upto 3years

If amount exceeds Rs. 50Lakhs – imprisonment of minimum 6 months and maximum upto 3 years (Non-cognizable and bailable offence )

Issue of invoice without provision of service.

Incorrect availment and utilization of CENVAT credit.

If amount exceeds Rs. 50 Lakhs–imprisonment of minimum 6 monthsand maximum upto 3years

If amount exceeds Rs. 50 Lakhs – imprisonment of minimum 6 months and maximum upto 7 years (Cognizable offence)

Default in deposit of collectedtax beyond 6 months

* Effective from a date to be notified after enactment of Finance Bill 2013

BB For Director / Manager / Secretary/ Any other officerFor Director / Manager / Secretary/ Any other officer

Voluntary Compliance Encouragement Scheme, 2013

EligibilityEligibility

Stop filers/ non-filers/ non-registrants or existing service providers who have not disclosed true liability in their service tax returns for “the specified period”

ExclusionsExclusions• Existing taxpayers who have filed service tax returns and have disclosed true

liability but have not paid the disclosed liability for the specified period.• Any taxpayer on whom notice/order has been passed by the Service Tax

Department prior to 1st March, 2013.• Applicants opting for VCES with regards to tax dues for subsequent periods on

identical issues in respect of which orders/notices have been issued for any prior period Finance Bill 2013 .

• Applicants opting for VCES with regards to tax dues in respect of issues which are subject to inquiry/ investigation/ audit and where such proceedings are pending completion as on 1st March, 2013. continue

Key BenefitsKey Benefits

• Only Service Tax payable at the applicable rates• No interest /penalties• Immunity from prosecution• No re-opening of proceedings

Due DatesDue Dates

• Declaration to be filed by 31st December, 2013• 50% of the tax dues to be paid by 31st December, 2013• Balance 50% to be paid by 30th June, 2014 without interest or by 31st

December, 2014 with applicable interest

Goods and Services Tax

• No definitive time frame prescribed for GST roll-out.• Budgetary allocation of Rs. 9,000 crores (first instalment)

in order to compensate States for the losses arising on account of reduction in CST rates.

• Broad consensus between the Union Government and "overwhelming majority" of States to introduce GST - GST

• legislation to be drafted by State Finance Ministers and the GST Council.

Thank you

CA YOGESH KESARIYA

CONTRACTOR,NAYAK & KISHNADWALA

CHARTERED ACCOUNTANTS

yogeshk@cnkindia.com

Reference •http://indiabudget.nic.in/budget.asp