Group : 3Sagar Oganja : 104147 Tushar Vasani : 104159Nandish Aghara : 104126 Nirav Parmar : 104131

BTP PresentationOn

Union Budget | Direct Tax Codes | Exemptions from Tax

Union Budget

The Union Budget of India, referred to as the annual Financial Statement presented each year on the last working day of February by the Finance Minister of India in Parliament. The budget has to be passed by the House before it can come into effect on April 1, the start of India's financial year.

Former Finance Minister Morarji Desai presented the budget eight times, the most by any.

The Budget is the most extensive account of the Government`s finances, in which revenues from all sources and expenses of all activities undertaken are aggregated.

(a) Introduction :

(b) Budget Estimates for 2011-12 :

Gross Tax receipts are estimated at Rs. 9,32,440 cr.

„Non-tax revenue receipts estimated at Rs. 1,25,435 cr.

Total expenditure proposed at Rs. 12,57,729 cr.

Fiscal Deficit kept at 4.6 per cent of GDP for 2011-12.

All subsidy related liabilities brought into fiscal accounting.

(c) Key Tax Proposals :

Direct Taxes

o „Exemption limit for the general category of individual tax payers enhanced from Rs. 1,60,000 to 1,80,000 giving uniform tax relief of Rs. 2,000.

o „Exemption limit enhanced and qualifying age reduced for senior citizens.

o Higher exemption limit for Very Senior Citizens, who are 80 years or above.

o „Current surcharge of 7.5 per cent on domestic companies proposed to be reduced to 5 per cent.

o „Tax incentives extended to attract foreign funds for financing of infrastructure.

(c) Key Tax Proposals : (Cont.)

Indirect Taxes

o „To stay on course for transition to GST.

o „Central Excise Duty to be maintained at standard rate of 10 per cent.

o Reduction in number of exemptions in Central Excise rate structure.

o „Nominal Central Excise Duty of 1 percent imposed on 130 Items entering in the tax net.

Direct Tax Codes (DTC)

Removal of most of the tax saving schemes : o Unit Linked Insurance Plans (ULIPs),o Equity Mutual Funds (ELSS),o Term deposits,o NSC (National Savings certificates),o Long term infrastructures bonds, etc.

The New Direct Tax Code (DTC) is said to replace the existing Income Tax Act of 1961 in India.

(a) Highlights of Direct Tax Codes :

New tax saving schemes : o Life Insurance,o Provident Fund,o Superannuation fund,o Gratuity Fundo New Pension Scheme (NPS).

Tax Slabs : (Man & Women are treated same)

Home Loan Interest : Exemption will remain same as 1.5 lakhs per year for interest on housing loan for self-occupied property.

Short Term & Loan Term Gains :o Only half of Short-term capital gains will be taxed. e.g. if

you gains 50,000, add 25,000 to your taxable income.o Long term capital gains (From equities and equity mutual

funds, on which STT has been paid) are still exempted from income tax.

Education Cess :Surcharge & Education Cess are abolished.

Income arising from House Property :Deductions for Rent and Maintenance would be reduced from 30% to 20% of the Gross Rent. Also all interest paid on house loan for a rented house is deductible from rent.

Corporate Tax:Corporate tax reduced from 34% to 30% including Education Cess and Surcharge.

Tax on Dividends :Equity mutual fund will attract 5% dividend distribution tax (DDT). There will also be a TDS 0f 10% (20% in case of NRI and companies) if dividend is more than 10,000 Rs for non-equity funds.

Income Exempted Under Various Sections

There are various incomes that is exempted under Sec. 10, 10A, 10AA, 10B, 10BA, 11, 12, 13, and 13A

Under Sec. 10A there is absolute exemption of tax, while under other sec. there is specific exemption available to newly established industrial undertakings in free trade zones, charitable trusts and political parties.

Agricultural Income Interest received by a non-resident from prescribed

securities Tax paid on behalf of foreign companies Death-cum-retirement gratuity House rent allowance subject to certain limits Income of local authorities Income of Employees State Insurance Fund Capital Gains on transfer of listed equity shares Income of Infrastructure Debt Fund

(a) Income Exempted Under Sec. 10 :

Receipts by a member from HUF :Any sum received by a HUF member either out of income of family or out of income of estate belonging to a family is exempted from tax. The exemption is based upon the principle of avoidance of double taxation.

Educational Scholarships :Scholarships granted to meet the cost of education is exempt from tax. In order to avail the exemption it is not necessary that scholarship should be financed by government.

Income of professional institutions :Any income other than house property, income by way of interest or dividend on investments is exempted from tax.

Conditions : oIt should be established in India for the purpose of control and regulation of profession of law, accountancy, medicine and any other profession.oIt should be approved by the Central Government

Reverse Mortgage scheme :Acc. To clause(43) w.e.f assessment year 2008-09, the periodic installments or lump sum money paid by lender to the borrower during his lifetime will be exempted from Income tax.

Income of Educational institutions :Conditions : oIt is existing solely for educational purpose and which is wholly or sustainably financed by govt.

oIts aggregate annual receipts do not exceed prescribed amount of annual receipts i.e; 1 crore.oOther than above cases and which is to be approved by the prescribed authority i.e; Chief Commissioner

Income of Infrastructure Debt fund :Acc. To clause(47) w.e.f assessment year 2012-13, it provides enabling power to Central government to notify any infrastructure debt fund which is set-up in accordance with the prescribed guidelines. Once notified, the income of such a debt fund would be exempt from tax.

(b) Special Provisions in respect to newly estab. undertakings in Free Trade Zone: Provision of Section 10A

o Conditions needed to be satisfiedo Amount of deductiono Period of deductiono Amount of deduction – Special Provisiono Other points

Provision of Section 10AAo Conditions needed to be satisfiedo Amount of deduction

(c) Special provisions in respect of newly estab. 100% EOU : Conditions needed to be satisfied Amount of deduction

(d) How to claim exemption in respect of income from property held for charity :

Section 11,12 and 13. Meaning of trust Charitable Purpose Essential condition for exemption – Sec.11 How to find our exemption under section 11

o How to compute income from property held for charitable purposes

o How to determine “Application” of income

Accumulation of Income

Forfeiture of exemption – sec.13o Income for private religious purposeso Income for the benefit of particular religious communityo Income for the benefit of interested personso Donation for providing relief to victims of Earthquake in

Gujarat

Public charitable/religious trust – How chargeable to tax.

(e) How can a political party claim exemption :

(f) Exemption to electoral trust

Thank You