INDEX Direct Taxation Indirect Taxation Corporate and Other Laws

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NEWSLETTER –APRIL 2012(Budget Special)

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INDEX

• Direct Taxation

• Indirect Taxation

• Corporate and Other Laws

• International Trade and Finance

• Statutory Due Dates for March 2012

Newsletter –April 2012

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DIRECT TAXATION Index

The Finance Minister presented the budget on 16 th March 2012. Following are the highlights of the same:

• The Finance Minister proposed raising the Income tax exemption limit for individuals to Rs 2 lakh per annum from Rs 1.80 lakh. Further he also increased the limit to Rs 10 lakh under the 20 per cent tax slab. The current limit is Rs 8 lakh.

• Individual will have to pay 10 per cent tax on income between Rs 2 lakh and Rs 5 lakh; 20 per cent between Rs 5 lakh and Rs 10 lakh; and 30 per cent for above Rs 10 lakh.

• The exemption limit for the senior citizens between 60 and 80 years of age will be Rs 2.50 lakh; 10 per cent will be levied on income between Rs 2.5-5 lakh, 20 per cent between Rs 5-10 lakh and 30 per cent above Rs 10 lakh.

• For very Senior Citizens (80 years and above), the income tax exemption limit will be Rs 5 lakh; 20 per cent will be levied on income between Rs 5-10 lakh and 30 per cent for above Rs 10 lakh.

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Newsletter – April 2012


• No deduction is available under Sec 80C towards insurance premium on the insurance policies issued after 1st April 2012 where premium exceeds 10% of the actual capital sum assured.

• The deduction for spending up to Rs 5,000 on preventive medical checkups to be allowed within 80Dlimit. These could include blood tests for diabetes, cardio-vascular tests and so on. Further 80D will help more elderly individuals claim higher deductions on health insurance premium. Section 80D allows tax relief of up to Rs 15,000 on health insurance premium paid for self, spouse and children.One can further claim tax deduction of Rs 15,000 if he/she is paying premiums for parents' health policy. If the individual (or parents) are senior citizens, this limit goes up to Rs 20,000. Earlier, only individuals above 65 years were considered as senior citizens for this benefit. The Budget has lowered the age to 60 years.

• Budget proposes to leave savings bank interest up to Rs 10,000 per year out of the tax net.

• The Finance Minister has announced the Rajiv Gandhi Equity Savings Scheme that will allow deduction of 50% to new retail investors with an annual income of less than Rs 10 lakh. To claim the same, they will have to invest up to Rs 50,000 directly in equities, with the maximum deduction

amounting to Rs 25,000.


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• Cash donations in excess of Rs 10,000 will not be eligible for deduction under Section 80G & 80GGA.

• Long term capital gains on sale of residential property not taxable where the net consideration is reinvested in the equity of manufacturing small and medium enterprises ad where other conditions are met.

• The threshold limit for getting accounts audited has been proposed to be raised to Rs 1 Crore from Rs 60 Lakh for businessmen and to Rs 25 lakh from Rs 15 lakh for professionals.

• The threshold limit of total turnover or gross receipts required to be covered under the presumptive tax has also been proposed to be raised from Rs. 60 lakh to Rs 1 crore.

• Tax Returns are made compulsory for individuals owning assets abroad. Individuals will also have to present records of such assets for up to 16 years if demanded by tax officials.

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• The Finance Minister has imposed TDS on real estate deals and gold transactions in cash.1% tax on cash transactions of bullion and jewellery worth over Rs 2 lakh will be deducted at source. Any transfer of immovable property, except agriculture land, worth over 50 lakh in urban areas and over 20 lakh in other areas will be subject to 1% TDS. These withholding taxes on gold and property will be effective from July and October respectively.

• VDIS (Voluntary Disclosure of income Scheme) is been introduced and been given the time till 30 th June 2012 to report the black money. The government has proposed a tax ranging from 30% to 90% on any unexplained sum of money, credit, investments or expenditures discovered by tax officials during the course of a search. The holder will be liable to pay this tax irrespective of the income bracket.

• It is proposed to amend Sec 194Jto provide that tax is required to be deducted on remuneration to be paid to Director at the rate of 10% of such remuneration. (applicable from 1 st July 2012 )



• It is proposed that a person other than a Company who has claimed deduction under any section (other than Sec 80P)included in Chapter VI A under the heading C-Deduction in respect of certain incomes or under Section 10AA and whose income is more than Rs 20lakh shall be liable to pay Alternate Minimum Tax (AMT). The tax is proposed to be 18.5%.

• Special Deposit Scheme For Non-Government PF, Superannuation & Gratuity Funds

Notification no. 5(4)-B(PD)2011dated 13th March 2012 notified that the deposits made under the Special Deposit Scheme for Non-Government Provident, superannuation and gratuity funds shall with effect from 1st December 2011 and until further orders bear interest at 8.6%per annum.

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INDIRECT TAXATION Index

Service Tax

•The rate of Service tax has been increased from 10% to 12% (with effect from 1 st April 2012).•Service Tax rate for Composition scheme for works contract service has been increased to 4.8%from 4% (with effect from 1st April 2012).•Rate of Service Tax on life insurance policies is increased on 1st year premium from 1.5% to 3%. For 2nd year it is 1.5%. (with effect from 1st April 2012).•Time limit for issuance of invoice increased from 14 days to 30 days and 45 days in case of banking and financial institutes.•Common registration format for service tax and central excise is proposed. And simplified one page common return for service tax and excise is introduced. •The rate of CENVAT reversal for exempt services has been increased to 6% from 5% presently (with effect from 1st April 2012).•Now the taxation will be based on what is popularly known as “Negative List of services”. It means any activity meets the characteristics of ‘service' it is taxable unless specified in negative list comprising 17 heads.•Also 9 services has been specified as declared services.•The word “service” is defined.


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• Draft of guidance paper on ‘place of provision of service’ is released. They will substitute existing Export of Service Rules and Taxation of Service Rules.

• The scheme is being introduced for three services (namely hiring of a motor vehicle designed to carry passengers, supply of manpower for any purpose, works contract service) where the service provider is either an individual or a firm or LLP and a recipient is a body corporate, both service provider as well as recipient are liable to pay service tax.

• At present service provider can adjust only 2lakh out of excess service paid/ deposited. Now this adjustment is allowed without any monetary limit.

• Monthly and quarterly returns are introduced based on service tax liability and type of entity.

• Now the interest will be levied only when the wrongly availed credit is utilized.

• Limitation period of show cause notice which is one year at present is been extended to 18 months.


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Customs

• DGFT vide Notification no. 106(RE-2010) 2009-14 DATED 12TH March 2012 has withdrawn the earlier Notification no. 102 imposing ban on export of cotton and now the export of cotton is free subject to the condition prior registration of contract with DGFT.

• The method of computation of Education cess and secondary and Higher Education Cess on imported goods is being simplified. The portion of cesses leviable on the CVD portion of customs duty is being exempted so as to avoid computation of such cess twice.

• The condition is being inserted requiring the importer of specified goods to declare state of destination where they are to be sold for the first time after import and VAT registration number. This will apply to goods imported on or after 1st May 2012.

• CENVAT credit rules are being amended to permit transfer of unutilized credit of SAD lying in balance at the end of each quarter to other registered premises of the same manufacturer. (w.e.f 1st April 2012)


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• With the aim of keeping a tab on the high current account deficit, finance minister has proposed to raise the import duty on gold and platinum. The FM doubled basic customs duty on standard gold and platinum bars from the existing two per cent to four per cent, and on non-standard gold from five per cent to 10 per cent. The duty increase was also extended to gold ore/concentrate and ore bars for refining from one per cent to two per cent.

• The basic customs duty /CVD is increased from 60% to 75% on completely built units of large cars /MUVs/SUVs permitted for import without type approval.10%to 30% on bicycles and 20% on parts of bicycles. All these increase in duties will take immediate effect (i.e. from midnight of 16 th March 2012)

• Full customs duty exemption is been provided to new textile machinery and concessional 5% duty is available to specified textile machinery.

• Mega power plant equipments imports will attract 21% customs duty.



Excise

• The standard rate of Central Excise Duty for non-petroleum products has been enhanced from 10% to 12% ad valorem.

• The merit rate of excise duty for non-petroleum goods that attract 5% duty has been increased to 6%.

• Similarly rate of duty of 1%imposed on 130 items has been increased from 1% to 2%.

• 1% levy of Excise Duty on precious metal jewellary will now be applicable on branded as well as unbranded goods (except silver jewellary)

• Excise duty on small cars is hiked from 10 to 12% and on big cars it is hiked from 22 to 24%.

• Excise Duty on environment friendly goods has been reduced from 10% to 6%,

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CORPORATE AND OTHER LAWS Index

• Registration of Companies or LLPs which have one of their objects is to carry on the profession of CA, CWA, CS, Architecture etc.

Vide General circular no. 2/2012, MCA said that at the time of incorporation of companies where one of the objects is to carry on the business of banking, insurance or to practice the profession of CA, CS, CWA then the concerned Registrar of Companies shall incorporate the same only on production of in-principle approval/NOC from the concerned regulator/professional institute. And where business or profession is of Architecture the

Registrar shall incorporate the same on production of in-principle approval/NOC from concerned regulator.

•PAN based DIN

Ministry of Corporate Affairs vide General Circular No. 2/2012 dated 9th March 2012 has further extended the time limit for obtaining PAN based DIN by the directors to 30th April 2012.


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CORPORATE AND OTHER LAWS Index

•Bank Rate increased

RBI announced that with effect from the close of business of 13 th February 2012, the bank rate will stand increased by 350 basis points i.e. 6% to 9.5%p.a.

•Prior intimation to RBI for raising the aggregate FII and NRI Limits for investment under the Portfolio Investment Scheme

RBI vide Circular no. 94 dated March 19, 2012 states that the Indian Company raising the aggregate FII investment limit of 24%to the sectoral cap/statutory limit as applicable to the company or raising the NRI Limits for investment of 10% to 24%should necessarily intimate the same to RBI immediately along with the Certificate from the company Secretary stating that all relevant provisions of FEMA and Foreign Direct Policy as amended from time to time have been complied with.

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INTERNATIONAL TRDAE AND FINANCE Index

•Easier ECB pledging norms to help Infra companies

In a move, which could provide additional liquidity to Indian companies and ease borrowing from outside India, the government is set to allow promoters of Indian companies to pledge shares against external commercial borrowings (ECBs). The move will also ensure additional security to the ECB lenders and enable infrastructure companies, who are the highest recipients of overseas loans, raise ECBs easily. The move is part of the new Foreign Exchange Management Act (FEMA) guidelines, which is being amended after 10 years. However, RBI has directed that no person would be allowed to pledge shares if he doesn’t have a no-objection certification (NOC) from a bank, which is an authorised dealer.


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STATUTORY DUE DATES FOR APRIL 2012 Index

•Statutory Due Dates Calendar for April 2012


Due Date Statutory Compliance

5th April 2012 Payment of Service Tax/ Excise duty

7th April 2012 Payment of TDS

15th April 2012 Payment of Provident Fund contribution/ Profession Tax

15th April 2011 Filing of Quarterly TDS Return ( January to March Qtr)

25th April 2012 Filing of Service tax Return

21st April 2012 Payment of ESIC/ MVAT

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Newsletter –April 2012

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INDEX Direct Taxation Indirect Taxation Corporate and Other Laws

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