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Adviser to Global SME'S |
An ISO 9001 : 2008 Certified Company |
Budget 2011
Tax Rate for the year
2011-12 (Assessment year 2012-13)
| Rate of Tax |
General |
Woman |
Senior citizen |
Very Senior citizen |
| Nil |
1.80 lakhs |
1.90 lakhs |
2.50 lakhs |
5 lakhs |
| 10% |
1.80 - 5 lakhs |
1.90 - 5 lakhs |
2.50 - 5 lakhs |
Nil |
| 20% |
5 - 8 lakhs |
5 - 8 lakhs |
5 - 8 lakhs |
5 - 8 lakhs |
| 30% |
Above 8 lakhs |
Above 8 lakhs |
Above 8 lakhs |
Above 8 lakhs |
| Saving (Rs.) |
2060 |
Nil |
1030 |
26780 |
Companies
The rates of income-tax in the case of companies are specified in Paragraph
E of Part III of the First Schedule to the Bill. These rates are the same as
those specified for the assessment year 2011-12.
The existing surcharge of 7.5 % on a domestic company is proposed to be
reduced to 5%.
In case of companies other than domestic companies, the existing surcharge
of 2.5% is proposed to be reduced to 2%.
Definition of “charitable purpose”
Existing Provision: - “charitable
purpose” has been defined in section 2(15) which, among others,
includes “the advancement of any other object of general public utility”.
However, “the advancement of any other object of general public utility”
is not a charitable purpose, if it involves the carrying on of any activity
in the nature of trade, commerce or business, or any activity of rendering
any service in relation to any trade, commerce or business, for a cess or
fee or any other consideration, irrespective of the nature of use or
application, or retention, of the income from such activity and receipts
from such activities is ten lakh rupees or more in the previous year.
Proposed provision: - It is proposed to amend section 2(15) to
enhance the current monetary limit in respect of receipts from such
activities from INR 10 lakhs to INR 20 Lakhs.
Effective Date: - 1st April, 2012
Infrastructure Debt Fund
New Provision :- It is
proposed to insert clause (47) to section 10 in order to augment long-term,
low cost funds from abroad for the infrastructure sector to facilitate
setting up of dedicated debt funds. Section 10 of the Income-tax Act
excludes certain incomes from the ambit of total income. It provides for
power to the Central Government to notify any infrastructure debt fund which
is set up in accordance with the prescribed guidelines. Once notified, the
income of such debt fund would be exempt from tax. It will, however, be
required to file a return of income.
Any interest received by a non-resident from such notified infrastructure
debt fund shall be taxable at the rate of 5% on the gross amount of such
interest income. It is further proposed to insert a new section 194LB to
provide that tax shall be deducted at the rate of five per cent. by such
notified infrastructure debt fund on any interest paid by it to a
non-resident.
Effective date :- 1st June 2011.
Provisions relating to Minimum Alternate
Tax (MAT) and Dividend Distribution Tax (DDT) in case of Special Economic
Zones
Existing Provisions: - A
deduction of hundred per cent. is allowed in respect of profits and gains
derived by a unit located in a Special Economic Zone (SEZ) from the export
of articles or things or services for the first five consecutive assessment
years of50% for further five assessment years; and thereafter, of 50% of the
ploughed back export profit for the next five years under Section 10AA of
the Income-tax Act.
A deduction of hundred per cent. is allowed in respect of profits and gains
derived by an undertaking from the business of development of an SEZ
notified on or after 1st April, 2005 from the total income for any ten
consecutive assessment years out of fifteen years beginning from the year in
which the SEZ is notified by the Central Governmen [Section 80-IAB of the
Income-tax Act,t.
Under the existing provisions of section 115JB(6), an exemption is allowed
from payment of minimum alternate tax (MAT) on book profit in respect of the
income accrued or arising on or after 1st April, 2005 from any business
carried on, or services rendered, by an entrepreneur or a Developer, in a
Unit or Special Economic Zone (SEZ), as the case may be.
Further, under the existing provisions of section 115-O(6), an exemption is
allowed from payment of tax on distributed profits [Dividend Distribution
Tax (DDT)] in respect of the total income of an undertaking or enterprise
engaged in developing or developing and operating or developing, operating
and maintaining a Special Economic Zone for any assessment year on any
amount declared, distributed or paid by such Developer or enterprise, by way
of dividends (whether interim or otherwise) on or after 1st April, 2005 out
of its current income. Such distributed income is also exempt from tax under
section 10(34) of the Act.
Proposed Provision :- W.e.f 1 April 2011 SEZ developers and units are
brought within the ambit of MAT and SEZ developers are now liable to
dividend distribution tax of 15% effective from 1 June 2011.
Weighted deduction for contribution made
for approved scientific research programme
Existing Provision: - Weighted
deduction to the extent of 175% is allowed for any sum paid to a National
Laboratory or a university or an Indian Institute of Technology (IIT) or a
specified person for the purpose of an approved scientific research
programme under section 35(2AA) of the Income-tax Act.
Proposed Provision: - It is proposed to increase this weighted
deduction from 175 per cent. to 200 per cent for the purpose of promoting
more contributions to such approved scientific research programmes.
Effective Date:- 1st April, 2012
Investment linked deduction
Existing provision:- Under the
existing provisions of section 35AD of the Income-tax Act, investment-linked
tax incentive is provided by way of allowing hundred per cent. deduction in
respect of any expenditure of capital nature (other than on land, goodwill
and financial instrument) incurred wholly and exclusively, for the purposes
of the “specified business”. Currently, the following specified
businesses are eligible for availing investment-linked deduction under
section 35AD(8)(c):-
(i) setting up and operating a cold chain facility;
(ii) setting up and operating a warehousing facility for storage of
agricultural produce;
(iii) laying and operating a cross-country natural gas or crude or
petroleum oil pipeline network for distribution, including storage
facilities being an integral part of such network;
(iv) building and operating, anywhere in India, a new hotel of two-star or
above category as classified by the Central Government;
(v) building and operating, anywhere in India, a new hospital with at least
one hundred beds for patients;
(vi) developing and building a housing project under a scheme for slum
redevelopment or rehabilitation framed by the Central Government or a State
Government, as the case may be, and notified by the Board in this behalf in
accordance with the guidelines as may be prescribed.
Proposed provision:
It is proposed to include two new businesses as “specified business”,
i.e.,-
(a) developing and building a housing project under a scheme for affordable
housing framed by the Central Government or a State Government, as the case
may be, and notified by the Board in this behalf in accordance with the
guidelines as may be prescribed; and
(b) production of fertiliser in India.
Effective date: - These amendments will take effect from 1st April,
2012 and will, accordingly, apply in relation to the assessment year 2012-13
and subsequent years.
Tax benefits for New Pension System (NPS)
Existing Provision: - Section
80CCD of the Income-tax Act provides, inter alia, a deduction in respect of
contributions made by an employee as well as an employer to the New Pension
System (NPS) account on behalf of the employee. In view of the provisions of
section 80CCE, the aggregate deduction under sections 80C, 80CCC and 80CCD
cannot exceed one lakh rupees. The allowable deduction under section 80CCD
includes both the employee’s as well the employer’s contribution
to the NPS.
Proposed Provision: - It is proposed that the contribution made by
the employer to the NPS be excluded for computing the INR 1,00,000 Limit
under Section 80CCE. Also it is proposed that the employer be allowed a
deduction under Section 36 in respect of his contribution to the NPS of an
amount to the extent that it does not exceed ten per cent of the salary of
the employee in the previous year.
Effective date: - These amendments are proposed to take effect from
1st April, 2012 and will, accordingly, apply in relation to the assessment
year 2012-13 and subsequent years.
Deduction for investment in long-term
infrastructure bonds
Existing Provision: - A sum of
Rs. 20,000 (over and above the existing limit of Rs. 1 lakh available under
section 80CCE for tax savings) is allowed as deduction in computing the
total income of an individual or a Hindu undivided family if that sum is
paid or deposited during the previous year relevant to the assessment year
2011-12 in long-term infrastructure bonds as notified by the Central
Government under Section 80CCF of the Income-tax Act,.
Proposed Provision: -It is proposed to amend section 80CCF to allow
deduction on account of investment in notified long-term infrastructure
bonds for the year 2011-12
Effective Date :- This amendment will take effect from 1st April, 2012 and
will, accordingly, apply in relation to the assessment year 2012-13.
Extension of sunset clause for tax holiday
for power sector
Existing provision: - Under the
existing provisions of section 80-IA(4)(iv) of the Income-tax Act, a
deduction of profits and gains is allowed to an undertaking which,—
(a) is set up for the generation and distribution of power if it begins to
generate power at any time during the period beginning on 1st April, 1993
and ending on 31st March, 2011;
(b) starts transmission or distribution by laying a network of new
transmission or distribution lines at any time during the period beginning
on 1st April, 1999 and ending on 31st March, 2011;
(c) undertakes substantial renovation and modernisation of existing network
of transmission or distribution lines at any time during the period
beginning on 1st April, 2004 and ending on 31st March, 2
Proposed Provision :- It is proposed to amend section 80-IA(4)(iv)
to extend the terminal date for a further period of one year, i.e., upto
31st March, 2012.
Effective date :- This amendment will take effect from 1st April,
2012 and will, accordingly, apply in relation to assessment year 2012-13 and
subsequent years.
Rationalization of provisions relating to
Transfer Pricing
Existing Porvision :- Section
92C of the Income-tax Act provides the procedure for computation of the Arm’s
Length Price (ALP). The section provides the methods of computing the ALP
and mandates that the most appropriate method should be chosen to compute
ALP. It is also provided that if more than one price is determined by the
chosen method, the ALP shall be taken to be the arithmetical mean of such
prices. The second proviso to section 92C(2) provides that if the variation
between the actual price of the transaction and the ALP, as determined
above, does not exceed 5% of the actual price, then, no adjustment will be
made and the actual price shall be treated as the ALP. A fixed margin of 5%
across all segments of business activity and range of international
transactions has out-lived its utility.
Proposed Provision :- It is, therefore, proposed to amend section
92C of the Act to provide that instead of a variation of 5%, the allowable
variation will be such percentage as may be notified by Central Government
in this behalf.
Effective Date :- This amendment is proposed to take effect from 1st April,
2012 and it shall accordingly apply in relation to the Assessment Year
2012-13 and subsequent years.
Existing Provision :- Section 92CA of the Act provides that the
Transfer Pricing Officer (TPO) can determine the ALP in relation to an
international transaction, which has been referred to the TPO by the
Assessing Officer.
Proposed Provision :- It is proposed to amend section 92CA so as to
specifically provide that the jurisdiction of the Transfer Pricing Officer
shall extend to the determination of the ALP in respect of other
international transactions, which are noticed by him subsequently, in the
course of proceedings before him. These international transactions would be
in addition to the international transactions referred to the TPO by the
Assessing Officer.
Existing Provision: - Section 92CA(7) provides that for the purpose
of determining the ALP, the TPO can exercise powers available to an
assessing officer under section 131(1) and section 133(6).
Proposed Provision : These are powers of summoning or calling for
details for the purpose of inquiry or investigation into the matter. In
order to enable the TPO to conduct on-the-spot enquiry and verification, it
is proposed to amend section 92CA(7) so as to enable the TPO to also
exercise the power of survey conferred upon an income-tax authority under
section 133A of the Act.These amendments are proposed to take effect from
1st June 2011.
It is proposed to section 139 to extend the due date for filing of return
of income by such corporate assessees who have undertaken international
transactions to 30th November of the assessment year.This amendment is
proposed to take effect from 1st April 2011.
Toolbox of counter measures in respect of
transactions with persons located in a notified jurisdictional area
In order to discourage transactions by
a resident assessee with persons located in any country or jurisdiction
which does not effectively exchange information with India, anti-avoidance
measures have been proposed in the Income-tax Act. It is proposed to insert
a new section 94A in the Act to specifically deal with transactions
undertaken with persons located in such country or area.
The proposed section provides –
1) an enabling power to the Central Government to notify any country or
territory outside India, having regard to the lack of effective exchange of
information by it with India, as a notified jurisdictional area;
2) that if an assessee enters into a transaction, where one of the parties
to the transaction is a person located in a notified jurisdictional area,
then all the parties to the transaction shall be deemed to be associated
enterprises and the transaction shall be deemed to be an international
transaction and accordingly, transfer pricing regulations shall apply to
such transactions;
3) that no deduction in respect of any payment made to any financial
institution shall be allowed unless the assessee furnishes an authorization,
in the prescribed form, authorizing the Board or any other income-tax
authority acting on its behalf, to seek relevant information from the said
financial institution;
4) that no deduction in respect of any other expenditure or allowance
(including depreciation) arising from the transaction with a person located
in a notified jurisdictional area shall be allowed under any provision of
the Act unless the assessee maintains such other documents and furnishes the
information as may be prescribed;
5) that if any sum is received from a person located in the notified
jurisdictional area, then, the onus is on the assessee to satisfactorily
explain the source of such money in the hands of such person or in the hands
of the beneficial owner, and in case of his failure to do so, the amount
shall be deemed to be the income of the assessee;
6) that any payment made to a person located in the notified jurisdictional
area shall be liable to deduction of tax at the higher of the rates
specified in the relevant provision of the Act or rate or rates in force or
a rate of 30 per cent. This amendment is proposed to take effect from 1st
June, 2011.
Taxation of certain foreign dividends at a
reduced rate
Existing Provision :- Under the
existing provisions of the Income-tax Act, dividend received from foreign
companies is taxable in the hands of the resident shareholder at his
applicable marginal rate of tax. Therefore, in case of Indian companies
which receive foreign dividend, such dividend is taxable at the rate of
thirty per cent. plus applicable surcharge and cess.
Proposed Provision :- It is proposed to insert a new section 115BBD
to provide that for an Indian company any income by way of dividends
received from a foreign subsidiary company shall be taxable at the rate of
fifteen% (plus applicable surcharge and cess) on the gross amount of
dividends. No expenditure in respect of such dividends shall be allowed
under the Act.
Effective date :- 1st April, 2012.
Minimum Alternate Tax
It is proposed to increase the rate of
MAT to eighteen and one-half per cent. from the existing rate of eighteen
per cent of book profit. This amendment will take effect from 1st April,
2012 and will, accordingly, apply in relation to the assessment year 2012-13
and subsequent years.
Alternate Minimum Tax for Limited Liability
Partnership (LLP)
The Limited Liability Partnership Act,
2008 (LLP) has come into effect in 2009. The LLP has features of both a body
corporate as well as a traditional partnership. The Income-tax Act provides
for the same taxation regime for a limited liability partnership as is
applicable to a partnership firm. It also provides tax neutrality (subject
to fulfilment of certain conditions) to conversion of a private limited
company or an unlisted public company into an LLP.
An LLP being treated as a firm for taxation, has the following tax
advantages over a company under the Income-tax Act:-
i) it is not subject to Minimum Alternate Tax;
ii) it is not subject to Dividend Distribution Tax (DDT); and
iii) it is not subject to surcharge.
In order to preserve the tax base vis-à-vis profit-linked
deductions, it is proposed to insert a new Chapter XII-BA in the Income-tax
Act containing special provisions relating to certain limited liability
partnerships. Under the proposed amendment, where the regular income-tax
payable for a previous year by a limited liability partnership is less than
the alternate minimum tax payable for such previous year, the adjusted total
income shall be deemed to be the total income of such limited liability
partnership and it shall be liable to pay income-tax on such total income at
the rate of eighteen and one-half per cent..
For the purpose of the above,
(i) “adjusted total income” shall be the total income before
giving effect to this newly inserted Chapter XII-BA as increased by the
deductions claimed under any section included in Chapter VI-A under the
heading “C – Deductions in respect of certain incomes” and
deduction claimed under section 10AA;
(ii) “alternate minimum tax” shall be the amount of tax computed
on adjusted total income at a rate of eighteen and one-half per cent; and
(iii) “regular income-tax” shall be the income-tax payable for a
previous year by a limited liability partnership on its total income in
accordance with the provisions of the Act other than the provisions of this
newly inserted Chapter XII-BA. It is further provided that the credit for
tax (tax credit) paid by a limited liability partnership under this newly
inserted Chapter XII-BA shall be allowed to the extent of the excess of the
alternate minimum tax paid over the regular income-tax. This tax credit
shall be allowed to be carried forward up to the tenth assessment year
immediately succeeding the assessment year for which such credit becomes
allowable. It shall be allowed to be set off for an assessment year in which
the regular income-tax exceeds the alternate minimum tax to the extent of
the excess of the regular income-tax over the alternate minimum tax. This
amendment is proposed to take effect from 1st April, 2012 and will,
accordingly, apply in relation to the assessment year 2012-13 and subsequent
years.
Rationalisation of Tax on Income
distributed to unit holders
Existing Provision: -Under the
existing provisions contained in section 115R(2) of the Income-tax Act, a
Mutual Fund is liable to pay additional income-tax on the amount of income
distributed to its unit holders. It is proposed to levy additional
income-tax at a higher rate of 30 per cent. on income distributed by debt
funds to a person other than an individual or HUF.
Proposed Provision: - It is therefore proposed to amend section
115R(2) to provide that the Mutual Fund shall be liable to pay additional
income-tax on such distributed income at the rate of –
(a) 25% - if the recipient is an individual or HUF in case of distribution
by a money market mutual fund or a liquid fund;
(b) 30% - if the recipient is any other person in case of distribution by a
money market mutual fund or a liquid fund;
(c) 12.5% - if the recipient is an individual or HUF in case of
distribution by a debt fund other than a money market mutual fund or a
liquid fund; and
(d) 30% - if the recipient is any other person in case of distribution by
debt fund other than a money market mutual fund or a liquid fund.
Effective date: - This amendment is proposed to take effect from 1st
June, 2011.
Collection of information on requests
received from tax authorities outside India
Existing Provision:- Certain
income-tax authorities have been conferred the same powers as are available
to a Civil Court while trying a suit [section 131(1) of the Income-tax Act].
It is proposed to facilitate prompt collection of information on requests
received from tax authorities outside India in relation to an agreement for
exchange of information under section 90 or section 90A of the Income-tax
Act.
Proposed Provision: - It is proposed to insert sub-section (2) in
section 131. The new sub-section provides that for the purpose of making an
enquiry or investigation in respect of any person or class of persons in
relation to an agreement referred to in section 90 or section 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 powers currently conferred on income-tax authorities referred
to in section 131(1). The authority so notified by the Board shall be able
to exercise the powers under section 131(1) notwithstanding that no
proceedings with respect to such person or class of persons are pending
before it or any other income-tax authority.
Proposed Provision: - It is further proposed to amend section 131(3)
so as to empower the aforesaid authority, as notified by the Board, to
impound and retain any books of account and other documents produced before
it in any proceeding under the Act. Similar amendments have also been
proposed in section 133 of the Income-tax Act.
Effective Date: - 1st June, 2011.
Exemption to a class or classes of persons
from furnishing a return of income
Existing Provision: - Section
139(1) of the Income-tax Act, every person, if his total income during the
previous year exceeds the maximum amount which is not chargeable to
income-tax, is required to furnish a return of his income.
Proposed provision: - It is proposed to notify a category of small
tax payers who will be exempt from tax filing requirements as in the case of
salaried tax payer, entire tax liability is discharged by the employer
through deduction of tax at source. Complete details of such tax payers are
also reported by the employer through Tax Deduction at Source (TDS)
statements. Consequential amendments are also proposed to be made to the
provisions of section 296 to provide that any notification issued under
section 139(1C) shall be laid before Parliament.
Effective Date: - 1st June, 2011.
Extension of time limit for assessments in
case of exchange of information
Existing Provision: - Section 153 of
the Income-tax Act provides for the time limits for completion of
assessments and reassessments. In Explanation 1 to section 153 of the
Income-tax Act, certain periods specified therein are to be excluded while
computing the period of limitation for completion of assessments and
reassessments. Proposed Provision: - Section 153 is proposed to be amended
to exclude the lower of the following while determining the period of
limitation for completion of assessment:
1. Time taken in obtaining information from the tax authorities in
jurisdictions situated outside India, under an agreement referred to in
section 90 or section 90A, from the statutory time limit prescribed for
completion of assessment or reassessment.
2 .The period of 6 months
Similar amendments are proposed to be made to section 153B of the
Income-tax Act.
Effective date :- 1st June, 2011.
Application before the Settlement
Commission
Existing Provisions: - The
existing provisions contained in the proviso to section 245C(1) allow an
application to be made before the Settlement Commission if,—
(i) the proceedings have been initiated against the applicant under section
153A or under section 153C as a result of search or a requisition of books
of account, as the case may be, and the additional amount of income-tax
payable on the income disclosed in the application exceeds fifty lakh
rupees;
(ii) in other cases, if the additional amount of income-tax payable on the
income disclosed in the application exceeds ten lakh rupees.
Proposed Provision: - A new clause (ia) in the proviso to section
245C(1) is proposed to be inserted. This stipulates that an application can
also be made, where the applicant—
(a) is related to the person [referred to in (i) above] in whose case
proceedings have been initiated as a result of search and who has filed an
application; and
(b) is a person in whose case proceedings have also been initiated as a
result of search,
The above is applicable only when the addition amount of Income tax payable
on the income disclosed exceeds INR 10 Lakh
Effective Date: - 1st June, 2011.
Power of the Settlement Commission to
rectify its orders
Existing provisions Section
245D(4) of the Income-tax Act provide that the Settlement Commission may
pass an order, as it thinks fit, on the matters covered by the applications
received by it, after giving an opportunity of being heard to the applicant
and to the Commissioner. Further, under section 245F(1), the Settlement
Commission has been conferred all the powers which are vested in an
income-tax authority under the Act. An income-tax authority has the power
(under section 154) to amend any order passed by it for the purpose of
rectifying any mistake apparent from the record.
Proposed Provisions :- It is proposed to insert a new sub-section
(6B) in section 245D so as to specifically provide that the Settlement
Commission may, at any time within a period of six months from the date of
its order, with a view to rectifying any mistake apparent from the record,
amend any order passed by it under section 245D(4). It is further provided
that a rectification which has the effect of modifying the liability of the
applicant shall not be made unless the Settlement Commission has given
notice to the applicant and the Commissioner of its intention to do so and
has allowed the applicant and the Commissioner an opportunity of being
heard. Consequential amendments on similar lines are proposed to be made to
section 22D of the Wealth Tax Act.
Effective Date: - 1st June, 2011.
Reporting of activities of liaison offices
A new Section 285 is proposed to be
inserted mandating the filing of annual information, within sixty days from
the end of the financial year, in the prescribed form and providing
prescribed details by non-residents as regards their liaison offices.
Effective Date : - 1st June, 2011.
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