Senthamaraikannanclub

Accounting Policy

2012-04-05T16:40:00.000+05:30

1. Basis for preparation of financial statements

The financial statements are prepared under historical cost convention,

on accrual basis, in accordance with the generally accepted accounting

principles in India and to comply with the Accounting Standards

prescribed in the Companies (Accounting Standards) Rules, 2006 issued

by the Central Government in exercise of the power conferred under

sub-section (1) (a) of Section 642 and the relevant provisions of the

Companies Act, 1956 (the Act).

2. Use of Estimates

The preparation of the financial statements in conformity with

generally accepted accounting principles requires management to make

estimates and assumptions that affect the reported amounts of assets

and liabilities and disclosure of contingent liabilities on the date of

the financial statements and the results of operations during the

reporting periods. Although these estimates are based upon management''s

best knowledge of current events and actions, actual results could

differ from those estimates and revisions, if any, are recognized in

the current and future periods.

3. Fixed Assets and Depreciation/Amortisation

(i) Fixed assets are stated at cost less accumulated

depreciation/amortisation. Cost comprises the purchase price and any

attributable cost of bringing the asset to its working condition for

its intended use.

(ii) Fixed assets under construction, advances paid towards acquisition

of fixed assets and cost of assets not ready for use as at the year-

end, are disclosed as capital work-in- progress.

(iii) Expenses incurred relating to project prior to commencement of

commercial production are classified as Pre-operative expenses pending

allocation and are disclosed under Capital work in progress (net of

income earned during the project development stage).

(iv) Depreciation on fixed assets is provided on straightline method

(except intangible assets which are amortised over the period of three

years) on pro rata basis from the date of addition at the rates and in

the manner prescribed in Schedule XIV to the Companies Act, 1956 which

are as under:

Asset category Rate of Depreciation/

Amortization

Computers 16.21% p.a.

Office equipments 4.75% p.a.

Furniture and

fixtures 6.33% p.a.

Vehicles 9.50% p.a.

Building 1.63% p.a.

Leasehold

improvements Over the period of lease

or estimated useful life,

if shorter

Assets costing Rs. 5,000 or less are individually depreciated at the

rate of one hundred percent.

4. Revenue Recognition

Interest income

Income from interest is accounted for on time proportion basis taking

into account the amount outstanding and the applicable rate of

interest.

5. Taxation

Provision for tax comprises current income tax and deferred tax.

Current income tax is determined in respect of taxable income with

deferred tax being determined as the tax effect of timing differences

representing the difference between taxable income and accounting

income that originate in one period, and are capable of reversal in one

or more subsequent period(s). Such deferred tax is quantified using

rates and laws enacted or substantively enacted as at the end of the

financial year.

6. Foreign Currency Transactions

Transactions in foreign currency and non monetary assets are accounted

for at the exchange rate prevailing on the date of the transaction. All

monetary items denominated in foreign currency are converted at the

year end exchange rate. The exchange differences arising on such

conversion and on settlement of the transactions are recognized in the

Pre-operative expenses pending allocation account.

7. Employee Benefits

Expenses and liabilities in respect of employee benefits are recorded

in accordance with Revised Accounting Standard 15 - Employee Benefits

(Revised 2005)

i) Gratuity

Gratuity is a post employment benefit and is in the nature of a defined

benefit plan. The liability recognized in the balance sheet in respect

of gratuity is the present value of the defined benefit obligation at

the balance sheet date, together with adjustments for unrecognized

actuarial gains or losses and past service costs. The defined benefit

obligation is calculated at or near the balance sheet date by an

independent actuary using the projected unit credit method.

Actuarial gains and losses arising from past experience and changes in

actuarial assumptions are charged or credited to the Pre-operative

expenses pending allocation account in the year in which such gains or

losses are determined.

ii) Provident Fund

The Company makes contribution to statutory provident fund in

accordance with Employees Provident Fund and Miscellaneous Provision

Act, 1952 which is a defined contribution plan and contribution payable

is recognized as an expense in the period in which services are

rendered by the employee.

iii) Compensated Absences

Liability in respect of compensated absences becoming due or expected

to be availed within one year from the balance sheet date is recognized

on the basis of undiscounted value of estimated amount required to be

paid or estimated value of benefit expected to be availed by the

employees. Liability in respect of compensated absences becoming due or

expected to be availed more than one year after the balance sheet date

is estimated on the basis of an actuarial valuation performed by an

independent actuary using the projected unit credit method.

iv) Other short term benefits

Expense in respect of other short term benefits is recognized on the

basis of the amount payable for the period during which services are

rendered by the employee.

8. Leases

Leases of assets under which significant risks and rewards of ownership

are effectively retained by the lessor are classified as operating

leases. Lease payments under an operating lease are recognized as

expense in the Pre-operative expenses pending allocation account on a

straight line basis over the lease term.

9. Impairment of Assets

The Company assesses at each balance sheet date whether there is any

indication that an asset may be impaired. If any such indication

exists, the Company estimates the recoverable amount of the asset. If

such recoverable amount of the asset or the recoverable amount of the

cash generating unit to which the asset belongs is less than its

carrying amount, the carrying amount is reduced to its recoverable

amount and the reduction is treated as an impairment loss and is

recognized in the Profit and Loss Account. If at the balance sheet date

there is an indication that a previously assessed impairment loss no

longer exists, the recoverable amount is reassessed and the asset is

reflected at the recoverable amount subject to a maximum of depreciated

historical cost.

10. Contingent Liabilities and Provisions

Depending upon the facts of each case and after due evaluation of legal

aspects, claims against the Company not acknowledged as debts are

treated as contingent liabilities. In respect of statutory dues

disputed and contested by the Company, contingent liabilities are

provided for and disclosed as per original demand without taking into

account any interest or penalty that may accrue thereafter. The Company

makes a provision when there is a present obligation as a result of a

past event where the outflow of economic resources is probable and a

reliable estimate of the amount of obligation can be made. Possible

future or present obligations that may but will probably not require

outflow of resources or where the same cannot be reliably estimated,

have been disclosed as a contingent liability in the financial

statements.

11. Miscellaneous Expenditure

Miscellaneous expenditure on account of increase in share capital and

other related expenses are written off over a period of 5 years from

the date of commencement of commercial production. Any reimbursements

received from the depository are credited to Miscellaneous

expenditure in the year such reimbursement is received.

12. Borrowing Costs

Borrowing costs that are attributable to the acquisition or

construction of qualifying assets are capitalised as part of the cost

of such assets. A qualifying asset is one that necessarily takes a

substantial period of time to get ready for its intended use. All other

borrowing costs are charged to the profit and loss account as incurred

13. Earnings Per Share

Basic earnings per share are calculated by dividing the net profit or

loss for the period attributable to equity shareholders by the weighted

average number of equity shares outstanding during the period.

For the purpose of calculating diluted earnings per share, the net

profit or loss for the period attributable to equity shareholders and

the weighted average number of shares outstanding during the period are

adjusted for the effects of dilutive potential equity shares.

Compliance Under Service Tax - 2012-13 - Bank Audit

2012-03-30T18:23:00.000+05:30

The compliance under service tax provisions post Finance Bill 2012 may need clarity on 3 aspects which are discussed as under

Small Service Provider Exemption

The basic exemption is available to the CA whose taxable services in 2011-12 did [does] not exceed Rs.10 lakhs. Such CA would not be liable to service tax for services provided in 2012-13 upto a value of Rs. 10 Lakhs. Once the limit is exceeded then they would be liable for the incremental services beyond Rs. 10 Lakhs.

Therefore if eligible for the exemption, no need to charge any service tax for the bank audit

II. Date of Billing

The Bank audit could have commenced in March 2012, however the completion of the services would be in April/ May 2012. Since the completion of service is important, as per the Point of Taxation Rules {POTR} the rate of service tax would be: Basic- 12% EC- 0.24 SHEC- 0.12- Total 12.36%.

This is so because we do not receive any advance and billing prior to provision of service would not change the rate.

III. Date of payment

The date of payment would be irrelevant this year as the rate of 12% is effective for the year and changes if any are only expected to be in Budget 2013.

This is for general guidance of members, however, members may take their independent and correct view regarding chargeability of service tax.

How to File Revised Tax Return Online

2012-03-30T17:40:00.002+05:30

If an individual has already filed the income tax return and subsequently discover any omission or wrong statement therein, he can re-file the return with necessary modification. This re-filing of the income tax return is referred to as Revised Return. The process for revising the return is very simple. Please remember that the process outlined below is applicable if you had filed the original return online.

Rules related to Revised Return

Revised return can be filed for any previous year at any time before the expiry of 1 year from the end of the relevant assessment year or before completion of the assessment whichever is earlier. For this financial year (2010-11), you can file the revised return till March 31st, 2012

However, if the income tax department completes the assessment of your return earlier, then a revised return cannot be filed.

Revised return can be filed only if the original return was filed before due date. Thus if a return is filed after a due date then it cannot be revised

A loss return filed within time can also be revised and in such case loss as per the revised is carried forward

One should have acknowledgement number and date of filing the original return in order to file a revised return

Return filed in response to the notice u/s 148 can also be revised. It should be noted that notice u/s 148 is issued in respect of the escaped income in the respective assessment year

In case of concealment of income and furnishing of inaccurate information in income tax return an individual will be penalized

NRI (non-resident indian)

2012-03-30T17:07:00.000+05:30

Tax saving options for NRIs:-

When it comes to NRIs they do not have as much tax saving options open to them as the Resident Indians do. Here we show you the list of tax saving options available for NRIs and how NRIs can make maximum profit from them:

1. Section 80C - From the various tax saving avenues available to Indian tax savers –

(i) ELSS (Tax saving Equity Mutual Fund schemes) – ELSS are equity-oriented mutual fund schemes that invest in a diversified portfolio of Indian stocks. ELSS schemes can be purchased online and come with a lock-in period of 3 years. They are ideal for long-term tax-free savings.

(ii) House property – Buying a house property in India is a good investment if you plan to come back in the future. The principal and interest payments made every year for a home loan availed in India are allowed as deductions subject to an overall limit of Rs 1 lakh per year on principal payments (under section 80C) and full interest payments made during the year (under section 24b) - in case of let-out property.

(iii) Life Insurance and Pension Plans – There are many life insurance and retirement/pension plans of Insurers that can be bought by an NRI. You can buy retirement plan with or without life cover and also choose between a traditional plan (endowment, money-back) and a unit-linked plan depending upon your risk appetite. Point to note is that the policies are issued in Indian Rupees only. There is also a facility available with few insurers like LIC for NRIs to obtain insurance cover from their present country of residence where all formalities are completed in their present country of residence, subject to fulfilment of certain rules and restrictions on sum insured amounts and add-on riders.

2. Section 80D - [Health insurance premium payment] -

NRIs can purchase health insurance policy in India for themselves, their family and also dependant parents and claim deduction for the premium paid up to Rs 35,000 per annum [Rs 15,000 in case of non-senior citizens and Rs 20,000 for senior citizens];

3. Other Deductions u/s 80 –

(i) Deduction under 80G - for specified donations;

(ii) Deduction under 80E – for interest payment towards Educational loan taken from any bank/approved financial institution for higher studies (comprising full time as well as vocational studies pursued after passing senior secondary examinations studies) for self or any of immediate family members (children, spouse)

Investments not available for NRIs – PPF (Public Provident Fund), NSC (National Savings Certificate), SCSS (Senior citizens savings account), tax saving infrastructure bonds under section 80CCF and POTD (Post office time deposits) are not available for NRIs. However, if you had already opened any of these accounts when you were a Resident Indian, you can continue to service the account(s) till maturity.

The overall limit on section 80C, 80CCC is Rs 1 lakh per annum.

RBI has made special Arrangement to Deposit TAX Payments on 30, 31 March 2012

2012-03-30T16:40:00.003+05:30

Due to rush hour ReserveBank of India has made special arrangement to deposit Tax Payment on 30, 31 March 2012 at Mumbai and Navi Mumbai Offices except normal working time Hours. RBI further instructed to all BankAgencies i.e. State Bankof India and theirAssociates, Public SectorBanks as well as designated private sectorbank to receive all types of taxes beyond Normal working hours. Thus the All Taxpayers are requested to take advantage of these facilities provided for the financial year ending March 31, 2012 and assessment year 2012-13 as per Press Release : 2011-2012/1551. Schedule of Tax Deposit is as below:

Date	Office	Cash DepositTimings	Cheque Deposit Timings
March 30.2012	Fort Mumbai	10.00 AM to 4.00 PM	10.00 AM to 5.00 PM
March 30.2012	Navi Mumbai Belapur	10.00 AM to 4.00 PM	10.00 AM to 4.00 PM
March 31,2012	Fort Mumbai	10.00 AM to 4.00 PM	10.00 AM to 5.30 PM
March 31,2012	Navi Mumbai Belapur	10.00 AM to 4.00 PM	10.00 AM to 4.00 PM

Calculate your tax liability based on your taxable income.

2012-03-30T16:40:00.000+05:30

After Budget-12, the Income Tax Department has published Online Tax Calculation Software on their portal. This calculator calculate Tax liablity which is based on your Taxable Income of Fin. Year 2012-13 i.e. Assessment year 2013-14. Simple procedure to calculate tax with this calculator.

For Example – If you earn annually Rs. 800000/- (Gross Income),

deduct from Gross Income your 10 (i)

Deductions then Less/Add your House Property Income under section 24.

After these Deductions add your Other source of Incomeand then Less deduction under chapter VIA.

After all you get Taxable Income. This Taxable Income Put on Tax Calculator and follow the procedute.

You will get Tax Liability for Assessment Year 2013-14.

Click Here to Calculate your Tax Liability for Assessment year 2013-14.

Income tax india

2012-03-29T00:05:00.000+05:30

Income Tax Department facilitates a PAN holder to view its Tax Credit Statement (Form 26AS) online. Form 26AS contains

Details of tax deducted on behalf of the taxpayer by deductors
Details of tax collected on behalf of the taxpayer by collectors
Advance tax/self assessment tax/regular assessment tax, etc. deposited by the taxpayers (PAN holders)
Details of paid refund received during the financial year
Details of the High value Transactions in respect of shares, mutual fund etc.

The Tax Credit Statement (Form 26AS) are generated wherein valid PAN has been reported in the TDS statements.
Tax Credits Statement (Form 26AS) can be viewed/accessed through 3 ways :
1. View Tax Credit from https://incometaxindiaefiling.gov.in
Taxpayers who are registered at the above potal viz. https://incometaxindiaefiling.gov.in can view 26AS by clicking on 'View Tax Credit Statement (From 26AS)' in "My Account". The facility is available free of cost.

For "New Registration", Click on 'Register' on the portal. The registration process is user-friendly and takes minimal time. View Demo2. View Tax Credit (Form 26AS) from bank site through net banking facility
The facility is available to a PAN holder having net banking account with any of authorized banks. View of Tax Credit Statement (Form 26AS) is available only if the PAN is mapped to that particular account. The facility is available for free of cost. View Demo
List of banks registered with NSDL for providing view of Tax Credit Statement (Form 26AS) are as below
      1. Axis Bank Limited
      2. Bank of India
      3. Bank of Maharashtra
      4. Citibank N.A.
      5. Corporation Bank
      6. ICICI Bank Limited
      7. IDBI Bank Limited
      8. Indian Overseas Bank
      9. Indian Bank
      10. Kotak Mahindra Bank Limited
      11. Oriental Bank of Commerce
      12. State Bank of India
      13. State Bank of Mysore
      14. State Bank of Travancore
      15. The Federal Bank Limited
      16. UCO Bank
      17. Union Bank of India
      18. Bank of Baroda
      19. Karnataka Bank
      20. The Saraswat Co-operative Bank Limited
      21. City Union Bank Limited
      22. State Bank of Patiala
3. View Tax Credit (Form 26AS) from TIN website
The facility is available to PANs that are registered with Tax Information Network for view of 26AS statement. The PAN holder has to fill up an online Registration form for such purpose. Thereafter, verification of PAN holder's identity is done by the TIN-Facilitation Centre personnel either at PAN holder's address or at the TIN-facilitation center that has been chosen by the PAN holder. The verification involves a cost at prescribed rates. Once authorised, the PAN holder can view Tax Credit Statement online.

What Is The Difference Between Tax Free Bonds & Long Term Infrastructure Bonds?

2012-03-28T20:18:00.000+05:30

The time of investing under schemes which help you save tax is approaching. Which is why people have started exploring new investment avenues which can reduce there taxable income. ‘Tax Free Bonds’ and ‘Long Term Infrastructure Bonds’ are two good investment options available which can help you save tax. But most of the people do not know the difference between both these terms and how much one can save by investing under these investment alternatives. So lets have a discussion to understand the difference between ‘Tax Free Bonds’ and ‘Long Term Infrastructure Bonds’.

What Are Tax Free Bonds?

Tax free bonds are bonds issues by Government entities, to arrange funds for building country’s infrastructure. Few designated entities which issue tax free bonds in India includes National Highway Authority Of India (NHAI) tax free bonds and PFC. These bonds generally offers a return of around 8% and With a maturity period of around 10 to 15 years.
What Are Long Term Infrastructure Bonds?

Long Term Infrastructure Bonds are bonds issues by
Industrial Finance Corporation of India Ltd.
Life Insurance Corporation of India
Infrastructure Development Finance Company Limited
A Non-Banking Finance Company (NBFC) classified as an Infrastructure Finance Company by the Reserve Bank of India (RBI)

In 2010, the government of India introduced a new section under Income tax act 1961 i.e section 80CCF. This section had been introduced to offer additional income tax deduction on investment upto Rs 20,000 in the financial year 2010-11. This deduction is over and above Rs 1 lakh deduction available under sections 80C, 80CCC and 80CCD of the Income Tax Act. Infrastructure bonds help in intermediating the retail investor’s savings into infrastructure sector directly.

EPFO Is Likely To Issue Passbook To All Employees Provident Fund (EPF) Accounts

2012-03-28T20:15:00.000+05:30

The Employee Provident Fund (EPF) organization has plans to issue passbook to all the EPF account holders. This service is expected to be implemented from the coming financial year i.e from April, 2012 onwards. With this salaried employees will be issued an EPF Passbook just like bank passbook which will reflect the account balance status of the employee.

The next meeting of EPF will be give a decision on this proposal which will be held on Feb 22, 2012.

EPF Passbook Will Help Employees To :-

Know the status of their EPF balance.
In case of death of EPF account holder, nominee can check the status of the account and make withdrawal easily.
This will encourage employees to save more for their retirement planning.

Employee Provident Fund (EPF), as name suggest is employees fund. In simple words, a fraction of salary get deducted from the monthly salary of every employee and get invested under EPF scheme with equal contribution by the employer. EPFO i.e employee provident fund organization is an institution which manages this fund and invested the same on behalf of the employees and pays interest on the amount invested.

This scheme has been made compulsory for all private sector employees, as there is no retirement benefits in private jobs, this scheme intends to save for the retirement of the employee.

Features/Benefits Of Employee Provident Fund (EPF)

The interest rate on EPF funds is 9.5% p.a. which is higher than other debt investments.
Investors get equal contribution from employer of the organization.
EPF account holder can also take loan from their EPF amount instead of taking the personal loans.
Employees can easily transfer their EPF balance on switching company.
Employees and employer contributes 12% of their basic salary to the EPF account.
It is considered to the safest mode of investment, as maintained by the government organization.
Offers tax exemption under section 80C of income tax act 1961.
Interest earned on EPF is tax free.
No TDS deduction at the time of retirement.

Exemption from Filing of Income Tax Return A.Y 2011-2012

2012-03-28T20:07:00.000+05:30

No.402/92/2006-MC (14 of 2011)Government of India / Ministry of FinanceDepartment of RevenueCentral Board of Direct Taxes***

New Delhi, dated the 23June, 2011

PRESS RELEASE

The Central Board of Direct Taxes has notified the scheme exempting salaried taxpayers with total income up to Rs.5 lakh from filing income tax return for assessment year 2011-12, which will be due on July 31, 2011.

Individuals having total income up to Rs.5,00,000 for FY 2010-11, after allowable deductions, consisting of salary from a single employer and interest income from deposits in a saving bank account up to Rs.10,000 are not required to file their income tax return. Such individuals must report their Permanent Account Number (PAN) and the entire income from bank interest to their employer, pay the entire tax by way of deduction of tax at source, and obtain a certificate of tax deduction in Form No.16.

Persons receiving salary from more than one employer, having income from sources other than salary and interest income from a savings bank account, or having refund claims shall not be covered under the scheme.

The scheme shall also not be applicable in cases wherein notices are issued for filing the income tax return under section 142(1) or section 148 or section 153A or section 153C of the Income Tax Act 1961.

***

AMENDMENTS IN INDIRECT TAX BUDGET 2012-13

2012-03-23T16:30:00.000+05:30

Changes In Rates Of Excise Duty

1) The effective rate of excise duty of 10% on non-petroleum products is being increased to 12% with a few exceptionswhere exemptions/concessions have been given.2) Concessional rate of excise duty of 5% on non-petroleum products is being increased to 6%.

3) The lower rate of 1% on non-petroleum products is being increased to 2%. However, precious metal jewellery, coaland fertilizers would remain at 1%.

SECTOR SPECIFIC PROPOSALS

I. CEMENT:

The excise duty structure on cement manufactured and cleared in packaged form is being rationalized. The graded RSP slabs for the purpose of charging of duty on cement manufactured and cleared in packaged form are being done away with. The rates on cement and cement clinkers are also being revised as under: Description Revised rate of duty

1. cement manufactured and cleared in packaged form:—

(a) from mini cement plants 6% ad valorem + Rs.120 per tonne

(b) from other than mini cement plants 12% ad valorem + Rs.120 per tonne

1 Cement cleared other than in packaged form. 12% ad valorem

2 Cement Clinker 12% ad valorem

Cement is also being notified under section 4A, that is, retail sale price (RSP) based assessment with an abatement of 30% from RSP.

II. PRECIOUS METALS:1) At present, branded jewellery of precious metals attracts excise duty of 1%. The scope of the levy is extended to include unbranded jewellery within its ambit. However, the duty on such unbranded jewellerywould be charged on 30% of transaction value declared in the invoice.

2) Unbranded silver jewellery is already exempt. Branded silver jewellery is being exempted from excise duty.

3) Excise duty on gold jewellery sold from EOUs into domestic tariff area (DTA) is being increased from 5% to 10%.

4) Excise duty on refined gold is being increased from 1.5% to 3%.

5) Excise duty on gold produced from copper smelting is being increased from 2% to 3%.

6) Excise duty on silver produced from copper smelting is being reduced from 6% to 4%.

7) Full exemption from excise duty is being provided on articles of goldsmith and silversmith wares of preciousmetals or of metals coated with precious metals, not bearing a brand name. 8) Gold coins of purity 99.5% and above and silver coins of purity 99.9% and above are being fully exempted from excise duty.

III. TOBACCO PRODUCTS:

1) Cigarettes are being notified under section 4A for RSP based assessment with abatement of 50% from RSP.

2) The basic excise duty on hand-rolled bidis is being increased from Rs.8 to Rs.10 per thousand and on machine-rolled bidis from Rs.19 to Rs.21 per thousand.

3) The rates of duty per machine applicable to pan masala, guthka, chewing tobacco, zarda scented tobacco and unmanufacture tobacco under the compounded levy scheme are being increased.

IV. MASS CONSUMPTION ITEMS:

1) Refills and inks used for the manufacture of writing instruments of value not exceeding Rs.200 per piece are being fully exempted from excise duty subject to actual user condition.

2) Exemption limit on footwear is being enhanced from Rs.250 per pair to Rs.500 per pair. Footwear above Rs.500 per pair would attract excise duty of 12%.

3) Excise duty on iodine is being reduced from 10% to 6%.

V. ENVIRONMENT FRIENDLY GOODS:

1) Excise duty is being reduced from 10% to 6% on battery packs supplied to manufacturers of electric vehicles for use as spares and OEMs subject to end-use condition.

2) Excise duty is being reduced from 10% to 6% on specific parts of Hybrid vehicles supplied to manufacturers of hybrid vehicles subject to end-use condition.

3) Excise duty on LED lamps is being reduced to 6%.

VI. TEXTILES:

1) For the purpose of charging excise duty on ready-made garments bearing a brand name or sold under a brand name, the level of abatement from the retail sale price (RSP) is being increased from 55% to 70%.

VII. MISCELLANEOUS:
1) Full exemption from excise duty is being provided to food preparations containing fruits and vegetables falling under Chapter 20, which are prepared in a hotel, restaurant or a retail outlet, whether or not such food is consumed in such hotels/restaurants/retail outlets. 2) Excise duty on parts of mobile phones, other than those cleared to a manufacturer of mobile phones, is being reduced from 10% to 2%, provided no Cenvat credit is taken.

3) Excise duty is being reduced from 10% to 6% on:

(a) Matches manufactured by semi-mechanized units (c) Processed food products of soya

4) Exemption from excise duty is being restored on intra ocular lens.

Service tax provisions as amended by Budget 2012

1 Rate of Service Tax Increased from 10% to 12% across all the services; (effective date 1st April, 2012)

2. Consequent rates changes in the service tax have been made in specific and compounding rates of tax for the following (effective date 1st April, 2012): a) Service in relation to purchase and sale of foreign currencyincluding money changing, existing rates increased proportionately by 20%; b) Service of promotion, marketing, organizing or in any manner assisting in organizing lottery by raising the specified amounts from Rs. 7000/- to Rs. 11000/-;

c) Works Contract Services from 4% to 4.8%; and d) Reversal of Cenvat Credit under rule 6(3)(i) from present 5% to 6% of

2 In case of Life Insurance Premium, where the premium is not towards risk cover, the first premium shall be taxed @ 3% and subsequent premiums @ 1.5% (effective date 1st April, 2012);

3 Transport of passengers embarking in India for domestic and international journey will now be taxed @ 12% of the ticket value (after abatement of 60%) effective service tax shall be 4.944% of the ticket amount. (effective date 1st April, 2012)

4 Introduction of Negative List of Services (Section 66D) mentioning 17 services out of the purview of Service Tax, the details are as under: (effective after Notified date)

(a) Services by Government or a local authority excluding the following services to the extent they are not covered elsewhere:

(i) services by the Department of Posts by way of speed post, express parcel post, life insurance and agency services provided to a person other than Government;

(ii) services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport;

(iii) transport of goods or passengers; or

(iv) support services, other than services covered under clauses (i) to (iii) above, provided to business entities.

(b) Services by the Reserve Bank of India.

(c) Services by a foreign diplomatic mission located in India.

(d) Services relating to agriculture by way of –

(i) agricultural operations directly related to production of any agricultural produce including cultivation, harvesting, threshing, plant protection or seed testing;

(ii) supply of farm labour;

(iii) processes carried out at an agricultural farm including tending, pruning, cutting, harvesting, drying, cleaning, trimming, sun drying, fumigating, curing, sorting, grading, cooling or bulk packaging and such like operations which do not alter essential characteristics of agricultural produce but make it only marketable for the primary market;

(iv) renting or leasing of agro machinery or vacant land with or without a structure incidental to its use;

(v) loading, unloading, packing, storage or warehousing of agricultural produce;

(vi) agricultural extension services;

(vii) services by any Agricultural Produce Marketing Committee or Board or services provided by a commission agent for sale or purchase of agricultural produce.

(e) Trading of goods.

(f) Any process amounting to manufacture or production of goods.

(g) Selling of space or time slots for advertisements other than advertisements broadcast by radio or television.

(h) Service by way of access to a road or a bridge on payment of toll charges.

(i) Betting, gambling or lottery.

(j) Admission to entertainment events or access to amusement facilities.

(k) Transmission or distribution of electricity by an electricity transmission or distribution utility.

(l) Services by way of –

(i) pre-school education and education up to higher secondary school or equivalent;

(ii) education as a part of a curriculum for obtaining a qualification recognized by law;

(iii) education as a part of an approved vocational education course.

(m) Services by way of renting of residential dwelling for use as residence;

(n) Services by way of –

(i) extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount;

(ii) inter-se sale or purchase of foreign currency amongst banks or authorized dealers of foreign exchange or amongst banks and such dealers;

(o) Service of transportation of passengers, with or without accompanied belongings, by –

(i) a stage carriage;

(ii) railways in a class other than –

(A) first class; or

(B) an air conditioned coach;

(iii) metro, monorail or tramway;

(iv) inland waterways;

(v) public transport in a vessel of less than fifteen tonne net, other than predominantly for tourism purpose; and

(vi) metered cabs, radio taxis or auto rickshaws;

(p) Services by way of transportation of goods –

(i) by road except the services of –

(A) a goods transportation agency; or

(B) a courier agency;

(ii) by an aircraft or a vessel from a place outside India to the first customs station of landing in India; or

(iii) by inland waterways;

(q) Funeral, burial, crematorium or mortuary services including transportation of the deceased.

6. Place of Provision of Services Rules, 2012 (Section 66C) is proposed containing the principles on the basis of which taxing jurisdiction of Service can be determined. (Effective date shall be from the receipt of assent to the Finance Bill by the President). On these rules becoming effective, the existing Export of Services Rules, 2005 and Taxation of Services (provided from outside India and received in India) Rules, 2006 will be rescinded;

A transaction will qualify as exports when it meets following requirements

(i) The service provider in located in taxable territory;

(ii) Service recipient is located outside India;

(iii) Service provided is a service other than in the negative list;

(iv) The place of provision of service is outside India;

(v) The payment is received in convertible foreign exchange.

7. Valuation Rules for Works Contract Services and for catering services revised.

a) For Works Contract Transactions the value of services will be computed by reducing VAT Taxable Component from the Sale Proceeds and balance will be chargeable for service tax;

b) If the value of the goods are not intimated to the VAT Authorities, then the assesee can still calculate the actual value of goods and the same will be relevant to deduce the value of the services involved;

c) If still the value is not deduced then there shall be an computed @ 40% of the total amount for original works, 60% in case of other contracts and for contracts involving construction of complex or building for sale where any part of consideration is received before the completion of the building it shall be chargeable for the 25% of the total amount;

d) The Input Tax Credit on goods forming part of the property on which VAT is payable shall not be available. However, tax paid on capital goods and Input Services will be available including for tax paid on 25% of theservice tax charged for construction of complex or building;e) For catering services the taxable portion shall be 40% in case the supply of food or any other article of human consumption or drink at a restaurant and if provided from elsewhere it shall be 60% of such amount resulting into effective rate of 4.944% and 7.416% respectively.

1 Valuation Rule 6 amended to prescribe inclusion on account of demurrage charges received, exclusion of interest on loan over and above sales consideration and amount received on account of accidental damages on account of unforeseen actions not relatable to the provision of services;

2 Abatement reduced in certain services wherein now for convention centre or mandap with catering, pandal or shamiana contractors with catering will be chargeable on 70% of the bill amount, accommodation in hotel will be

chargeable on 60% of the total amount, railway goods no change with cenvat credits made available as per the rules specified;

1 New Levy on Passenger fares on 30% of the ticket amount (on first class and AC travels) with cenvat credit made available;

2 In case of coastal shipping the taxable amount will now be on the 50% of the bill amount and no cenvat credit will be available;

3 Section 67A to be inserted to prescribe the value of taxable service (more particularly for Import and Export of Taxable Services) and the rate of tax shall be determined in terms of Point of Taxation Rules, 2011 (effective date enactment of the Finance Bill);

4 Section 72A to be inserted to introduce provisions related to Special Audit in the Service Tax Law on the lines of Section 14A and Section 14AA of the Central Excise Act, 1944.
Provision of these Sections reads as under: (effective date enactment of the Finance Bill);

SPECIAL AUDIT IN CASES WHERE CREDIT OF DUTY AVAILED OR UTILISED IS NOT WITHIN THE NORMAL LIMITS, ETC.

(1) If the Commissioner of Central Excise has reason to believe that the credit of duty availed of or utilised under the rules made under this Act by a manufacturer of any excisable goods -

(a) Is not within the normal limits having regard to the nature of the excisable goods produced or manufactured, the type of inputs used and other relevant factors, as he may deem appropriate;

(b) Has been availed of or utilised by reason of fraud, collusion or any willful mis-statement or suppression of facts,

He may direct such manufacturer to get the accounts of his factory, office, depot, distributor or any other place, as may be specified by him, audited by a accountant nominated by him.

(2) The accountant so nominated shall, within the period specified by the Commissioner of Central Excise, submit a report of such audit duly signed and certified by him to the said Commissioner mentioning therein such other particulars as may be specified.

(3) The provisions of sub-section (1) shall have effect notwithstanding that the accounts of the said manufacturer aforesaid have been audited under any other law for the time being in force or otherwise.

(4) The expenses of, and incidental to, such audit (including the remuneration of the accountant) shall be determined by the Commissioner of Central Excise (which determination shall be final) and paid by the manufacturer and in default of such payment shall be recoverable from the manufacturer in the manner provided in section 11 for the recovery of sums due to the Government.

(5) The manufacturer shall be given an opportunity of being heard in respect of any material gathered on the basis of the audit under sub-section (1) and proposed to be utilised in any proceeding under this Act or rules made there under.

1 The one year time limit for issuance of Notice under Section 73(1) for evasion, short payment or nonpayment of collected taxes increased to 18 months. New Section 73(1A) introduced to prescribe follow on notices issued on the same grounds need not repeat the grounds but to state the amount of service tax chargeable to the subsequent period. (effective date enactment of the Finance Bill)

2 Section 83 is being amended to make Settlement Commission provisions applicable to the Service Tax and to make revision mechanism prescribed in Section 35EE of the Central Excise Act, 1944(effective date enactment of the Finance Bill);

3 Section 68(2) of the Finance Act amended to put the onus of payment of service tax on reverse charge basis partly on service provider and partly on service receiver on three types of Services i.e. hiring of Transport, Construction and Man power Supply, separate Notification for the charge of the same shall be issued in case of the three services;

The details are as under

Sl. No Description of Service Service Recipient Service Provider

1 Hiring of motor vehicle designed to carry passengers (a) With abatement; (b) Without abatement 100 % 60% Nil 40%

2 Supply of man power for any purpose 75% 25%

3 Works Contract Service 50% 50%

It is clarified that the liability of the two persons is for the respective amounts and is not influenced by the compliance or lack of it by the other side.

1 Rule 2(1)(d) of the Service Tax Rules, 1994 is being suitably amended for definition “person liable to pay”

2 Exemption of Service Tax on repairs of roads is exempted vide Notification No. 24/2009 dt, 27.07.2009, the period of exemption increased from 16.06.2005 onwards;

3 Management, Maintenance and Repairs Service undertaken in relation to non commercial Government buildings is being exempted from Service Tax vide Section 98 with effect from 16.06.1995. The same shall be chargeable under Section 66B from the date on which Section 66B becomes effective;

4 Sub-rule 6-A inserted under Rule 6 of the Cenvat Credit Rules, 2004 to protect Domestic Tariff Area from the reversal of Cenvat Credit when they supply taxable services under exemption to the Authorised Operations of SEZ. (Retrospective effect from 10.02.2006);

5 Exemption made retrospective (i.e. from 16.06.2005) to the services provided by an Association of Dyeing Units in relation to Common Effulent Treatment Plants;

6 Waiver of penalty for the taxes due paid along with interest within six months in respect of Service Tax on Rent on Immovable Properties.

Amendment in Cenvat Credit Rules

1 Existing Rule 5 to be replaced with new rule to simplify the procedures for refund of non utilized Cenvat Credit on account of exports;

2 Credit of tax paid on motor vehicles to be allowed in case of the supply of such vehicles for services on vehicle rent, insurance and repairs shall also be allowed;

3 Credit of Tax paid for Insurance and Service Station Services is allowed to insurance Companies in respect of motor vehicles insured and re-insured by them and manufacturers in respect of motor vehicles manufactured by them;

4 Rule 4(1) and Rule 4(2) is being amended to provide credit for the taxes paid to take the credit of input of service tax on delivery of goods, subject to compliance of certain conditions as against availment of credit only after they are brought to the premises of the Service provider;

5 Rule 7 in respect of Input Service Distributors is being amended to provide that the credit for the service tax attributable to service used wholly in a unit shall be distributed only to that unit and that the credit of service tax attributable to service used in more than one unit shall be distributed on pro-rata on the basis of the turnover of the concerned unit to the total turnover of all the units;

6 Rule 9(1)(e) is being amended to provide for the credit for the taxes paid by Challan by the Service recipient on reverse charge mechanism;

7 Interest on loan being an exempt service will require reversal of credits used for earning such income. For banking and financial institutions, provisions are available to reverse credits upto 50% in rule 6(3D), It is proposed to change the formula to actual basis, subject to a minimum of 50% of the interest paid on deposits and for the non financial sector, it is proposed that they may reverse credits on gross interest basis.

Other Rules

1. Time Limit for issue of invoices is increased presently from 14 days to 30 days in case of assessee other than bank and financial institutions. In their case, the time limit shall be 45 days from the date of completion of service (Rule 4A of

the Service Tax Rules). Similarly, Clause 89(a) of the provisions in relation to the prosecution for non issue of invoice is being replaced with “knowingly evades payment of service tax” to meet the demand of business that mere non issue of invoices should not be made punishable with prosecution;

1 Central Excise Section 35EE made applicable for revision of the Orders. Similarly Power of Advance Ruling Authority to hear cases relating to Cenvat Credit;

2 Rule 6(4A) is being amended to provide unlimited amount of permissible adjustments which is for service tax paid excess in advance for any month or quarter or the case may be. At present the said excess is allowed to be adjusted only in the subsequent month or the quarter as the case may be.

3 At present in case of Export and Individuals and firms rendering eight specified services, the date of payment shall be the date of rendering services and the special dispensation is shifted from the Point of Taxation Rules to the Service Tax Rules;

4 For Exporters, the period extended by RBI on specific requests is also being included in the period of deferment of the tax liability.

5 The option of deferred payment is being allowed to all service providers rather than for specific services. Now this facility will only be available to individuals and partnership firms (including LLP) upto a turnover of services of Rs. 50 lakhs, subject to the condition that their turnover of taxable service in previous year was below Rs. 50 lakhs. The limit of Rs. 50 lakhs is for whole entity with all the registered units and not for single registration.

6 Amount paid as refund for service tax to the extent of unrealized sale proceeds of the shipping bill will be recoverable from the exporters in future at any point of time. Necessary amendments to these effects are made.

7 Common EST-1 Form for Excise and Service Tax Registration introduced and Common EST-3 Form for Excise and Service Tax Returns filing introduced.

8 Filing of Appeals for Service Tax are being aligned with that of the Central Excise.

9 New Scheme for tax recovery from the registrants collected the tax and not paid to the Government to be introduced;

Point of Taxation Rules Amended

1 Definition of continuous supply of services amended to include recurring nature of services and the obligation for periodically payment from time to time;

2 The effective rate of taxation shall be effective at the new rates on the continuous supply of services also, definition of the date of payment, option to determine the point of taxation in respect of advances upto Rs. 1000 received in excess of the amount indicated in the invoice or completion of the service rather than payment;

3 Incorporation of new residual rule to ascertain point of taxation in cases where the same cannot be ascertained by the rules prescribed;

4 Reverse charge mechanism amended to tax received from Jammu and Kashmir;

5 The exemption of Rs. 10 lakhs for exemption, will be in terms of invoices and not mere payments received;
Changes in Payment of Service Tax

1. Assesee having made payment of Service Tax of Rs. 25 lakhs or more in the previous year and new assesees other than individual and firms – Monthly payments for others Quarterly; (Effective date from 1st April, 2012)

General

1. Guidance Notes issued as under

a) Guidance Note-2 : What is service;

Services means all the services other than listed in the negative list. It includes any activity for consideration carried out by a person for another and includes a declared service and excludes any activity which constitutes only transfer in title of goods or immovable property by way of sale, gift or in any other manner, a transaction involving any money or actionable claim, any service provided by an employee to an employer in the course of the employment, fees payable to court or tribunal set up under a law for the time being in force.

b) Guidance Note-3 : Taxability of service;

Appropriate steps given to define the scope and method of valuation of the services.

c) Guidance Note-4 : Negative List;

List of 17 services d) Guidance Note-5 : Declared Services; e) Guidance Note-6 : Exemptions;f) Guidance Note-7 : Rules of Interpretation;

TOP 25 AMENDMENTS DIRECT TAX Budget 2012-13

2012-03-23T16:20:00.000+05:30

UNION BUDGET 2012 HIGHLIGHTS

2) TDS on transfer of certain immovable properties (other than agricultural land):
Under the existing provisions of the Income-tax Act, tax is required to be deducted at source on certain specified payments made to residents by way of salary, interest, commission, brokerage, professional services, etc. On transfer of immovable property by a non-resident, tax is required to be deducted at source by the transferee. However, there is no such requirement on transfer of immovable property by a resident except in the case of compulsory acquisition of certain immovable properties. In order to collect tax at the earliest point of time and also to have a reporting mechanism of transactions in the real estate sector, it is proposed to insert a new provision to provide that every transferee, at the time of making payment or crediting any sum by way of consideration for transfer of immovable property (other than agricultural land), shall deduct tax, at the rate of 1% of such sum, if the consideration paid or payable for the transfer of such property exceeds –

(a) fifty lakh rupees in case such property is situated in a specified urban agglomeration; or

(b) twenty lakh rupees in case such property is situated in any other area.

It is further proposed to provide that where the consideration paid or payable for the transfer of such property is less than the value adopted or assessed or assessable by any authority of a State Government for the purposes of payment of stamp duty, the value so adopted or assessed or assessable shall be deemed as consideration paid or payable for the transfer of such immovable property.

For better compliance, it is also proposed to provide that a registering officer appointed under the IndianRegistration Act, 1908 (Registrar) shall not register the transfer of any immovable property where taxes are required to be deducted under this provision unless the transferee furnishes proof of deduction and payment of TDS.

For reducing the compliance burden on the transferee, it is also proposed that a simple one page challan for payment of TDS would be prescribed containing details (including PAN) of transferor and transferee and also certain details of the property. The transferee would not be required to obtain any Tax Deduction and Collection Account Number (TAN) or to furnish any TDS statement as this would be mostly a one time transaction. The transferor would get credit of TDS like any other pre-paid taxes on the basis of information furnished by the transferee in the challan of payment of TDS. This amendment will take effect from 1st October, 2012.

3) TCS on cash sale of bullion and jewellery:

Tax Collection at Source (TCS) on cash sale of bullion and jewellery

Under the existing provisions of the Income-tax Act, tax is required to be collected at source by the seller at the specified rate on certain goods like alcoholic liquor, tendu leaves, scrap etc. at the time of sale. In order to reduce the quantum of cash transaction in bullion and jewellery sector and for curbing the flow of unaccounted money in the trading system of bullion and jewellery, it is proposed to provide that the seller of bullion and jewellery shall collect tax at the rate of 1% of sale consideration from every buyer of bullion and jewellery if sale consideration exceeds two lakh rupees and the sale is in cash. This would be irrespective of the fact whether buyer is a manufacturer, trader or purchase is for personal use.

This amendment will take effect from 1st July, 2012.

4) Penalty on undisclosed income found during the course of search at 10 pc, 20 pc, 30 pc:

Penalty on undisclosed income found during the course of search

Under the existing provisions of section 271AAA of the Income-tax Act, no penalty is levied if the assessee admits the undisclosed income in a statement under sub-section (4) of section 132 recorded in the course of search and specifies the manner in which such income has been derived and pays the tax together with interest, if any, in respect of such income. As a result, undisclosed income (for the current year in which search takes place or the previous year which has ended before the search and for which return is not yet due) found during the course of search attracts a tax at the rate of 30% and no penalty is leviable. In order to strengthen the penal provisions, it is proposed to provide that the provisions of section 271AAA will not be applicable for searches conducted on or after 1st July, 2012. It is also proposed to insert a new provision in the Act (section 271AAB) for levy of penalty in a case where search has been initiated on or after 1st July, 2012. The new section provides that,-

(i) If undisclosed income is admitted during the course of search, the taxpayer will be liable for penalty at the rate of 10% of undisclosed income subject to the fulfillment of certain conditions.

(ii) If undisclosed income is not admitted during the course of search but disclosed in the return of income filed after the search, the taxpayer will be liable for penalty at the rate of 20% of undisclosed income subject to the fulfillment of certain conditions.

(iii) In a case not covered under (i) and (ii) above, the taxpayer will be liable for penalty at the rate ranging from 30% to 90% of undisclosed income.

These amendments will take effect from the 1st day of July, 2012 and will, accordingly, apply to any search and seizure action taken after this date.

5) No Basic Exemption on Unexplained Income – To be taxed at 30 percent:

Taxation of cash credits, unexplained money, investments etc.

Under the existing provisions of the Income-tax Act, certain unexplained amounts are deemed as income under section 68, section 69, section 69A, section 69B, section 69C and section 69D of the Act and are subject to tax as per the tax rate applicable to the assessee. In case of individuals, HUF, etc., no tax is levied up to the basic exemption limit. Therefore, in these cases, no tax can be levied on these deemed income if the amount of such deemed income is less than the amount of basic exemption limit and even if it is higher, it is levied at the lower slab rate. In order to curb the practice of laundering of unaccounted money by taking advantage of basic exemption limit, it is proposed to tax the unexplained credits, money, investment,

expenditure, etc., which has been deemed as income under section 68, section 69, section 69A, section 69B, section 69C or section 69D, at the rate of 30% (plus surcharge and cess as applicable). It is also proposed to provide that no deduction in respect of any expenditure or allowance shall

be allowed to the assessee under any provision of the Act in computingdeemed income under the said sections.

This amendment will take effect from 1st April, 2013 and will, accordingly, apply in relation to the assessment year 2013-14 and subsequent assessment years.

6) Compulsory filing of income tax return in relation to assets located outside India irrespective of Income:

Under the existing provisions of section 139, every person is required to furnish a return of income if his income during the previous year relevant to the assessment year exceeds the maximum amount which is not chargeable to tax. The return of income has to be furnished in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed. It is proposed to amend the provisions of section 139 so that furnishing of return of income under section 139 may be made mandatory for every resident having any asset (including financial interest in any entity) located outside India or signing authority in any account located outside India. Furnishing of return by such a resident would be mandatory irrespective of the fact whether the resident taxpayer has taxable income or not. This amendment will take effect retrospectively from the 1st day of April, 2012 and will accordingly apply to assessment year 2012-13 and subsequent assessment years.

7) Relief from long-term capital gains tax on transfer of residential property if invested in a manufacturing small or medium enterprise:

The Government had announced National Manufacturing Policy (NMP) in 2011, one of the goals of which is to incentivise investment in the Small and Medium Enterprises (SME) in

the manufacturing sector. It is proposed to insert a new section 546B so as to provide rollover relief from long term capital gains tax to an individual or an HUF on sale of aresidential property (house or plot of land) in case of re-investment of sale consideration in the equity of a new start-up SME company in the manufacturing sector which is utilized by the company for the purchase of new plant and machinery. This relief would be subject to the conditions that-

(i) the amount of net consideration is used by the individual or HUF before the due date of furnishing of return of income under sub-section (1) of section 139, for subscription in equity shares in the SME company in which he holds more than 50% share capital or more than 50% voting rights.

(ii) The amount of subscription as share capital is to be utilized by the SME company for the purchase of new plant and machinery within a period of one year from the date of subscription in the equity shares.

(iii) If the amount of net consideration subscribed as equity shares in the SME company is not utilized by the SME company for the purchase of plant and machinery before the due date of filing of return by the individual or HUF, the unutilised amount shall be deposited under a deposit scheme to be prescribed in this behalf.

(iv) Suitable safeguards so as to restrict the transfer of the shares of the company, and of the plant andmachinery for a period of 5 years are proposed to be provided to prevent diversion of these funds. Further, capitalgains would be subject to taxation in case any of the conditions are violated.

(v) The relief would be available in case of any transfer of residential property made on or before 31st March, 2017.

The proposed amendments in the provisions of the Income-tax Act shall be effective from 1st April, 2013 and would accordingly apply to assessment year 2013-14 and subsequent assessment years

8) S. 80C No Deduction on life insurance Premium if premium payable exceed 10% of sum assured:

Eligibility condition for deduction in respect of life insurance policies

Section 80C of the Income-tax Act provides that in computing the total income of an assessee, being an individual or an HUF, a deduction of up to one lakh rupees for life insurancepremia, contributions to any provident fund, tuition fees, subscription to any deposit scheme of a public sector company engaged in financing, construction or purchase of houses in India for residential purposes, fixed term deposits of not less than five years with a scheduled bank, etc., is allowed. The existing provisions contained in section 80C(3) provide that the deduction for life insurance premium shall be allowed for only so much of any premium or other payment made on an insurance policy as is not in excess of 20% of the actual capital sum assured.

It is proposed to amend the provisions to provide that the deduction for life insurance premium as regardsinsurance policies issued on or after 1st April, 2012 shall be allowed for only so much of the premium payable as does not exceed 10% of the actual capital sum assured. It is further proposed to insert the definition of “actual capital sum assured” so as to provide that the actual capital sum assured in relation to a life insurance policy shall be the minimum amount assured under the policy on happening of the insured event at any time during the term of the policy, not taking into account— (i) the value of any premiums agreed to be returned, or (ii) any benefit by way of bonus or otherwise over and above the sum actually assured, which is to be or may be received under the policy by any person. This amendment has been proposed to ensure that the life insurance products are not designed to circumvent the prescribed limits by varying the capital sum assured from year to year. This definition is also referred to in the proposed Explanation 2 in section 10(10D). These amendments will take effect from 1st April, 2013 and will, accordingly, apply in relation to the assessment year 2013-14 and subsequent assessment years.

9) Presumptive taxation not applicable to commission/ brokerage and Income from Agency business:

Presumptive taxation not to apply to professions etc.

Finance (No.2) Act, 2009 substituted Section 44AD in the Income-tax Act to provide for a presumptive income schemefor small businesses with effect from 1st April, 2011. Under this scheme a sum equal to 8% of the total turnover or gross receipts is deemed to be the profits and gains from business. This presumptive scheme is applicable only to a person carrying on any business, except business of plying, hiring or leasing goods carriage, having turnover or gross receipt of less than 60 lakh rupees. It is proposed to amend section 44AD to clarify that this presumptive scheme is not applicable to (i) a person carrying on profession as referred to in sub-section (1) of section 44AA; (ii) persons earning income in the nature of commission or brokerage income; or (iii) a or a person carrying on any agency business.

This amendment will take effect retrospectively from 1st April, 2011 and will, accordingly, apply in relation to theassessment year 2011-12 and subsequent assessment years.

10) Deduction for Donation not allowed for cash donations in excess of ten thousand rupees:

Prohibition of cash donations in excess of ten thousand rupees

Section 80G of the Income-tax Act provides for a deduction inrespect of donations to certain funds, charitable institutions, etc. subject to specified conditions. The deduction is allowed in respect of any donation being a sum of money. Similarly, section 80GGA of the Income-tax Act provides for adeduction in respect of certain donations for scientific research or rural development made to researchassociations, universities, colleges or otherassociations/institutions, subject to specified conditions. Currently, there is no provision in either of the aforesaid sections specifying the mode of payment of money. Therefore, it is proposed to amend sections 80G and 80GGA so as specify therein that any payment exceeding a sum of ten thousand rupees shall only be allowed as adeduction if such sum is paid by any mode other than cash.

These amendments will take effect from 1st April, 2013 and will, accordingly, apply in relation to assessment year 2013-14 and subsequent assessment years.

11) Threshold Limit for TDS on payment of interest on debentures raised to Rs. 5000:

Threshold for TDS on payment of interest on debentures

Under the existing provisions of section 193 of the Income-tax Act, a person responsible for paying interest to a resident individual on listed debentures of a company, in which the public are substantially interested, is not required to deduct tax on the amount of interest payable if the aggregate amount of interest paid during a financial year does not exceed Rs.2,500/- and the interest is paid by account payee cheque. However, in the case of unlisted debentures of a company, no threshold limit is specified for deduction of tax on payment of interest. In order to reduce the compliance burden on small assessees and companies, it is proposed that no deduction of tax should be made from payment of interest on any debenture, (whether listed or not)

issued by a company, in which the public are substantially interested, to a resident individual or Hindu undivided family, if the aggregate amount of interest on such debenture paid during the financial year does not exceed Rs.5,000 and the payment is made by account payee cheque. This amendment will take effect from 1st July, 2012.

12) Tax Audit & presumptive taxation Limit rasied to One Crore:

Under the existing provisions of section 44AB, every person carrying on business is required to get his accounts audited if the total sales, turnover or gross receipts in the previous year exceed sixty lakh rupees. Similarly, a person carrying on a profession is required to get his accounts audited if the total sales, turnover or gross receipts in the previous year exceed fifteen lakh rupees. In order to reduce the compliance burden on small businesses and on professionals, it is proposed to increase the threshold limit of total sales, turnover or gross receipts, specified

under section 44AB for getting accounts audited, from sixty lakh rupees to one crore rupees in the case of persons carrying on business and from fifteen lakh rupees to twenty five lakh rupees in the case of persons carrying on profession.

II. It is also proposed that for the purposes of presumptive taxation under section 44AD, the threshold limit of total turnover or gross receipts would be increased from sixty lakh rupees to one crore rupees.

These amendments will take effect from 1st April, 2013 and will, accordingly, apply to the assessment year 2013-14 and subsequent assessment years.

13) Senior Citizens not having Business Income Exempt from Advance tax payment:

Under the existing provisions of Income-tax Act, every assessee is required to pay advance tax if the tax liability for the previous year exceeds ten thousand rupees. In case of senior citizens who have passive income of the nature of interest, rent, etc., the requirement of payment of advancetax results in raising compliance burden.

In order to reduce the compliance burden of such senior citizens, it is proposed that a resident senior citizen, not having any income chargeable under the head “Profits and gains of business or profession”, shall not be liable to payadvance tax and such senior citizen shall be allowed to discharge his tax liability (other than TDS) by payment ofself assessment tax. This amendment will take effect from the 1st April, 2012. Accordingly, the aforesaid senior citizen would not be required to pay advance tax for the financial year 2012-13 and subsequent financial years.

Section 56(2) provides for the specific category of incomes that shall be chargeable to income-tax under the head “Income from other sources”.

14) Share premium in excess of the fair market value to be treated as income:

It is proposed to insert a new clause in section 56(2). The new clause will apply where a company, not being a company in which the public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares. In such a case if the consideration received for issue of shares exceeds the face value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares shall be chargeable to income-tax under the head “Income from other sources. However, this provision shall not apply where the consideration for issue of shares is received by a venture capital undertaking from a venture capital company or a venture capital fund. Further, it is also proposed to provide the company an opportunity to substantiate its claim regarding the fair market value. Accordingly, it is proposed that the fair market value of the shares shall be the higher of the value—

(i) as may be determined in accordance with the method as may be prescribed; or

(ii) as may be substantiated by the company to the satisfaction of the Assessing Officer, based on the value of its assets, including intangible assets, being goodwill, know-how, patents, copyrights, trademarks, licenses, franchises or any other business or commercial rights of similar nature.

This amendment will take effect from 1st April, 2013 and will, accordingly, apply in relation to the assessment year 2013-14 and subsequent assessment years.

15) Reopening time limit Increased to 16 Years for income in relation to asset located outside India:

Reassessment of income in relation to any asset located outside India

Under the provisions of section 149 of the Income-tax Act, the time limit for issue of notice for reopening an assessment on account of income escaping assessment is 6 years. The

time limit of 6 years is not sufficient in cases where assets are located outside India because gathering information regarding such assets takes much more time on account of additional procedures and laws of foreign jurisdictions.

It is proposed to amend the provisions of section 149 so as to increase the time limit for issue of notice for reopening an assessment to 16 years, where the income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment.

Amendments are also proposed to be made in section 147 of the Income-tax Act to provide that income shall be deemed to have escaped assessment where a person is found to have any asset (including financial interest in any entity) located outside India.

The provisions of sections 147 and 149 are procedural in nature and will take effect from 1st July, 2012 for enabling reopening of proceedings for and assessment year commencing prior to this date. This is proposed to be clarified through an Explanation stating that the provisions of these sections, as amended, by the Finance Act, 2012, shall also be applicable for any assessment year beginning on or before the 1st day of April, 2012. Corresponding amendments are also proposed to be made to the provisions of section 17 of the Wealth-tax Act.

These amendments will take effect from the 1st day of July, 2012.

16) Alternate Minimum Tax (AMT) on all persons other than companies:

Under the existing provisions of the Income-tax Act,Minimum Alternate Tax (MAT) and Alternate Minimum Tax(AMT) are levied on companies and limited liabilitypartnerships (LLPs) respectively.

However, no such tax is levied on the other form of business organisations such as partnership firms, sole proprietorship, association of persons, etc. In order to widen the tax base vis-à-vis profit linked deductions, it is proposed toamend provisions regarding AMT contained in Chapter XII-BA in the Income-tax Act to provide that aperson other than a company, who has claimed deduction under any section (other than section 80P) included in Chapter VI-A under the heading “C – Deductions in respect of certain incomes” or under section 10AA, shall be liable to pay AMT.

Under the proposed amendments, where the regular income-tax payable for a previous year by a person (other than a company) 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 person and he 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 provisions of Chapter XII-BA as increased by the deductions claimed under any section (other than section 80P) 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 person other than a company on his total income in accordance with the provisions of the Act other than the provisions of Chapter XII-BA.

It is further provided that the provisions of AMT under Chapter XII-BA shall not apply to an individual or a Hindu undivided family or an association of persons or a body of individuals (whether incorporated or not) or an artificial juridical person referred to in section 2(31)(vii) if the adjusted total income of such person does not exceed twenty lakh rupees.

It is also provided that the credit for tax (tax credit) paid by a person on account of AMT under Chapter XII-BA shall be allowed to the extent of the excess of the AMT 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 AMT to the extent of the excess of the regular income-tax over the AMT. Consequential amendments are also proposed to the provisions of section 140A relating to self-assessment, section 234A relating to interest for defaults in furnishing return of income, section 234B relating to interest for defaults in payment of advance tax and section 234C relating to interest for deferment of advance tax.

These amendments will take effect from 1st April, 2013 and will, accordingly, apply in relation to the assessment year 2013-14 and subsequent assessment years.

17) Processing of return not necessary where scrutiny notice issued:

Under the existing provisions, every return of income is to be processed under sub-section (1) of section 143 and refund, if any; due is to be issued to the taxpayer. Some returns of income are also selected for scrutiny which may lead to raising a demand for taxes although refunds may have been issued earlier at the time of processing. It is therefore proposed to amend the provisions of the Income-tax Act to provide that processing of return will not be necessary in a case where notice under sub–section (2) of section 143 has already been issued for scrutiny of the return. This amendment will take effect from the 1st day of July, 2012.

18) Sum received from life insurance policy exempt if premium for any of the years during policy tenure not exceeded 10% of sum assured:

Under the existing provisions contained in section 10(10D) of the Income-tax Act, any sum received under a life insurancepolicy, including the sum allocated by way of bonus on such policy, is exempt. For this purpose, it is necessary that the premium payable for any of the years shall not exceed 20% of the actual capital sum assured. It is proposed to reduce the threshold of premium payable to 10% of the actual capital sum assured from 20% of the actual capital sum assured. Accordingly, it is proposed to amend section 10(10D) so as to provide that the exemption for insurance policies issued on or after 1st April, 2012 would only be available for policies where the

premium payable for any of the years during the term of the policy does not exceed 10% of the actual capital sum assured.Further, in order to ensure that the life insurance products are not designed to circumvent the prescribed limits byvarying the capital sum assured from year to year, it is also proposed to provide that the capital sum assured would bethe minimum of the sum assured in any of the years of the policy. Insertion of a new Explanation 2 has been proposedtowards this effect by referring to the new definition

of “actual capital sum assured” under Explanation of section 80C (3A). This Explanation will apply to insurance policies issued on or after the 1st April, 2012.This amendment will take effect from 1st April, 2013 and will, accordingly, apply in relation to the assessment year2013-14 and subsequent assessment years.

19) Fair market value shall be deemed full value of consideration if actual consideration not attributable or determinable:

Capital gains are calculated on transfer of a capital asset, as sale consideration minus cost of acquisition. In some recent rulings, it has been held that where the consideration in respect of transfer of an asset is not determinable under the existing provisions of the Income-tax Act, then, as themachinery provision fails, the gains arising from the transfer of such assets is not taxable. It is, therefore, proposed that where in the case of a transfer, consideration for the transfer of a capital asset(s) is not attributable or determinable then for purpose of computing income chargeable to tax as gains, the fair market value of the asset shall be taken to be the full market value of consideration. Accordingly, it is proposed to insert a new provision (section 50D) in the Income-tax Act to provide that fair market value of the asset shall be deemed to be the full value of consideration if actual consideration is not attributable or determinable.

This amendment will take effect from 1st day of April, 2013 and will accordingly apply to assessment year 2013-14 and subsequent assessment years.

20) Relief from LTCG tax on transfer of residential property if invested in a manufacturing small or medium enterprise:

Relief from long-term capital gains tax on transfer of residential property if invested in a manufacturing small or medium enterprise

The Government had announced National Manufacturing Policy (NMP) in 2011, one of the goals of which is to incentivise investment in the Small and Medium Enterprises (SME) in the manufacturing sector. It is

proposed to insert a new section 546B so as to provide rollover relief from long term capital gains tax to an individual or an HUF on sale of aresidential property (house or plot of land) in case of re-investment of sale consideration in the equity of a new start-up SME company in the manufacturing sector which is utilized by the company for the purchase of new plant and machinery. This relief would be subject to the conditions that-

(i) the amount of net consideration is used by the individual or HUF before the due date of furnishing of return of income under sub-section (1) of section 139, for subscription in equity shares in the SME company in which he holds more than 50% share capital or more than 50% voting rights.

(ii) The amount of subscription as share capital is to be utilized by the SME company for the purchase of new plant and machinery within a period of one year from the date of subscription in the equity shares.

(iii) If the amount of net consideration subscribed as equity shares in the SME company is not utilized by the SME company for the purchase of plant and machinery before the due date of filing of return by the individual or HUF, the unutilised amount shall be deposited under a deposit scheme to be prescribed in this behalf.

(iv) Suitable safeguards so as to restrict the transfer of the shares of the company, and of the plant and machinery for a period of 5 years are proposed to be provided to prevent diversion of these funds. Further, capitalgains would be subject to taxation in case any of the conditions are violated.

(v) The relief would be available in case of any transfer of residential property made on or before 31st March, 2017.

The proposed amendments in the provisions of the Income-tax Act shall be effective from 1st April, 2013 and would accordingly apply to assessment year 2013-14 and subsequent assessment years.
21) Assessee liable to pay advance tax on income without deduction or collection of tax:

Under the existing provisions of section 209 of the Income-tax Act, the amount of advance tax payable is computed by reducing the amount of income-tax which would be deductible or collectible during the financial year from income-tax on estimated income. Therefore, in cases where the assessee receives or pays any amount (on which the tax was deductible or collectible) without deduction or collection of tax, it has been held by Courts that he is not liable to pay advance tax to the extent the tax is deductible or collectible from such amount.

In order to make an assessee liable for payment of advance tax in respect of income which has been received or paid without deduction or collection of tax, it is proposed to amend the aforesaid section to provide that where a person has received any income without deduction or collection of tax, he shall be liable to pay advance tax in respect of such income.

This amendment will take effect from the 1st April, 2012 and would, accordingly, apply in relation to advance tax payable for the financial year 2012-13 and subsequent financial years.

22) Intimation after processing of TDS statement rectifiable and appealable:

Vide finance (No.2) Act, 2009, section 200A was inserted in the Income-tax Act to provide for processing of TDSstatement. After processing of TDS statement, an intimation is generated specifying the amount payable or refundable. The intimation generated after processing of TDS statementis not

(i) subject to rectification under section 154; (ii) appealable under section 246A; and

(iii) deemed as notice of demand under section 156. In order to reduce the compliance burden of the deductor and also to rationalise the provisions of processing of TDS statement, it is proposed to provide that the intimation generated after processing of TDS statement shall be

(i) subject to rectification under section 154;

(ii) appealable under section 246A; and

(iii) deemed as notice of demand under section 156.

These amendments will take effect from 1st July, 2012.

23) Heavy Penalty for delay & incorrect information in TDS/TCS Statement:

As per the existing provisions of the Income-tax Act, a deductor is required to furnish a periodical TDS statement (quarterly) containing the details of deduction of tax made during the quarter by the

prescribed due date. A substantialnumber of the deductors are not furnishing their TDS statement within the prescribed due date. Delay in furnishingof TDS statement results in delay in granting of credit of TDS to the deductee and consequently results into delay in issue of refunds to the deductee tax payers or raising of infructuous demand against the deductee tax payers. Further, in largenumber of cases, the deductors are not furnishing correct information like PAN of the deductee, amount of tax deducted, etc. in the TDS statement. Furnishing of correct information in respect of tax deduction is critical for processing of return of income furnished by the deductee because credit for TDS is granted to the deductee on the basis of information furnished by the deductor. Under the existing provisions of section 272A, penalty of Rs.100 per day is levied for delay in furnishing of TDS statement, however, no specific penalty is specified for furnishing of incorrect information in the TDS statement. The said provisions of penalty are not proved to be effective in reducing or eliminating defaults relating to latefurnishing of TDS statement.

In order to provide effective deterrence against delay in furnishing of TDS statement, it is proposed –

(i) to provide for levy of fee of Rs.200 per day for late furnishing of TDS statement from the due date offurnishing of TDS statement to the date of furnishing of TDS statement. However, the total amount of fee shall not exceed the total amount of tax deductible during the period for which the TDS statement is delayed, and

(ii) to provide that in addition to said fee, a penalty ranging from Rs.10,000 to Rs.1,00,000 shall also be levied for not furnishing TDS statement within the prescribed time.

In view of the levy of fee for late furnishing of TDS statement, it is also proposed to provide that no penalty shall be levied for delay in furnishing of TDS statement if the TDS statement is furnished within one year of the prescribeddue date after payment of tax deducted along with applicable interest and fee.

In order to discourage the deductors to furnish incorrect information in TDS statement, it is proposed to provide that a penalty ranging from Rs.10,000 to Rs.1,00,000 shall be levied for furnishing incorrectinformation in the TDS statement.

Consequential amendment is proposed in section 273B so that no penalty shall be levied if the deductor proves thatthere was a reasonable cause for the failure.Consequential amendment is also proposed in section 272A to provide that no penalty under this section shall belevied for late filing of TDS statement in respect of tax deducted on or after 1st July, 2012.

Amendments on the similar lines for levy of fee and penalty for delay in furnishing of TCS statement and furnishingof incorrect information in the TCS statement are also proposed to be made.

These amendments will take effect from 1st July, 2012 and will, accordingly, apply to the TDS or TCS statement to be furnished in respect of tax deducted or collected on or after 1st July, 2012.

24) Disallowance of business expenditure on account of non-deduction of tax on payment to resident payee:

A related issue to the above is the disallowance under section 40(a)(ia) of certain business expenditure like interest, commission, brokerage, professional fee, etc. due to non-deduction of tax. It has been provided that in case the tax is deducted in subsequent previous year, the expenditure shall be allowed in that subsequent previous year of deduction. In order to rationalize the provisions of disallowance on account of non-deduction of tax from the payments made to a resident payee, it is proposed to amend section 40(a)(ia) to provide that where an assessee makes payment of the nature specified in the said section to a resident payee without deduction of tax and is not deemed to be an assessee in default under section 201(1) on account of payment of taxes by the payee, then, for the purpose of allowing deduction of such sum, it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the resident payee. These beneficial provisions are proposed to be applicable only in the case of resident payee.

These amendments will take effect from 1st April, 2013 and will, accordingly, apply in relation to the assessment year 2013-14 and subsequent assessment years.
25) Deduction in respect of Interest on deposit in Savings Accounts:

Under the proposed new section 80TTA of the Income-tax Act, a deduction up to an extent Of Ten Thousand rupees in aggregate shall be allowed to an assessee, being an individual Or Hindu undivided family, in respect of any income by way of Interest on deposit (Not being time deposits) in a savings account with –

i. A banking company to which the Banking regulation act, 1949 applies (Including any bank or banking Institution refer to any section 51 of that act).

ii. A co-operative society engaged in carrying on the business of banking (Including a co-operative land mortgage bank or a co-operative land development bank).

iii. A post office as define in Indian Post office Act.
However, where the aforesaid Income is derived from any deposit in a savings account held by, or on behalf

of, a firm, an association of person or a body of Individuals, no deduction shall be allowed in respect of such

income in computing the Total Income of any partner of firm or any member of association or Body.

This amendment will take effect from 1st April 2013 and will, accordingly, apply in relation to the assessment

year 2013-2014 and subsequent Assessment year.

NRIs, PIOs need not report property deals in India

2012-03-22T02:17:00.000+05:30

Non-resident Indians (NRIs) and Persons of Indian Origin (PIOs) will not be required to report to the Central Bank on the details oftransactions while purchasing immovable property in India, theReserve Bank of India (RBI) confirmed on Wednesday.
Unlike foreigners, who have to file a declaration with the Reserve Bank within 90 days from the date of purchase of properties, NRIs and PIOs are not expected to comply with any such procedures.
"It is clarified that the extant regulations do not prescribe any reporting requirements for transactions where a person resident outside India who is a citizen of India or a PIO... acquire/s immovable property in India," the RBI said.
According to the RBI, foreigners make the declaration in IPI form, which has now been amended for greater clarity. RBI’s announcement could spur investment in India from the country’s diaspora, the report added.

Govt tries to allay NRI fears

2012-03-22T02:16:00.000+05:30

The government on Tuesday tried to allay fears of NRIs being harassed by the income tax department due to the new Budget provision of compulsory declaration of foreign assets.“We will bother only those non- resident Indians (NRIs) who have unexplained funds. If any money is found to be of some person and then it comes to our knowledge and is legitimately explained, he doesn’t have to bother. But if it is unexplained, then we will have to bother and we will bother,” CBDT chairman Laxman Das said at an interactive session with members of the Federation of Indian Chambers of Commerce and Industry (FICCI).

Finance secretary R. S. Gujral said that there is no intention that NRIs should not return or should not bring back their assets to the country. “I do not think there is any doubt,” he remarked. “Obviously, if they have earned money and they are not required to file a return in India and they have assets abroad, they are not undisclosed assets,” he explained. However, Gujral said, “ If a person is employed as a clerk abroad and comes back after two years with $ 1 billion in his pocket, the person would have to explain the amount. But generally, it is very clear that India wants to attract NRI investment, NRI remittances and we welcome the NRIs even coming back.”Regarding reassessment of income in relation to any asset located outside India, the Budget has proposed reopening of assessments of up to 16 years compared with six years at present. Besides, it would be mandatory to reporting assets held abroad.

The time limit of six years is not sufficient in cases where assets are located outside India because gathering information regarding such assets takes much more time on account of additional procedures and laws of foreign jurisdictions, the Budget Memorandum states.
The 16- year thing is an enabling provision where it is found that the person, whether NRI or anybody else, is not able to explain as to how he acquired the money and whether tax has been paid on it, whether in India or abroad. It is never the government’s purpose to trouble people who are explaining money held abroad, Das added.

Experts said that such a move could create unnecessary reporting requirements and harassment for NRIs who have returned to India after staying abroad for long.

NRIs staying beyond 60 days to pay tax

2012-03-22T02:14:00.000+05:30

Come April 2012 and a new taxation law will make things slightly more difficult for those Non-Resident Indians (NRIs) who spend more than 60 days a year in India. They will need to make a disclosure of their global income if their stay exceeds the 60-day limit. NRI associations are up in arms against the decision and say the move will estrange the community from their motherland, apart from weaning away investments made in India in the form of bank deposits by many such persons settled abroad.

The government, on its part, wants to bring exclusively rich NRIs who spend months in India doing business and then evade paying taxes. At present, NRIs can spend up to 182 days in a year in India without being taxed. If they exceed the 182-day limit, they are considered ordinary citizens for levy of taxes.

Influential NRI associations in countries like the United States and Canada, however, are not willing to give in so easily and are lobbying to get the 60-day limit waived. A delegation comprising members from associations representing different communities residing in the United States are due to visit India in January 2011 to meet senior ministers and convey their problems over the changing taxation laws and possible relaxations.

Service Tax Exemptions in a Nutshell

2012-03-21T01:00:00.000+05:30

The Negative List: Service Tax Exemptions in a Nutshell

The Service Tax provisions in the budget detail out 17 areas on which you will not be charged a tax, and for absolutely everything else that involves a service, you will need to pay 12 % (plus cess). The seventeen areas are:

1. 1. Services by the Government or local authorities: These will include such services like getting a passport, a driving license, paying municipal taxes, car registration fees, police fines and so on. What you pay for such services will not include any service tax.

But of course, there are exceptions. Service tax will still be applicable on:
- Speed or Express Post, and life insurance bought from a post office
- airport services
- government services provided to businesses. (Companies will pay it on the annual filing charges payable to the Registrar of Companies, for instance).

2. 2. Services by the Reserve Bank of India. They won't tax the ones that print the money!

1. 3. Foreign consulates and embassies in India. Hopefully this will mean to visa fees as well.

1. 4. Agricultural services. This includes harvesting, planting, or warehousing services, renting of either vacant agricultural land or machinery,

1. 5. Trading, and (see point 6)

1. 6. Manufacturing of goods. For this and trading, service tax will not apply but there is already the excise duty, customs duty and VAT structure that will ensure they are still taxed.

1. 7. Advertisements on hoardings or newspapers: The clause says that service tax will still apply on advertisements in TV or Radio, but for every other form of advertising.

1. 8. Toll charges: No extra charges; imagine trying to pay Rs. 23.60 at a toll booth with twenty impatient cars behind you.

1. 9. Gambling: Yes, you don't have service tax if you visit a casino, buy a lottery ticket or bet on a horse race. But if you win, the income tax is quite hefty, so all this clause does is that they don't tax you when you lose.

1. 10. Entertainment events: What you pay to enter a concert or an amusement park will not be subject to service tax.

1. 11. Electricity: If you're paying a local utility, no service tax will be applicable. But if you pay for power coming off a generator, you'll shell out 12% extra.

1. 12. Education: No service tax for pre-school to high-school education. And not for any education to purse a qualification recognized by law. (I imagine this applies to courses such as a CA, MBBS, or any recognized degree) That also means you'll pay it for a course that gives you an unrecognized diploma, and for private tuitions.

1. 13. Residential rent: For those of us that stay in rented premises, we don't have to pay service tax. Offices, factories and other users must, but that was true last year as well.

1. 14. Certain financial transactions like giving money as a loan, buying a deposit, where interest is involved will not be chargeable to service tax. However, the interest actually received (or paid) will be subject to service tax. Also, given the way this clause is worded, if you give anyone money without any interest, service tax will apply. (At the very least, give or take some interest)

1. 15. Public Transport: Exemption applies to all kinds of transportation, on water or land, included metered cabs. You will still pay service tax on First Class or any air-conditioned coach seats in a train. And you will pay it on packaged tours.

1. 16. Goods transport: Except if you use a road transport agency or a courier service.

1. 17. For the absolute end: This includes funeral, burial, crematorium, hearse or mortuary services. Taxes may kill you, but they won't touch your final rites.

In general, you need to have a "service" in order to be taxed. For the most part, if a transaction already has a different tax on it — excise or customs duty, or VAT — you may not need to pay service tax on it. (The exception being restaurant bills, where you might pay both!)

There are other "exemptions" to service tax, such as the maintenance charges you pay to your housing society (if the total amount is less than Rs. 5,000 per month).

While you may fret that now everything else comes under service tax, note that the small service provider will not pay any service tax unless he makes more than Rs. 10 lakhs (Rs. 1 million) in a year. This spares you from the tax at the micro level.

TDS, TCS, TAN

2012-03-19T20:00:00.000+05:30

Tax Deduction at Source (TDS)Tax deduction at source means the tax required to be paid by the assesses, is deducted by the person paying the income to him. Thus, the tax is deducted at the source of income itself. The income tax act enjoins on the payer of such income to deduct the given percentage of income as income tax and pay the balance amount to the recipient of such income. The tax so deducted at source by the payer is to be deposited in the income tax department account. The tax so deducted from the income of the recipient is deemed to be payment of income tax by the recipient at the time of his assessment.
For example, person responsible for paying any income which is chargeable to tax under the head 'Salaries' is required to compute the tax liability in respect of such income and deduct tax at source at the time of payment.If the employee has any other income,he needs to inform the employer so that employer can take that income into consideration while computing his tax liability but he will not take into account losses except loss from house property.
Similarly, person responsible for paying any income by way of 'interest on securities' or any other interests are required to deduct tax at source at the prescribed rates at the time of credit of such income to the account of the payee or at the time of payment,whichever is earlier.
The income from the following sources is subjected to tax deduction at source

Salary and all other positive incomes under any head on income( Section 192 )
Interest on securities ( Section 193 )
Interest other than interest on securities( Section 194A )
Payments to contractors and sub-contractors( Section 194C )
Winnings from Lottery or crossword puzzles( Section 194B )
Winnings from horse races( Section 194BB )
Insurance Commission covering all payments for procuring Insurance business(Section 194D )
Any interest other than interest on securities payable to non-residents not being a company or to a foreign company( Section 195 )
Payment to non-resident sportsman including athlete or sports association/institution.In case of non-resident sportsman,payments in respect of advertisements as well as articles on any game/sports in India in newspapers,magazines,etc. is included( Section 194E )
Payment in respect of deposits under NSS[National Savings Scheme]( Section 194EE )
Payment on account of repurchase of Units by Mutual Fund or UTI( Section 194F )
Payment for Commission or brokerage( Section 194H )
Payment of rent( Section 194I )
Payment of fees for professional or technical services( Section 194J )
Commission to Stockist,distributors,buyers and sellers of Lottery tickets including remuneration or prize on such tickets( Section 194G )
Income from Units purchased in foreign currency or long-term capital gain arising from the transfer of such Units purchased in foreign currency ( Section196B )
Payment of any income to non-residents in respect of interest or dividend on bonds and shares( Section 196C )etc.

Tax Collection at Source (TCS)
Tax collection at source arises on the part of the seller of goods. Here, tax is collected at the source of income itself. It is to be collected at source from the buyer, by the seller at the point of sale. Such tax collection is to be made by the seller at the time of debiting the amount payable to the buyer to the account of the buyer or at the time of receipt of such amount from the buyer, whichever is earlier. A person collecting tax shall furnish a certificate specifying whether tax has been collected or not,what sum has been collected,the rate of tax applied on it and other such particulars as may be prescribed. It shall be furnished within 10 days from the date of debit or receipt of the amount furnished to the buyer to whose account such amount is debited or from whom such payment is received. The taxes collected must be remitted into the income tax department's account. Every person collecting tax shall, within such time as may be prescribed, apply to the Assessing Officer for the allotment of a tax-collection account number.
The following goods when sold must be subjected to tax collection at source :-

Alcoholic liquor for human consumption (other than Indian made foreign liquor).
Timber obtained under a forest lease.
Timber obtained by any mode other than under a forest lease.
Any other forest produce not being timber.

Tax Deduction and Collection Account Number (TAN)
TAN or Tax Deduction and Collection Account Number is a 10 digit alpha numeric number required to be obtained by all persons who are responsible for deducting or collecting tax. All those persons who are required to deduct tax at source or collect tax at source on behalf of Income Tax Department are required to apply for and obtain TAN. TAN is allotted by the Income Tax Department on the basis of the application submitted to TIN Facilitation Centres managed by National Securities Depository Limited ( NSDL ). NSDL will intimate the TAN which will be required to be mentioned in all future correspondence relating to TDS/TCS. An application for allotment of TAN is to be filled in Form 49B and submitted at any of the TIN facilitation centres meant for receipt of e-TDS returns. The income tax act makes it mandatory for TAN to be quoted in all TDS/TCS returns, all TDS/TCS payment challans and all TDS/TCS certificates to be issued. Failure to apply for TAN or comply with any of the other provisions of the Act attracts a penalty. TDS/TCS returns will not be received if TAN is not quoted and challans for TDS/TCS payments will not be accepted by banks.

Taxation of Corporates

2012-03-19T19:59:00.000+05:30

Company whether Indian or foreign is liable to taxation, under the Income Tax Act,1961. Corporation tax is a tax which is levied on the incomes of registered companies and corporations.

A Company means:-

Any Indian company, or
Any corporate body, incorporated by or under the laws of a country outside India, or
Any institution, association or a body which was assessed as a company for any assessment year under the Income Tax Act,1922 or was assessed under this Act as a company for any assessment year commencing on or before April 1, 1970,or
Any institution, association, or body, whether incorporated or not and whether Indian or Non-Indian, which is declared by a general or special order of the Central Board of Direct Taxes to be a company.

Companies in India, whether public or private are governed by the Companies Act, 1956. The registrar of companies and the company law board administers the provisions of the Act.

However, for the purpose of taxation, companies are broadly classified as:-

Domestic company [Section 2(22A)]:- means an Indian company (i.e. a company formed and registered under the Companies Act,1956) or any other company which, in respect of its income liable to tax, under the Income Tax Act, has made the prescribed arrangement for declaration and payments within India, of the dividends payable out of such income. A domestic company may be a public company or a private company.
Foreign company [Section 2(23A)] :- means a company whose control and management are situated wholly outside India, and which has not made the prescribed arrangements for declaration and payment of dividends within India.

Direct Tax Code

2012-03-19T19:57:00.002+05:30

The direct tax code seeks to consolidate and amend the law relating to all direct taxes, namely, income-tax, dividend distribution tax, fringe benefit tax and wealth-tax so as to establish an economically efficient, effective and equitable direct tax system which will facilitate voluntary compliance and help increase the tax-GDP ratio. Another objective is to reduce the scope for disputes and minimize litigation.

It is designed to provide stability in the tax regime as it is based on well accepted principles of taxation and best international practices. It will eventually pave the way for a single unified taxpayer reporting system.

The salient features of the code are:

Single Code for direct taxes: all the direct taxes have been brought under a single Code and compliance procedures unified. This will eventually pave the way for a single unified taxpayer reporting system.
Use of simple language: with the expansion of the economy, the number of taxpayers can be expected to increase significantly. The bulk of these taxpayers will be small, paying moderate amounts of tax. Therefore, it is necessary to keep the cost of compliance low by facilitating voluntary compliance by them. This is sought to be achieved, inter alia, by using simple language in drafting so as to convey, with clarity, the intent, scope and amplitude of the provision of law. Each sub-section is a short sentence intended to convey only one point. All directions and mandates, to the extent possible, have been conveyed in active voice. Similarly, the provisos and explanations have been eliminated since they are incomprehensible to non-experts. The various conditions embedded in a provision have also been nested. More importantly, keeping in view the fact that a tax law is essentially a commercial law, extensive use of formulae and tables has been made.
Reducing the scope for litigation: wherever possible, an attempt has been made to avoid ambiguity in the provisions that invariably give rise to rival interpretations. The objective is that the tax administrator and the tax payer are ad idem on the provisions of the law and the assessment results in a finality to the tax liability of the tax payer. To further this objective, power has also been delegated to the Central Government/Board to avoid protracted litigation on procedural issues.
Flexibility: the structure of the statute has been developed in a manner which is capable of accommodating the changes in the structure of a growing economy without resorting to frequent amendments. Therefore, to the extent possible, the essential and general principles have been reflected in the statute and the matters of detail are contained in the rules/schedules.
Ensure that the law can be reflected in a Form: for most taxpayers, particularly the small and marginal category, the tax law is what is reflected in the Form. Therefore, the structure of the tax law has been designed so that it is capable of being logically reproduced in a Form.
Consolidation of provisions: in order to enable a better understanding of tax legislation, provisions relating to definitions, incentives, procedure and rates of taxes have been consolidated. Further, the various provisions have also been rearranged to make it consistent with the general scheme of the Act.
Elimination of regulatory functions: traditionally, the taxing statute has also been used as a regulatory tool. However, with regulatory authorities being established in various sectors of the economy, the regulatory function of the taxing statute has been withdrawn. This has significantly contributed to the simplification exercise.
Providing stability: at present, the rates of taxes are stipulated in the Finance Act of the relevant year. Therefore, there is a certain degree of uncertainty and instability in the prevailing rates of taxes. Under the Code, all rates of taxes are proposed to be prescribed in the First to the Fourth Schedule to the Code itself thereby obviating the need for an annual Finance Bill. The changes in the rates, if any, will be done through appropriate amendments to the Schedule brought before Parliament in the form of an Amendment Bill.

II. Benefits/Relief from Taxation

2012-03-19T19:17:00.000+05:30

1.STT:

It isproposed to reduce the Securities Transaction Tax (STT) from 0.125 percent to 0.1 percen to fthe value of the securities transactions.

2.Deductions:

Deduction in respect ofintereston Savings Bank Account to theextent of Rs.10,000/.

Deduction in respect ofany payment made by an assessee on account of preventive health check‐up of self, spouse, dependent children orparent upto a limitofRs.5000/withinthe existing limits prescribed in the section80D.

3.Capital Gains Exemption:

The capital gains tax on sale of aresidentialproperty is exempted ifthesale consideration isused for subscribing inequity shares of amanufacturing SME company which in turn shall utilize the funds for purchase of new plant and machinery.

4.Baggage Allowance: Baggage allowance for Indians travellingabroad has increasedthe duty‐free allowance for eligible passengersof Indian originfrom Rs.25,000 to Rs.35,000 and for children of up to 10 years from Rs.12,000 to Rs.15,000

Direct Tax Code---Residential status in India – Restriction of 60 days stay F.Y 2012-13

2012-03-19T19:12:00.000+05:30

Direct Tax Code---Residential status in India – Restriction of 60 days stay

Does it really apply to all NRIs ?????

Is it exceptional for few?

IT IS EXCEPTIONAL ONLY FOR FEW

The major change introduced by the DTC is in the criteria of determining the residential

status of NRIs who, are working abroad, and come on visit to India. Currently, such

NRIs who are citizen of India or Person of Indian Origin (PIO) are regarded as resident, only

if, they stay in India for 182 days or more in the financial year. However, under the

proposed DTC, any inbound individual (including NRIs/PIO) will become resident, if

they are present in India for 60 days or more in the financial year and 365 days or more

over a period of four years prior to the financial year.

However in general it is not correct to opine that under the proposed provisions of the

Direct Tax Code, in relation to the ‘Residential Status’, the NRI shall be resident in India if

he stays for more than 60 days in India in a financial year (1st April to 31

March) and

attract Indian tax liability in respect of his income earned outside India.

In nutshell, we advise that NRI may stay in India for more than 60 days in a financial year

and yet he shall continue to special status of “Resident but Not Ordinarily Resident” under

the Income-tax Act, 1961 for tax purposes and even under proposed DTC and shall not be

liable to tax in India in respect of his income earned outside India. To a large extent, the

majority of the NRI’s may not be adversely affected by the proposed changes.

It is important for NRI to know that if he has stayed in India for less than 364 days in past 4

years or less than 728 days in past 7 years than his tax liability shall be restricted to income

earned in India only even if his stay in India is more than 60 days in a year.

He can stay in India up to 90 to 120 days or may be little more depending upon his past

stay in India and yet not covered by the proposed DTC PROVISION.

We can assist the NRI’s to know his Income tax status under the proposed DTC and no of

days he can stay in India ( even beyond 60 days) for the financial year1st April 2010 – 31

March 2011 and subsequent one to three years

NRI Status as per new budget F.Y 2012-13

2012-03-19T18:54:00.000+05:30

Bank deposit rates for Non Resident Indians (NRIs) have turned attractive after recent changes to interest rates. But NRIs may need to keep the following factors in mind while making investment decisions in India.

CHANGES IN THE DTC

It now appears unlikely that the new direct tax code (DTC) will come into effect in April 2012. But as and when it takes effect, it may result in changes to the method by which a person is determined to be an NRI.

The current tax law states that an Indian citizen who stays abroad for employment or is carrying on business for an uncertain duration is a non-resident. However, an NRI becomes a ‘resident' of India in any financial year, if he stays in India for 182 days or more. The added stipulation is that a person will be deemed as resident if he has also visited in India for 365 days or more in the preceding four financial years.

In the new DTC, the 182-day requirement has been reduced to 60 days. This change could impact the residential status for select NRIs, say tax experts.

“Under the Direct Tax Code, NRIs who have historically been spending significant time in India stand to become residents the moment their stay in India exceeds 60 days in the financial year” says Amitabh Singh, Partner, Tax & Regulatory Services, Ernst and Young.

A resident becomes ‘ordinarily resident' under the Income Tax Act if he was resident in India in nine out of the ten previous years and has been in India for 730 days or more during the seven years preceding that year. In such cases, even global income of these NRIs could be added to the Indian income.

“NRIs may have to go through a tie-breaker test if they become tax resident in India and are also tax resident in the overseas country. The tie-breaker test will help decide which country has the taxing rights and which country will give a tax credit” says Singh.

TAX IN THE HOME COUNTRY

A second factor that may have a bearing on NRIs is the tax incidence in their home country.

“Tax-free bonds or tax-free fixed deposits are beneficial only to NRIs who do not have to pay tax in the foreign country. NRIs should look at the post-tax yield taking their global tax liability into consideration and then decide. For example, an NRI who is a US tax resident will benefit more from a 12 per cent taxable bond than a 8 per cent tax-free bond because he will have to pay taxes in the US on his Indian sourced income” says Amitabh Singh. Effectively, NRIs need to compare post-tax returns, based on their tax rates at the foreign country.

In the case of countries with which India has a Double Taxation Avoidance Agreement, NRIs may be allowed to set off tax paid in India against taxes due in such countries. The effective tax rate will be at the higher rate, between the two countries.

RUPEE SWINGS

In addition to the tax effect, NRIs will also have to take a call on the rupee's direction while making Indian investments. Even if the interest rates happen to be high, an adverse currency movement can offset this at the time of maturity of the deposit. This is especially if the NRI plans to repatriate funds back home.

Post Union Budget 2012-13 TDS Rates for financial year (FY) 2012-13 and assessment year (AY) 2013-14

2012-03-19T18:04:00.002+05:30

TDS RATE CHART FINANCIAL YEAR 2012-13 (ASSESSMENT YEAR 13-14)

Sl. No.	Section Of Act	Nature of Payment in brief	Cut Off Amount		Rate %
		Nature of Payment in brief	01.04.2012	01.07.2012	HUF/IND	Others
1	192	Salaries	Salary income must be more then exemption limit after deductions.		Average Rate
2	193	Interest on debentures	2500	5000	10	10
3	194	Deemed dividend	-	-	10	10
4	194A	Interest other than Int on securities (by Bank)	10000	10000	10	10
4A	194A	Interest other than Int. on securities (By others)	5000	5000	10	10
5	194B	Lottery / Cross Word Puzzle	10000	10000	30	30
6	194BB	Winnings from Horse Race	5000	5000	30	30
7	194C(1)	Contracts	30000	30000	1	2
8	194C(2)	Sub-contracts/ Advertisements	30000	30000	1	2
9	194D	Insurance Commission	20000	20000	10	10
10	194EE	Paymentsout of deposits under NSS	2500	2500	20	-
11	194F	Repurchase of units by MF/UTI	1000	1000	20	20
12	194G	Commission on sale of lottery tickets	1000	1000	10	10
13	194H	Commission or Brokerage	5000	5000	10	10
14	194I	Rent (Land & building)	180000	180000	10	10
14	194I	Rent (P & M , Equipment, furniture & fittings)	180000	180000	2	2
15	194J	Professional/Technical charges/Royalty & Non-compete fees	30000	30000	10	10
16	194J(1)(ba)	Any remuneration or commission paid to director of the company(Effective from 1 July 2012)	NA	NIL	10	10
17	194LA	Compensation on acquisition of immovable property	100000	200000	10	10
18	194LLA	Payment on transfer of certain immovable property other than agricultural land (applicable only if amount exceeds : (a) INR 50 lakhs in case such property is situated in a specified urban agglomeration; or(b) INR 20 lakhs in case such property is situated in any other area) (Effective from 1 October 2012)	NA	(a) INR 50 lakhs in case such property is situated in a specified urban agglomeration; or(b) INR 20 lakhs in case such property is situated in any other area) (Effective from 1 October 2012)	1	1

TCS Rates for the FY 2012-13

The Tax Collection at Source Rates for the Financial Year 2013-13 is tabulated below:

Sl.No.	Nature of Goods	Rates in %
Sl.No.	Nature of Goods	01.04.2012	01.07.2012
1	Alcoholic liquor for human Consumption	1	1
2	Tendu leaves	5	5
3	Timber obtained under forest lease	2.5	2.5
4	Timber obtained by any mode other than a forest lease	2.5	2.5
5	Any other forest produce not being timber or tendu leaves	2.5	2.5
6	Scrap	1	1
7	Parking lot	2	2
8	Toll plaza	2	2
9	Mining & Quarrying	2	2
10	Minerals, being coal or lignite or iron ore	NA	1
11	Bullion or jewellery (if the sale consideration is paid in cash exceeding INR 2 lakhs)	NA	1

No Education Cess on payment made to resident-Education Cess is not deductible/collectible at source in case of resident Individual/HUF /Firm/ AOP/ BOI/ Domestic Company in respect of payment of income other than salary. Education Cess @ 2% plus secondary & Higher Education Cess @ 1% is deductible at source in case of non-residents and foreign company.

Surcharge on Income-tax - Surcharge on Income-tax is not deductible/collectible at source in case of individual/ HUF /Firm/ AOP / BOI/Domestic Company in respect of payment of income other than salary.

Due date for furnishing TDS return for the last quarter of the financial year has been modified to 15^th May (from earlier 15^th June). The revised due dates for furnishing TDS return are


Sl. No.	Date of ending of the quarter of the financial year	Due date
1	30^th June	15^th July of the financial year
2	30^th September	15^th October of the financial year
3	31^st December	15^th January of the financial year
4	31^st March	15th May of the financial year immediately following the financial year in which deduction is made

Due date for furnishing TDS certificate to the employee or deductee or payee is revised as under :

Sl. No.	Category	Periodicity of furnishing TDS certificate	Due date
1	Salary (Form No.16)	Annual	By 31^st day of May of the financial year immediately following the financial year in which the income was paid and tax deducted
2	Non-Salary(Form No.16A)	Quarterly	Within fifteen days from the due date for furnishing the ‘statement of TDS’

Union Budget 2012 – Changes in Service Tax

2012-03-19T17:36:00.001+05:30

It is said that in matters relating to taxes, questions rarely change, but the answers do. Budget 2012 has, however, changed a number of questions relating to service tax.

2. No more will the most often-asked question “which taxable service is being provided?” be relevant; no more will an exporter be asked whether an input service has been used in export to claim a Cenvat refund; and no more will a host of questions confront a tax-payer filing his new one page return.

3. Budgetary changes relating to service tax this year are aimed at addressing a number of basic issues: simplicity and certainty in tax processes, neutrality of business to tax by mitigating cascading, encouraging exports, optimizing compliance. And these are largely driven by the desire to create the required setting for the eventual launch of GST in a far more familiar environment.

4. Clauses 143 to 145 of the Finance Bill, 2012 cover the legislative changes relating to Service Tax. Changes have also been made in the rules as well as exemptions. A number of other changes are slated to be introduced in subordinate legislation at the time the legislative provisions are operationalized.

5. These changes can be broadly captured as follows:

A. Rate changes:

1. The rate of service tax is being restored to the statutory rate of 12% – same as goods-and Notification No. 8/2009-ST dated February 24, 2009 reducing the rate to 10% has been rescinded effective April 1, 2012.

2. Consequent changes have also been made in composition rates as follows:

i. For life insurance: 3% for the first year premiums while retaining the rate @1.5% for the subsequent years(simultaneously restoring full Cenvat credit);

ii Money changing: raising the existing rates proportionately by 20%;

iii Distributor or selling agent of lotteries: Raising the specified amounts proportionately and suitably rounded off to Rs 7,000 and 11,000;

iv For works contracts from 4% to 4.8%.

3. The rate for Cenvat reversal for exempt services has been revised likewise from 5% to 6% in Rule 6(3) of Cenvat Credit Rules (CCR), 2004.

4. The dual tax structure for air transportation: partly specific, partly ad valorem – is being replaced with a uniform ad-valorem levy at standard rate with an abatement of 60% on all sectors and all classes.

5. All these changes will be effective April 1, 2012.

B. Taxation of services:

B.1. Negative List:

1. There is paradigm shift in the way services are proposed to be taxed in future. Taxation will be based on what is popularly known as “Negative List of Services”.

2. In simple words, it means that if an activity meets the characteristics of a “service” it is taxable unless specified in the Negative list, comprising 17 heads listed in proposed new section 66D, or otherwise exempted by a notification issued under section 93 of the Act. Most of the 88 exemptions at present will be either rescinded, being no more needed, or modified in some manner, or merged in a mega notification, leaving the final tally of exemptions to just 10.

3. The word “service” is defined in clause (44) of the new section 65B. This will also include certain activities that have been specified as declared services in section 66E. Most of these declared services are presently taxed as positive list.

4. The new charging section is contained in section 66B and levies taxes on all services, other than those in the negative list, provided or agreed to be provided in the taxable territory by one person to another.

5. The entire concept, including the key to understanding the various dimensions of the new taxation, together with answers to possible questions, is contained in a detailed draft Guidance Paper: A (GPA for short) and is attached as Annexure A to this letter. The negative list, the mega-exemption notification and list of other exemptions, being retained, are a part of GPA as Exhibits “A1”, “A2” and “A3” respectively.

6. On the coming into force of the new provisions, the earlier provisions contained in sections 65, 65A, 66, 66A will cease to apply but will remain relevant in respect of services provided prior to the coming into force of the new provisions.

B.2. Place of Provision of Services Rules, 2012:

7. An important component of the proposed changes is the introduction of the Place of Provision of Services Rules, 2012, which have been released for comments and feedback for the time being. Another draft Guidance Paper-B, or GPB for short, has also been issued explaining all the various aspects relating to these rules and is attached as Annexure B.

8. The new rules will replace the existing Export of Services Rules, 2005 and the Taxation of Services (Provided from Outside India and Received in India) Rules, 2006. Rule 5 of the export rules will be incorporated in Service Tax Rules.

B.3. Other related changes:

9. The transition to Negative List will require a number of other changes, in particular, movement away from service-specific provisions in rules and notifications. Many other changes are also being timed with the introduction of negative list, including most of the new exemptions. These changes are as follows:

B. 3(I). Service Tax Rules

10. Besides complying with some revised drafting needs due to negative list, the rules will need changes in respect of person liable to pay tax: to provide for recipient persons relating to services provided to business entities by government, advocates or arbitrators, change in services provided from non-taxable territory, some changes to services provided by GTA and the deletion of all those services that are now exempt e.g. mutual fundsagents and distributers.

11. Since the Export Rules will cease to apply, the required provisions will be incorporated in Service Tax Rules. A transaction will qualify as export when it meets following requirements:

i. The service provider is located in Taxable territory;

ii. Service recipient is located outside India;

iii. Service provided is a service other than in the negative list.

iv. The Place of Provision of the service is outside India; and

v. The payment is received in convertible foreign exchange

B. 3(II). Valuation Rules

12. Negative list will require movement away from service-specific provisions. As such, the abatements under Notification 1/2006-ST and composition rate under the Works Contract (composition scheme for payment of service tax) Rules, 2007 will need some reformulations.

13. A new valuation rule is being introduced to substitute the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007. The value of the Works Contract is proposed to be redefined, as follows:

i. As at present, first determination will be the value of service being the total amount charged for the contract reduced by the value of property transferred in goods for State VAT purpose;

ii. If value of goods is not intimated to State VAT, the assessees can still calculate the actual value of goods and the same will be relevant to deduce the value of the service involved in the works contract;

iii. If the value is not so deduced, and not merely as an option, the value shall be specified percentage of the total value as follows:

a. for original works: 40% of the total amount;

b. other contracts: 60% of the total amount;

c. for contracts involving construction of complex or building for sale where any part of the consideration is received before the completion of the building: 25% of the total amount

14. Original works will include all new constructions and all types of additions and alterations to abandoned or damaged structures to make them workable.

15. The total amount will be gross amount plus the value of any material supplied under the same contract or any other contract.

16. The input tax credit on goods forming part of the property on which VAT is payable shall not be available as they are not used in the provision of service, which is totally independent of the deemed sale. However taxes paid on capital goods and input services will be available including in respect of iii.c of para 13 above.

17. Likewise a new Rule 2C is being introduced, for determination of value of taxable service involved in supply of food and drinks in a restaurant or as outdoor catering. The value is being adjusted such that the industry is able to utilize credit on capital goods, specified inputs (other than chapter 1 to 22 i.e. foods and beverages) and input services. Thus the taxable portion is being raised but the move is expected to be business-friendly.

18. The revised taxable portion shall be as follows:

S. No	Description of service	Existing taxable portion	Proposed taxable portion
1. 1.	Service portion in the supply of food or any other article of human consumption or drink at a restaurant	30%	40%
1. 2.	S. No.1 provided from a premises elsewhere(outdoor catering)	50%	60%

19. Further, it is proposed to amend Rule 3 of valuation rules to provide that ‘prescribed manner’ in Rule 3 will be applicable only in the cases where valuation is not ascertainable. At present Rule 3 has been inadvertently made applicable to situation where consideration received is not wholly or partly consisting of money, which is fully covered by the Act.

20. Rule 6 of Valuation Rules prescribes inclusions and exclusions to the taxable value. Following changes are being made here:

i Sub-rule (1) to include “any amount realized as demurrage, or by any other name, for the provision of a service beyond the period originally contracted or in any other manner relatable to the provision of service”. This change will become relevant in the context of negative list where such amounts may be collected in the name of demurrage but will actually be in all respects a service.

ii In sub-rule (2) clause (iv) regarding exclusion of ‘interest on loans’ is proposed for substitution with “interest on (a) deposits; and (b) delayed payment of any consideration for the provisions made (services/goods)”. This will keep such amounts outside the value and thus not be relevant for reversal of credits under rule 6(3) of CCR, 2004. Interest on loans will now be an exempt income rather than an exclusion from value.

iii Under the list of exclusions in sub-rule (2) from taxable value “accidental damages due to unforeseen actions not relatable to the provision of service” is being added. This again is in view of the negative list approach to taxation of services and to confine inclusions of demurrages to those under category I above and not beyond.

21. In the Negative List approach, Rule 7 may not be required; therefore it is proposed to omit the same.

B.3(III). Abatements:

22. Certain changes are proposed to be introduced in the abatements along with negative list. The increase in taxable portion of value are accompanied with liberalization in input tax credits following the principle of neutrality of taxes that the burden of taxes should not raise the cost per se but passed on to the point of consumption. It is expected that, though the taxable portion of services may appear a little higher, but the availability of credits will lead to reduction in costs and hence prices for the consumers.

23. The existing and new abatements shall be as follows:

S. No.	Service	Existing taxable portion	Proposed taxable portion	Cenvat credits
1.	Convention center or mandap with catering	60%	70% 70%	All credits, except on inputs, of chapter 1 to 22, will now be available.
2	Pandal or Shamiana with catering.	70%	70% 70%
3	Coastal shipping	75%	50%	No credits as at present
4	Accommodation in hotel etc.	50%	60%	Credits on input services allowed
5	Railways: goods	30%	30%	All credits will be allowed
6	Railways: passengers	New levy	30	-do-

B.3(IV) Cenvat Rules:

24. Cenvat rules will require some changes in the light of negative list. First of all the service-specific references in the rules by clauses will be replaced by broad descriptions retaining the essence of the existing provisions.

25. Due to the fact that exports will cease to be a taxable service per se, changes are being made to incorporate the concept by changing the definition of output service such that it includes exports of service and that too without payment being received until the period available under the RBI requirements. This will allow continuation of the benefit of not reversing the input tax credits for exports without treating them exempt until the period specified for realizing export proceeds.

26. Interest on loans, advances will now be an exempt service. This will require reversal of credits used for earning such income. For the banking and financial sector, provisions are available to reverse credits up to 50% in rule 6(3D). It is being proposed to change this formula to actual basis, the value of service being net interest i.e. interest earned less interest paid on deposits, subject to a minimum of 50% 0f interest paid on deposits. For the non-financial sector it is being proposed that they may reverse credits on gross interest basis.

B. 3(V). Rebate of service tax on export of goods:

27. The scheme for electronic refund of service tax paid on taxable services (eighteen different taxable services) used for export of goods at the post-manufacture /post-removal stage has been made operational since 3rd January, 2012, as announced by the Honorable Finance Minister in his last year’s Budget speech.

28. The scheme is operated at present as a general exemption under section 93(1) of the Finance Act, 1994. To strengthen the electronic refund further, it is proposed to amend section 93A of Finance Act, 1994. After its enactment, Notification 52 /2011-ST dated 30/12/2011 concerning refund service tax paid on export of goods at the post-manufacture/ removal stage, will be placed under this section.

29. This means that in future, service tax refunded will be recoverable, without any time bar from the exporter, against whose shipping bill, sale proceeds have not been received from abroad. Moreover the service-specific exemption will be revisited and suitably altered.

B.3 (VI) SEZ changes:

30. There are no changes at present. However service-specific criterion for determination of services provided exclusively within the SEZ shall be taken care at the time of introducing negative list.

C. Other legislative changes:

C.1. General Changes

1. In Explanation to section 67, definition of money, in clause (b), is proposed for omission as nearly the same definition shall be available in section 65A for capturing the meaning of ‘service’.

2. A new section: 67A is being inserted to prescribe the relevant date for the application of rate of exchange, valuation or rate of service tax. Rule 5B of ST Rules, which covers this aspect partially will be deleted.

3. Special audit provisions, available at present by way of section 14AA of the Central Excise Act and made applicable to Service Tax by way of section 83, are being replaced by a new section: 72A, giving comprehensive powers for such audit relevant for service tax purposes.

4. The provisions of section 73 are being amended as follows:

i The period for issue of demands in normal situations is being raised from 12 months to 18 months. This is being done to take care of the shorter period available due to the periodicity of the new return EST-1 (to replace ST-3 and discussed later) being reduced to 1 month for large assessees from the existing 6 months and to have the benefit of audited accounts available for the purpose of scrutiny of returns;

ii A new sub-section (1A) is being inserted to save the botheration of retyping the same charges (and save paper) when a follow-up demand is given for a period subsequent to the previous notice(s) on same grounds;

iii Reference to sub-section (3) is being deleted in sub-section (4A) so that the latter section will not overrule the earlier;

5. Provisions relating to Settlement Commission are being brought in the Service Tax by adding sections 31, 32 and 32A to 32P of the Central Excise Act in section 83. On the date of the enactment of the Finance Bill, notification containing Service Tax (Settlement of Cases) Rules, 2007 along the lines of Central Excise (Settlement of Cases) Rules, 2007, will come into effect. This should encourage quick settlement of disputes and save the business from the worries of prosecution in certain situations.

6. The periods for filing appeals in service tax are being aligned with Central Excise. These are captured by relevant amendments in sections 85 and 86. New limitations will apply to decisions or orders passed after the date on which Finance Bill, 2012, receives the assent of the President.

7. At present in service tax, appeals against the order of commissioner (appeals) lie before the Tribunal; whereas in Central Excise, a revision mechanism is available to hear certain specified matters i.e. credit of any duty allowed to be utilized towards payment of excise duty on final products, rebate on exports. It is proposed that this revision mechanism may also be made available for service tax, to the extent applicable. Accordingly, Central Excise provisions relating to revision mechanism (section 35EE of Central Excise Act) are being made applicable to service tax by amending section 83.

8. Clause (a) of section 89 relating to prosecution for non-issue of invoice is being replaced with the words “knowingly evades payment of service tax”. This will meet the demand of business that mere non-issue of invoices should not be made punishable with prosecution, while giving a comprehensive coverage to offences and also aligning with other indirect laws. Simultaneously process of compounding of offences will be operationalized and the enabling rule making power has been obtained in the Act.

9. Powers of Advance Ruling Authority to hear cases relating to Cenvat credit will also cover cases of Central Excise duty. This was an anomaly due to the applicability of the then 2002 Cenvat rules only to service tax credits that has been corrected.

C.2. Reverse charge provisions:

10. There are a number of changes relating to reverse charge provisions. First of all, the term “taxable territory” has been defined in the Act and only services provided in taxable territory will be liable to tax. Thus any service provided in the state of J&K will not be liable to tax. The Place of Supply Rules, 2012 will determine whether a service is being provided in J&K.

11. Moreover wherever the service provider is located in J&K but the service is being provided in taxable territory, in terms of the stated rules, the tax will be collected from the service receiver.

12. Secondly it has been noticed that a number of registrants collect the tax but do not pay the same to the Department. This is a serious loss of the revenue even though the compliant section at the recipient end is often not benefitted. To ensure proper collection, while not inconveniencing small business, a new scheme is proposed to be introduced.

13. To give effect to this new reverse charge mechanism, some changes are being proposed: firstly, a proviso is being added to sub-section (2) of section 68 and both the service provider and service receiver will be considered as persons liable to pay the tax on notified taxable services and to the extent specified against each one of them.

14. The scheme is being introduced for three services where the service provider is either an individual or a firm or LLP and the recipient is a body corporate.

The three services and the portion of tax payable are as follows:

Sl. No.	Description of service	Service recipient	Service provider
1.	Hiring of a motor vehicle designed to carry passengers: (a) with abatement (b) without abatement	100% 40%	NIL 60%
2.	Supply of manpower for any purpose	75%	25%
3.	Works contract service	50%	50%

15. It is clarified that the liability of the two persons is for respective amounts and is not influenced by compliance or the lack of it by the other side. Service provider is allowed Cenvat credit of tax paid by him on inputs and input services. The respective portions have been attempted such that the credits available will be well below the amount required to be paid by such persons. In extreme situations the small service provider is also being allowed the refund of unutilized Cenvat credit if any, available with him. Suitable changes will be made in Cenvat Credit Rules, to this effect.

16. Even though the above scheme can be given effect on enactment, it is proposed to time it with Negative List approach as a part of the comprehensive reform.

C.3 Penalty waiver for renting of immovable property service:

17. Recently, Delhi High Court while examining the issue of constitutionality of service tax on renting of immovable property service in the matter of Home Solutions Retail Vs UOI observed that ‘on the question of penalty due to non-payment of tax, it is open to the Government to examine whether any waiver or exemption can be granted’ [para 73]. Subsequently, in the matter of Retailers Assn. of India Vs Union of India, Honorable apex court, had ruled on October 14, 2011, that litigants should pay 50% of the arrears within six months in three equated installments. For the balance, solvent surety should be furnished to the satisfaction of the jurisdictional commissioner.

18. Against the above backdrop, it is proposed that penalty may be waived for those taxpayers who pay the service tax due on the renting of immovable property service (as on the sixth day of March, 2012), in full along with interest within six months. Section 80A is being introduced for this purpose. Those who fail to avail the benefit will be treated as if this section did not exist.

C.4. Retrospective changes

19. Rule 6(6A) of the Cenvat Credit rules, introduced last year vide Notification 3/2011-CE (NT), dated 01/03/2011, is being given effect from February 10, 2006. This will neutralize the investigations or demands for reversal of credits in respect of services provided to SEZs for the past.

20. Exemption provided for the setting up of common facilities for treatment and recycling of effluents and solid wastes by Notification 42/2011-ST dated 25th July, 2011 shall be made applicable effective June 16, 2005;

21. Repair of roads has been exempted from service tax by Notification 24/2009- ST dated 27th July, 2009. By section 97, exemption relating to roads is extended for the earlier period commencing from June 16, 2005;

22. Service tax exemption has also been granted with retrospective effect on management, maintenance or repair service in relation to non-commercial Government buildings from 16th June, 2005 till the coming into force of the negative list when such repair will be exempted by the new mega notification.

23. These changes will come into effect when the Bill receives the Presidential assent barring C.1.1 & reverse charge that will come into effect along with Negative List.

D. Point of Taxation Rules, 2011

1. The time period for issuance of invoice is being increased to 30 days ordinarily and 45 days for banks and financial institutions (to reconcile with the business practice of issuing monthly statement). These changes are being provided in Rule 4A of Service Tax Rules and the time period so defined is being incorporated in POT Rules.

2. In case of export of services and eight specified services provided by individuals or firms, the point of taxation is the date of payment. The special dispensation is being shifted from the POT Rules to the Service Tax Rules. This would help provide certainty in the application of rate of tax while retaining the benefit of payment of tax until payment is received.

3. In case of exporters, the period extended by the Reserve Bank of India is now explicitly included in the period for which the tax is allowed to be deferred.

4. The benefit available to individuals and firms to determine POT on the basis of date of payment for eight specified services is being extended to all services in a slightly modified form. The facility will be now available to individuals and partnership firms (including limited liability partnership) up to a turnover of Rs 50 lakh in a financial year provided the taxable turnover did not exceed this limit in the previous financial year. For computing the above limits, the turnover of the whole entity is required to be summed up and not any single registration.

5. The definition of continuous supply of service is being amended to capture the concept in a more wholesome manner, namely the recurrent nature of services and the obligation for payment periodically or from time-to-time.

6. Since the essence of the rule in case of continuous supply of service is the same as the main Rule, the separate rule for continuous supply of service [Rule 6] is being merged with the main rule. Moreover the provisions of rules 4 and 5 relating to changes in rates or application of tax on new services would also be applicable to continuous supply of services;

7. In case of a new levy, no tax is chargeable on services where payment has been received and invoice issued within a period of 14 days. To provide certainty, clause (b) is being amended to specify that invoice should be issued within 14 days of the date of the new levy.

8. The “date of payment” could be a subject of litigation particularly when effective rate changes. A new rule has been created: Rule 2A, keeping in view the impending change in rate effective April 1, 2012 and introduction of Negative List at a later date. In normal circumstances this date shall be the earlier of the dates of entry into books of accounts or actual credit in the bank account (when applicable). However, when there is change in effective rate of tax or a new levy between the said two dates, the date of payment shall be the date of actual credit in the bank account, if the amount is credited through a banking instrument more than four working days after the date of such change.

9. This will have no impact where invoice is the basis for point of taxation. Thus business may be advised to take steps to deposit all advances received up to March 31, 2012 in their bank accounts suitably. Any delay in this regard will lead to charging tax at higher rate.

10. As a measure of added facilitation, an option has been provided to determine the point of taxation in respect of small advances up to Rs 1000, in excess of the amount indicated in the invoice, on the basis of invoice or completion of service rather than payment. Such provision is expected to address the accounting problems faced by service providers in telecommunications, credit card businesses who regularly receive minor excess payments from their customers.

11. A residual rule has been made by way of best judgement to handle situations where the tax-payer is unable to furnish one or more of the details needed i.e. date of payment or date of invoice or both to determine POT.

12. And lastly, the small scale exemption has also been amended recognizing that the first clearances up to Rs 10 lakhs will be in terms of invoices and not mere payments received.

13. These changes come into effect from April 1, 2012.

E. Service Tax Rules, 1994:

1. A common simplified registration format for Central Excise and Service Tax is being placed for public comments, together with further liberalization in registration requirements, particularly centralized registrations. The proposed changes are attached as Annexure C.

2. Likewise a new simplified one page common return with Central Excise: to be called Excise & Service Tax Return (EST for short) is being introduced. The format of the return is given as Annexure D. It is also being proposed that the cycles for the payment service tax and filing of return should coincide. To this end the tax payment requirement is proposed to be revised as follows:

A. Assessees who paid tax of Rs 25 lakh or more in previous year and new assessees other than individuals and firms: Monthly

B. Others: Quarterly

3. This will improve cash flow for small businesses registered as companies or other corporate bodies while making large non-corporates pay tax on monthly business.

4. The restrictions in Rule 6(4B) are being omitted allowing unlimited amount of permissible adjustments.

5. Changes at S. No 1 & 2 will come into force after inviting comments from stakeholders. S. No 4 will come into force from April 1, 2012.

F. Cenvat Credit Rules, 2004:

F.1. Simplified scheme for refunds:

1. A simplified scheme for refunds is being introduced by substituting the entire Rule 5 of CCR, 2004. The new scheme does not require the kind of correlation that is needed at present between exports and input services used in such exports. Duties or taxes paid on any goods or services that qualify as inputs or input services will be entitled to be refunded in the ratio of the export turnover to total turnover.

2. The notification prescribing the detailed manner and safeguards will be issued by the Policy wing shortly.

F.2. Other changes:

3. Presently credit on all motor vehicles is not available except to a few specified service providers. This is being liberalised and credit on motor vehicles, other than those falling under tariff heading 8702, 8703, 8704, 8711 and their chassis, will be allowed. The credit of service tax paid on their hiring, insurance and repair will also be allowed.

4. Following credits in respect of vehicles will also be allowed:

i of insurance to motor insurance companies (as re-insurance and third party insurance) and manufacturers (as in-transit insurance);

ii of repair of vehicles to manufacturers in respect of motor vehicles manufactured by them and to insurance companies in respect of motor vehicles insured /re-insured by them.

5. Presently credit on goods can be taken only after they are brought to the premises of the service provider. Sub-rules 4(1) and 4(2) have been amended to allow credit without bringing them into premises subject to due documentation regarding their delivery and location.

6. Rule 9(1)(e) is being amended to allow availment of credit on the tax payment challan in case of payment of service tax by all service receivers on reverse charge.

7. Changes are being made in Rule 7 relating to distribution of credits of input services by an input service distributer (ISD) to ensure their scientific allocation to only such units where they have been put to use and proportionate to turnover. For example in case of services by way of advertisement-

i. if the advertisement is for a product or service provided from only one unit, the said credit shall be distributed only to that unit; and if two units, the said credit shall be distributed only to those two units, in proportion to the respective turnovers;

ii. if the advertisement is for the company as such, the said credit shall be distributed only to the extent of the turnover of units registered and entitled to avail Cenvat credit to the total turnover of the company including unregistered units.

8. These changes will be effective from 1.4.2012.

9. Additionally, there are other changes which have implication largely in respect of central excise but may also touch upon service tax. These may be referred to in JS, TRU-I’s letter.

G. Disclaimer:

The changes mentioned in this letter are intended to provide you a quick glimpse of the budgetary changes. They are neither exhaustive nor meant to be used to interpret any provision. For the sake of easier understanding legal texts have been avoided in the writing of this letter, which may impact the precise understanding sometimes. The wordings used in the statutory provisions and the notifications should be relied upon which alone have the legal standing.

Need to revise some tax-free limits

2012-03-19T17:18:00.000+05:30

The exemption of Rs 10,000 interest from a savings bank account is a pragmatic move that takes into account ground realities. However, there are several other exemptions that should have been reviewed but found no mention in the budget.

For instance, there is an education allowance of Rs 100 per month per child. As any urban parent will tell you, this is not even 10% of what he actually spends on his child's education. While the government has gradually increased the education allowance for its employees over the years (it is Rs 15,000 a year per child), the tax exemption limit has not been revised since the 1980s.

We suggest this should be raised to Rs 10,000 a year to make it more meaningful. Then there is the tax-freetransport allowance of Rs 800 a month. Auto fares in most urban centres hover around Rs 6-8 per kilometre. If a person travels 8 km to work and back in a day, he will spend more than Rs 100 a day. The tax-free limit will be exhausted in just eight working days. We suggest this limit be raised to at least Rs 3,000 a month.

If a person is living on rent, but does not get a house rent allowance as part of his income, he can still claim deduction under Section 80GG. The least of the following can be claimed as deduction-rent paid, less 10% of the total income; 25% of total income; or Rs 2,000 a month.

However, the last condition means that nobody can claim a deduction of more than Rs 2,000 a month. This is a ridiculously low amount because rents have gone up considerably in the past decade. This should be raised to at least Rs 10,000 a month. To avoid tax leakages, the government can make it mandatory for the taxpayer to mention the PAN of the landlord while claiming the deduction.

Similarly, the exemption for a minor child's income should be revised from the current Rs 1,500 a year to about Rs 5,000 a year for it to make a significant difference.