DT Amendments Part-2

IMPORTANT DIRECT TAX AMMENDMENTS BY FINANCE BILL 2013 PART-II

1.       Definition of the term ‘Capital Asset’

The new definition states that agricultural land will be exempt from the definition of the term capital asset ,if the land is not within the specified distance measured aerially (shortest aerial distance(.

The specified distance will be;

(i)                  2 km, if the population of the municipality or cantonment board is less than 1 lakh but more than 10000

(ii)                6 km, if the population of the municipality or cantonment board is 1lakh to 10 lakh.

(iii)               8 km, if the population of the municipality or cantonment board is more than 10 lakh.

Also, definition of the term population has been amended to mean population according to the last preceding census of which the relevant figures have been published before the first day of the previous year.

Similar amendment is proposed for the definition of the term 'urban land' in Wealth Tax.

2.       Return filed without self assessment tax

This amendment will take effect from 1^st of June 2013. According to the amendment, any return of income shall be treated as defective unless the tax together with interest, if any, payable in accordance with the provisions of sec.140A has been paid on or before the date of furnishing of the return.

3.       Keyman Insurance

The amendment states that a keyman insurance policy which has been assigned to any person during its term with or without any consideration shall continue to be treated as a keyman insurance policy.

This amendment will be effective from 1^st April 2014 and accordingly apply in relation to AY 2014-15 & subsequent assessment years.

4.       Taxability of immovable property received for inadequate consideration.

If an immovable property is received for a value less than the stamp duty by Rs.50,000 or more, then such difference in value shall be chargeable in the hands of the individual or HUF as income from other sources.

If there is a difference in the date of agreement and date of registration, stamp duty value as on the date of agreement may be adopted , provided that, the amount of consideration, or a part thereof has been paid by any mode other than cash on or before the date of agreement fixing the amount of consideration for the transfer of such immovable property.

5.       Direction for special audit.

The relevant section has been amended to include; if at any stage of the proceedings before him, the assessing officer, having regard to the nature and complexity of the accounts, volume of the accounts, doubts about the correctness of the accounts, multiplicity of transactions in the accounts or specialised nature of business activity of the assessee, and the interests of the revenue, is of the opinion that it is necessary so to do, he may, with the previous approval of the chief commissioner, direct the assessee to get his accounts audited by an accountant & to furnish a report of such audit.

By this amendment, the scope of the section has increased. The amendment will be effective from 1^st June 2013.

6.       Application of seized assets u/s 132B.

The section is proposed to be amended so as to clarify that the existing liability, against which the seized assets can be adjusted, does not include advance tax liability of the assessee, payable in accordance with the provisions of part C of chapter XVII of the Act.

7.       Tax residency certificate.

The amendment is proposed to clarify that the tax residency certificate is a necessary but not sufficient condition for claiming benefits under the DTAA as referred to in sec 90&90A of the Act.

This amendment will take effect retrospectively from 1^st April 2013, and hence apply in relation to AY 2013-14 & subsequent assessment years.

8.       Contributions for claiming deductions u/s 80GGB and 80GGC

To discourage cash payments bi the contributors, it is proposed to amend the provisions of sec 80GGB&80GGC so as to provide that no deduction will be available in the said sections if such sum is contributed by way of cash.

9.       Clarification of the phrase ‘Tax Due’ for the purpose of recovery in certain cases.

In view of the interpretations of some courts that tax due does not include interest, penalty etc., it is clarified that , for the purposes of sec.179 tax due includes penalty, interest or any other sum payable under the Act.

Indirect Tax Amendments.

IMPORTANT INDIRECT TAX AMENDMENTS BY FINANCE BILL 2013

CUSTOMS

1.       Period of concession available for specific parts of electric and hybrid vehicles extended up to 31-3-2015

2.       The duty on specified machinery used for manufacture of leather and leather goods reduced from 7.5% to 5%

3.       The duty on pre-forms of precious and semi-precious stones reduced from 10% to 2%.

4.       Export duty on de-oiled rice bran oil cake is withdrawn.

5.       Export duty is imposed on ilmenite @ 10% on unprocessed ilmenite & 5% on upgraded ilmenite.

6.       Duty on set top boxes increased from 5% to 10%.

7.       Duty on raw silk increased from 5% to 15%.

8.       Duty on steam coal and bituminous coal equalised at 2% customs duty & 2% CVD.

9.       Import duty on motor vehicles increased from 75% to 100%, that on motorcycles above 800cc or more from 60% to 75% and on yachts & similar vessels from 10% to 25%.

10.   Duty free limit for jewellery increased to Rs 50000 per male and Rs 100000 per female passenger.

EXCISE

1.       ‘Zero excise duty route’ for cotton and manmade sector(spun yarn) at the yarn, fabric and garment stages proposed. ie. For cotton, zero duty at fibre stage also and for spun yarn 12% at fibre stage.

2.       Handmade carpets and textile floor coverings of coir and jute totally exempt.

3.       Ships and vessels exempt from excise duty, consequently no CVD

4.       Specific excise duty on cigarettes, cigars, cheroots and cigarillos increased by about 18%.

5.       Excise duty on SUVs increased from 27% to 30%. The provision is not applicable to taxis.

6.       Excise duty on marble increased from Rs.30/sq.m to Rs.60/sq.m .

7.       Excise duty on silver manufactured by smelting zinc or lead increased to 4%.

8.       For mobile phones priced above Rs.2000, excise duty increased to 6%.

9.       An MRP based assessment on branded medicaments of Ayurveda, Siddha, Unani, and  Homeopathy introduced. Abatement @ 35% will be available.

SERVICE TAX

1.       Two services included in the negative list, First, Vocational courses offered by institutions affiliated to state council of vocational training and the second, training and testing activities in relation to agriculture and agricultural produce.

2.       Exemption of service tax granted on copyright on cinematography now limited to films exhibited in cinema halls.

3.       Service tax imposed on all A/C Restaurants.

4.       Abatement on high end constructions or flats with carpet area of more than 2000 sq.ft or value of more than Rs.1 crore is reduced from 75% to 70%. Other exemptions and provisions remain unaltered.

5.       A voluntary compliance encouragement scheme introduced. Details of which are available in Chapter VI of The Finance Bill, 2013.

Important direct tax amendments for AY :2014-15

IMPORTANT DIRECT TAX AMMENDMENTS BY FINANCE BILL 2013

1.       For every person with a total income of Rs.2,00,000 to Rs.5,00,000 , a tax credit of Rs.2000 will be provided.

2.       For every person (individual, HUF, firms and entities with similar status) with a total income of more than Rs.1 crore a surcharge of 10 % is introduced.

3.       Surcharge on domestic companies with income more than 10 crore increased from  5% to 10%

4.       Surcharge on foreign companies with income more than 10 crore increased from 2% to 5%

5.       In all other cases including dividend distribution tax or tax on distributed income, surcharge increased from 5% to 10%. For companies (both domestic and foreign) with income 1 crore to less than 10 crore the existing surcharge rates applicable.

6.       Additional deduction of Rs.1,00,000 for interest paid on housing loan if used for purchase of first house and if loan not exceeding 25 lakhs. This seduction will be available u/s 80EE subject to other conditions specified in the section.

7.       For persons suffering from disability or certain ailments, the permissible premium rates for life insurance has been increased from 10% to 15%.

8.       Donations made to national children’s fund will be eligible for 100% deduction under chapter VI A

9.       Investment allowance at the rate of 15% to a manufacturing company that invests more than 100 crores in plant and machinery during the period 1-4-2013 to 31-3-2015

10.   TDS @ 1% to be deducted by the buyer of an immovable property where consideration is more than 50 lakhs. Agricultural land will be exempt from this provision.

11.   Withholding tax @ 20% on profits distributed by unlisted companies to shareholders through buyback of shares.

12.   Rate of tax on payments by way of royalty & fee for technical services to non-residents have been increased from 10% to 25%.If DTAA exists , the rate prescribed therein will be applicable.

13.   Reduction in securities transaction tax.

(i)                  Equity futures:                                                from 0.017% to 0.01%

(ii)                MF/ETF redemptions at fund counters:    from  0.25% to 0.001%

(iii)               MF/ETF purchase or sale on exchange:     from 0.1% to 0.001%, only on the seller.

14.   Commodities transaction tax (CTT) has been introduces on non-agricultural commodities futures contracts @ 0.01%. Trading in such commodities derivatives will no longer be speculative transaction but business & CTT will be an allowable business deduction.