Tuesday, March 20, 2012

Budget 2012 Highlights

Direct Taxes

1. Tax Rates

Slab Rate



Max Savings


Rs. 1,80,000

Rs. 2,00,000

Rs. 2,060


Rs. 1,80,001 to Rs. 5,00,000

Rs. 2,00,001 to Rs. 5,00,000


Rs. 5,00,001 to Rs. 8,00,000

Rs. 5,00,001 to Rs. 10,00,000


Greater than Rs. 8,00,000

Greater than Rs. 10,00,000

Rs. 20,600

2. The differentiation in Basic Exemption Limit for women has been removed.

3. There is no change in basic exemption limits for senior citizen.

4. There has been no change in the Tax Rates applicable on companies i.e. Tax Rates for Domestic Companies and Foreign Companies stand static at 30% and 40% respectively.

5. The rate of Minimum Alternate Tax has been also left unchanged at 18.5%, and so has the Dividend Distribution Tax at 15%.

6. Turnover limit for compulsory tax audit for SMEs raised from Rs. 60 lakh to Rs. 1 crore, and from Rs. 15 lakhs to Rs. 25 lakhs for professionals.

7. STT on actual delivery or transfer of shares reduced from the existing 0.125% to 0.1%.

8. Weighted deduction of 200% for in-house research expenditure is currently available till 31 March 2012. This has been extended for a further period of 5 years till 31 March 2017.

9. Weighted deduction of 150% on expenses incurred on Skill Development Projects in manufacturing sector and Agricultural Extension Projects.

10. Alternate Minimum Tax (@18.5% of Adjusted Total Income) which was applicable to LLP till now, has been extended to all non-corporates who claim certain deductions in computing their total income.

§ Threshold limit of Adjusted Total Income ≥ Rs. 20 lakhs for individuals, HUF, AOP, BOI and artificial juridical persons.

§ AMT Credit allowed to be carried forward up to 10 years.

11. Any unexplained income or credit in the books of the assessee will be charged to tax at a flat rate of 30% without allowing any deductions.

12. Irrespective of whether the income is charged in India or otherwise, all residents having assets located outside India, including financial interest in any entity are required to furnish tax returns in India from Financial Year 2011-12.

13. A General Anti Avoidance Rule being introduced to counter aggressive tax avoidance.

14. Senior Citizens (above the age of 60 years) not having income from business and profession are no longer required to pay Advance Tax.

15. In order to make the effective age of senior citizens uniform across all the provisions of the Income Tax Act, it is proposed to reduce the age for availing of the benefits by a senior citizen under the sections 80D, 80DDB and 197A from sixty-five years to sixty years (w.e.f. 1st April 2013 for Sec 80D and 80DDB; and w.e.f. 1st July 2012 for Sec 197A).

16. Any sum received under a life insurance policy is exempt from tax, provided the premium payable for such policy for the year does not exceed 10% of the sum assured, as against 20% presently.

17. A sum spent towards preventive health check up will be allowed as a deduction up to Rs. 5,000 under Section 80D (w.e.f. 1st April 2013).

18. Exemption of Rs. 10,000 is available for interest earned from deposits held in Savings Bank Account, Cooperative Banks and Post Office.

19. Exemption available for Capital Gains on sale of residential property (house or land) where the net consideration is invested in a small and medium enterprise (SME) subject to specified conditions.

20. It is proposed to amend sections 80G and 80GGA so as specify therein that any payment exceeding a sum of Rs. 10,000 made as donation to any specified fund, charitable institution or for scientific research to specified institutions shall only be allowed as a deduction if such sum is paid by any mode other than cash (w.e.f. 1st April 2013).

21. Time limit for issue of notice for reopening assessments is enhanced to 16 years where income relating to assets situated outside India has escaped assessment.

22. Seller of bullion or jewellery shall collect tax @ 1% of sale consideration from every buyer if sale consideration in cash exceeds Rs. 2 lakhs (w.e.f. 1st July 2012).

23. TDS on transfer of certain immovable properties (other than agricultural land) to be deducted @1% if the consideration on transfer exceeds-

§ Rs. 50 lakhs in case such property is situated in specified urban agglomeration; or

§ Rs. 20 lakhs in case such property is situated in any other area.

24. TDS on remuneration (other than salary) to a director is to be deducted @ 10% (w.e.f. 1st July 2012).

25. Penalty on delay in furnishing of TDS Statement increased from Rs. 100 per day to Rs. 200 per day.

26. Penalty from Rs. 10,000 to Rs. 1,00,000 will be levied for wrong information furnished in TDS Statement e.g. wrong deductee details.

82 Double Taxation Avoidance Agreements and 19 Tax Information Exchange Agreements have been finalized.

Excise & Customs

1. Standard rate of Excise duty on non- petroleum goods increased from 10% to 12%.

2. Concessional rate of excise duty of 5% on non-petroleum products is being increased to 6%.

3. Abatement of Retail Sale Price on readymade Garments and made up articles of textiles increased from 55% to 70% of Retail Sale Price.

4. Facility to transfer unutilized Cenvat Credit of Special Additional Duty from one factory to another of the same manufacturer is now available.

5. Customs duty on gold bars, coins and platinum would be increased from 2% to 4%. Duty on nonstandard gold is to be doubled to 10% from 5% earlier. Excise duty on gold has also been increased to 3% from 1.5% earlier.

6. The duty-free allowance under the Baggage Rules is being increased from Rs. 25,000 to Rs. 35,000 for adult passengers of Indian origin and from Rs. 10,000 to Rs. 15,000 for children up to 10 years of age.

Service Tax

1. Service tax rate increased from 10% to 12%.

2. A Negative List has been proposed, which lists down 17 services that remain non-taxable. All the other services are now taxable under Service Tax.

3. Excess Service Tax paid can now be adjusted without any monetary limit.

4. Section 68(2) of the Finance Act, 1994 is being amended to put the onus of payment of service tax on reverse charge basis partly on service provider and partly on service receiver. The scheme is proposed to be made applicable on three specific services i.e. hiring of means of transport; construction and man power supply. A notification will be issued after the Finance Bill, 2012 receives the assent of the President, in which the manner and extent of service tax payable by service provider and service receiver in the case of the three services will be specified.

5. Goods and Services Tax (GST) is now proposed to be made applicable as early as possible. GST Network (GSTN) to be set up as a National Information Utility and will become operational by August 2012.

6. Relief in indirect taxes is proposed to sectors under stress: agriculture, infrastructure, mining, railways, roads, civil aviation, manufacturing, health and nutrition, and environment.