Union Budget2013 - 14Discipline : DIRECT TAXATION

Presentation by: Govind Rai Garg

• Firstly, Finance Minister visits Finance Ministry to carry budget papers• Then he moves to Rashtrapati Bhawan and submits them to cabinet for their

acceptance• After this, budget speech is given by Finance Minister in two parts-A & B at

exactly 11a.m.• TAX PROPOSALS are contained in part `B` of his speech• In 2001, the time of speech was 5p.m. which is London standard of budget

speech but NDA after 54 years of independence changed it to 11 a.m.• P. Chidambaram presented union budget for the 8th time

Procedure for budget speech

Theme of Chidambaram’s proposal

“Clarity in tax laws, a stable tax regime, a non-adversarial tax administration, a fair mechanism for dispute resolution, and an independent judiciary will provide great assurance”

Perception of P Chidambaram• There will be no less money for security of nation• Agricultural needs more investment• Appreciation of FDI is necessary• Many states are developing but few section of people like women

and SC ST are lacking behind• Only China and Indonesia are better than India in present scenario

but as per forecasters, only China will remain• In order to finance Current Account Deficit, India needs 75

billion USD• Personal savings have declined constantly• Indian share market is the most regulated share market in the

whole world

What are Direct Taxes?• Direct tax generally means tax paid directly

to the government by the persons on whom it is imposed

• A direct tax is one which cannot be shifted by the taxpayer to someone else

• Direct taxes are progressive in nature i.e. richer the assessee; higher is the tax

• Example- Income Tax, Wealth Tax etc.

Relief to Tax Payers• Rates of personal income tax survived 4 Finance Ministers & 4

governments• Current slabs introduced only last year• No case to revise either rates or slabs• Moderate increase in level of threshold exemption will mean

hundreds of thousands of taxpayers going out of tax net• Some relief to tax payers in first bracket of 2L to 5L i.e. tax

credit of 2,000-section 87A.• 1.8 crore tax payers expected to benefit to value of 3,600 crores

How much you`ll shell out

Income Slab Tax RateUpto Rs2 lakh NILRs2 Lakh to 5 Lakh 10% minus Rs2,000*Rs5 Lakh to 10 Lakh 20.60%Rs10Lakh to 1 cr 30.90%Rs 1cr and above 33.99%

*With additional surcharge of 2% of tax liability as education cess and 1% as SHE cess

Surcharge on Super Rich

• Fiscal consolidation cannot be effected only by cutting expenditure

• Wherever possible, revenues must be augmented• Source: Those well placed in society• Only 42,800 people having taxable income exceeding 1 crore

per year• Surcharge of 10% imposed on such persons• Persons include individuals, HUFs, firms & entities with

similar status

Shockwaves on the RICHter scale

Income Old Tax Liability New Tax Liablity Gain/(Loss)Upto 2 lakh - - -2.2 lakh 2,060 - 2,0603 lakh 10,300 8,240 2,0605 lakh 30,900 28,840 2,06010 lakh 133,900 133,900 050 lakh 1,369,900 1,369,900 01 crore 2,914,900 2,914,900 01.5 crores 4,459,900 4,905,890 (445,990)2 crores 6,004,900 6,605,390 (600,490)5 crores 15,274,900 16,802,390 (1,527,490)

CROREPATIS clubbed with a 10% surcharge blow; Tax credit for those in LOWER SLABREPATIS clubbed with a 10% surcharge blow; Tax credit for those in LOWER SLAB

CROREPATIS clubbed with a 10% surcharge blow; Tax credit for those in LOWER SLAB

Changes in surcharge• Increase from 5% to 10% on domestic companies having taxable

income exceeding 10 crores per year• Increase from 2% to 5% on foreign companies paying higher rate of

corporate tax• Increase from 5% to 10% in case of dividend distribution tax• Additional surcharges will be in force only for 1 year• “I believe there is a little bit of the spirit of Mr. Azim Premji in

every affluent tax payer. I am confident that when I ask the relatively prosperous to bear a small burden for one year, just one year, they will do so cheerfully”

YOUR TAX BURDEN OVER THE YEARSYEAR MIN. INCOME

FOR TAXTAX RATE(%) Income at which highest tax

rate startsHighest tax rate

Income which attracts surcharge

Surcharge rate(%)

Highest tax rate including surcharge & edu. cess

2001-02 50,000 10 1,50,000 30 60,000 2 30.62002-03 50,000 10 1,50,000 30 60,000 5 31.52003-04 50,000 10 1,50,000 30 8,50,000 10 33.02004-05 50,000 10 1,50,000 30 8,50,000 10 33.62007-08 1,10,000 10 2,50,000 30 1,000,000 10 33.9

2009-10 1,60,000 10 5,00,000 30 1,000,000 10 33.9

2010-11 1,60,000 10 5,00,000 30 No surcharge - 30.9

2011-12 1,80,000 10 8,00,000 30 No surcharge - 30.9

2012-13 2,00,000 10 1,000,000 30 No surcharge - 30.9

2013-14 2,20,000 10* 1,000,000 30 10,000,000 10 33.99

*For income higher than Rs5L, Exemption limit is Rs 2L

• Tax benefit to first home buyer who takes loan for an amount not exceeding 25,00,000

• Additional deduction of 1,00,000 allowed to such home buyers

• If limit not exhausted, balance may be claimed in AY 2015-16

• This deduction over & above deduction of 1,50,000 allowed for self occupied houses allowed under section 24 of the Income-tax Act

Shelter for Aam Admi

PROPOSED SECTIONS IN INCOME TAX ACT, 1961

SECTION 194IA (earlier proposed as 194LAA)

APPLIES TO ALL BUYERS OF IMMOVABLE PROPOERTY OF VALUE MORE THAN 50 LAKH

BUYER HAS TO DO DEDUCT TAX AT SOURCE @ 1% OF ACTUAL TRANSACTION VALUE AT THE TIME OF PAYMENT OR CREDIT; WHICHEVER IS EARLIER

PROVISIONS OF SECTION 206AA ALSO APPLICABLE ON THIS SECTION

SECTION 32AC-INVESTMENT ALLOWANCE

15% INVESTMENT ALLOWANCE ON FRESH P&M OTHER THAN AIRCRAFTS

VALUE SHOULD BE MRE THAN 100 CRALLOWED ONLY TO MANUFACTURING SECTORINVESTMENT VALID BETWEEN 1-4-2013 TO 31-3-15

SECTION 90(4) INDIAN REVENUE AUTHORITY WILL NOT BE BOUND BY TAX

RESIDENCE CERTIFICATE WHILE DOING ASSESSMENT OF NON RESIDENTS

SECTION 40 ANY FEES GIVEN TO STATE GOVERNMENT BY PUBLIC

SECTOR UNDERTAKING WILL NOT BE ALLOWED AS AN EXPENSE WHILE COMPUTING PROFIT & GAINS OF BUSSINESS & PROFESSION

SECTION 10(10D) AMOUNT RECEIVED ON MATURITY OF KEYMAN INSURANCE

POLICY WILL BE TAXABLE IN HIS HANDS ALSO

OTHER PROVISIONS SPECIAL AUDIT CAN BE ORDERED BY ASSESSING OFFICER IF: VOLUME OF TRANSACTIONS IS LARGEMULTIPLICITY OF TRANSACTIONSDOUBT ON CORRECTNESS OF ACCOUNTING ENTRIESINTERPRETATION OF ACCOUNTS IS COMPLEX

FILLING OF RETURN WITHOUT PAYMENT OF SELF ASSESSMENT TAX WILL LEAD TO A DEFECTIVE RETURN U/S 139(9) OF INCOME TAX ACT, 1961GAAR ARE POSTPONED TO ASSESSMENT YEAR 2016-17

OLD PROVISION: LAND IS URBAN IF IT FALLS IN 8KM FROM THE URBAN MUNICIPALITY BY ROAD NEW PROVISION:IT DEPENDS ON THE POPULATION OF THE AREA

DURING LAST PREVIOUS YEAR` CENSUS AND THE DISTANCE WILL BE MEASURED ARIALLY

FOR CLASSIFYING A LAND AS URBAN OR RURAL

POPULATION AS PER RECENT CENSUS OF LAST PREVIOUS YEAR

DISTANCE TO BE TAKEN INTO CONSIDERATION

LESS THAN ONE LAKH TWO KMS

ONE LAKH OR MORE THAN ONE LAKH BUT LESS THAN TEN LAKH

SIX KMS

TEN LAKH OR MORE THAN TEN LAKH EIGHT KMS

Budget impact on certain deductions

• Eligibility conditions for Life insurance policies relaxed• Increase in permissible premium rate from 10% to 15% of sum assured• Contributionn made to Central Government Health Scheme eligible for deduction

under Section 80D• Same benefit extended to similar schemes of Central & State Governments• Donations made to National Children’s Fund now eligible for 100% deduction • Investment allowance of 15 % to manufacturing companies investing more than

100 cr in plant and machinery during 1-4-13 to 31-3-15• Eligibility date to avail benefit u/s 80-IA extended from 31-3-13 to 31-3-14

• To attract investment in long term infrastructure bonds in foreign currency, the rate of tax on interest paid to non-resident investors reduced from 20% to 5 % last year

• Same benefit extended to investment made through designated bank account in a rupee denominated long term infrastructure bond

• 50,000 crores long term infrastructure bonds to be issued in FY 2013-14%

Long term infrastructure bonds

Direct Tax Code• Direct tax code is work in progress• It is not intended to be amended version of Income Tax

Act, 1961 but a new code based on best international practices that will be compatible with needs of fast developing nation

• Standing committee has submitted its report on introduction of direct taxes

Conclusion• Budget might be favourable keeping in

mind the political attempt to win the ensuing elections

• The provisions within the scope of my knowledge have been explained

THANK YOU SIR

I would like to thank CA Gaurav Garg Sir for giving me this opportunity to understand the union budget 2013-14 and present it