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(Applicable for the Assessment Year 2011-12)

Presentation by :

CA. S Ranganath Partner


Singhvi, Dev & Unni Chartered Accountants Bangalore

              Key features Rates of Tax for Individuals Definition of Charitable Purpose Income deemed to accrue or arisen in India to a non-resident Cancellation of Registration obtained u/s 12A Weighted deduction for scientific research & development Investment linked deduction for specified business Expenditure disallowed on account of non-compliance with TDS provisions Tax Audit Limited Liability Partnership Transactions without adequate consideration Deductions Minimum Alternative Tax TDS

Cement and Non-smoking cigars. Reduction in individual and HUF tax rates. 7. Wind mills and Solar equipments. Steps to enact GST and DTC. Exempting capital gains for conversion of a Company into LLP subject to fulfilling the specified conditions. Increase in Corporate Tax rates. Reduction / exemption to those agricultural equipments. 3. 6. Increase in limits for TDS. 8.KEY FEATURES 1. 2. Increase in weighted deduction for donation to research and development industry. Increase in Excise duty with respect to Petroleum products. 5. 4. Cars. 3 .

000 240.000 190.000 Nil Nil Nil 10 20 Nil Nil 10 10 20 Nil 10 10 10 20 800.RATES OF TAX-INDIVIDUALS Taxable Income Rates (in percentage)* Amount (in Rupees) Resident Senior Citizen Resident Women Others < 160.000 500.001 to 500.001 and above 30 30 30 * Education Cess shall be levied @ 3 percent on above tax 4 .001 to 800.001 to 240.001 to 190.000 160.

MINIMUM ALTERNATIVE TAX Existing provision MAT is 15% Proposed provision Impact/Recommendations Proposed to 18% ►Higher corporate tax burden .

995 19.995(of book profits) 16.931(of book profits) 16.609 Regular tax C) Firm and LLP& 42.OTHERS Description A) Domestic Company Existing Rate (%) Proposed Rate (%) Regular tax MAT DDT B) Foreign company 16.90 6 Corporate Surcharge reduced from 10% to 7.5% .23 Regular tax 30.90 30.RATES OF TAX.23 42.

000 30.000 14.000 10.000 34.000 Tax liability as per existing Tax liability as per Tax Savings as per rates and slabs revised slabs revised slabs Nil 4.000 34.000 8.00.000 3.000 1.000 74.000 84. 2.04.000 50.000 *For Resident women below 65 yrs =Rs.60.00.000 9. 1.000 Nil Nil Nil 10.000 50.000 5.000 50.00.9 Lakhs and for senior citizens =Rs.000 1.000 54.000 40.000 24.00.000 1.000 2.54.RATES OF TAX – LIBERALISED Total Income 1.14.000 Nil 4.000 20.00.000 94.000 1.44.000 Lakhs 7 .000 1.000 2.000 54.24.000 6.000 4.00.

000 in 20% slab and upto Rs. upto Rs.9 Lakhs and for senior citizens =Rs. 3. 20.00. 2.000 for those in 10% slab. 6.000 and presently in the 10% tax slab Thus.RATES OF TAX – COMMENTS No tax relief for taxpayers whose total income is less than Rs.000 is the deduction they can get by investing upto Rs. the only relief to individuals earning income of less than Rs. 4. 3.000 in notified longterm infrastructure bonds and this would save tax to the tune of upto Rs. 2. 1.4 Lakhs 8 .00.000 for those in 30% slab *For Resident women below 65 yrs =Rs.

.10 lakh in the year. ►Clarification is required as to whether “receipts” of Rs. commerce or business provided that the receipts from such activities do not exceed Rs.Definition of “Charitable Purpose” Existing provision ► As Proposed provision ►The Impact/Recommendations ►To per Section 2(15) -”The advancement of any other object of general public utility” to be “charitable purpose” advancement of any other object of general public utility” to be “charitable purpose” even if it involves carrying on of any activity in the nature of trade.10 lakhs is to be reckoned as per the method of accounting followed by assessee-trust or whether it is “receipts” in ordinary sense of the term.2009. mitigate hardship to the organizations which receive sundry considerations from such activities . This amendment is proposed to take effect retrospectively from 01.04.

vs DCIT (TDS). accordingly. apply in relation to the assessment year 1977-78 and subsequent years. amendment is proposed to take effect retrospectively from 1st June.INCOME DEEMED TO ACCRUE OR ARISE IN INDIA TO A NON-RESIDENT Existing provision ►Section Proposed provision Impact/Recommendations ►This 9 provided for ►It is proposed to substitute the situation where the existing Explanation to income is deemed to Section 9 with a new accrue or arise in India Explanation to specifically state that the income of a non-resident shall be deemed to accrue or arise in India under clause (v)/(vi)/(vii) of Sec 9(1) and shall be included in his total income. or (b) the non-resident has rendered services in India. Vs DIT (2007) (SC). (a) the non-resident has a residence or place of business or business connection in India. By this amendment the “situs rule” prevails over the source rule. [2009] (Kar) .. whether or not. and ► Jindal Thermal Power Company Ltd. Judgements Nullified ►Ishikawajima-Harima Heavy Industries Ltd. 1976 and will.

CANCELLATION OF REGISTRATION GRANTED U/S 12A Existing provision ►The Proposed provision Impact/Recommendations ►Commissioner ► Registration of trust was empowered to cancel governed by Section 12A of the registration u/s 12AA the Act prior to the w. However.06. This was unintended omission of powers of the CIT to cancel registration and accordingly amendments have been proposed to enabling the CIT to cancel registration even in cases where the original registration is granted u/s. 12A.e. 2007. the provision is silent for cancellation of registration.f 01. where the registration is granted u/s.2010 introduction of Section 12AA vide Finance Act. 12A of the Act. . Commissioner does not have the power to cancel the registration which was obtained earlier by any trust or institution under provisions of section 12A as it is not specifically mentioned in section 12AA.

is not covered by section 35 and shall be subject to tax ► approved research association are to be allowed as a weighted deduction of 125 per cent. The income of such approved research association shall be exempt from tax.WEIGHTED DEDUCTION FOR SCIENTIFIC RESEARCH AND DEVELOPMENT Existing provision Proposed provision Impact/Recommendations the words “scientific research association” ► the words “research association “ shall be substituted ► ►Such ►Scope Widened Payment made to an approved association engaged in research in social sciences or statistical research. ►Scope Widened .

college or other institution [Research Social Science and Statistical Research proposed to be added] 125% of expenditure such ►200% 35(2AB) of expenditure such 35(1)(ii) such ►175% of expenditure such 35(2AA) any sum paid to a National Laboratory or a 125% of university or an Indian Institute of expenditure Technology (IIT) or a specified person for the purpose of an approved scientific research programme.f. A.INCREASE ON QUANTUM OF WEIGHTED DEDUCTION Sec Expenditure in respect of which Weighted deduction Proposed weighted deduction available available under the (Increased) rate extant provisions of weighted deduction (w.e. [deduction available to companies] Contribution to an approved research association. university. such ►175% of expenditure such .Y.2011-12) expenditure (not being expenditure in the 150% of nature of cost of any land or building) expenditure incurred on scientific research on an approved in-house research and development facility.

On december 23. 5. 60. 90. a Partnership firm.000 to the Indian statistical Institute.0000.70. the firm had made the following revenue expeditor for its research laboratory: ► Expenditure on salary and perquisite to research personnel and research material during the 12 months ending on November 30. 40. date of completion of construction : March 1.P1 XY.000. the firm pays Rs. 2009 : Rs.000 9out of which amount certified by the prescribed authority is Rs. commenced production on December 1. On December 21. 4. The firm has made the following expenditure on scientific research up to the year ending on March 31.00. Letter on a laboratory building constructed (cost of construction : Rs. 2007. 61.0000.000. 2009 : Rs. 8. 1. 2009. Ahmedabad. 2006 to November 30. Before the commencement of the production. On December 13. 2.000 to the Indian Institute of Management.000 to an approved National Laboratory for carrying out programmes of scientific research. On january 10. 2009.► 114 . being an approved research institution under section 35 (1) (ii). 42. being an approved institute under section 35 (1) (iii). . the firm pays Rs. ► Expenditure on providing rent-free flats and club facility to research personnel. 2006 to November 30. the firm pays Rs. 20. the firm purchases a plot of land for Rs. for the purpose of carrying out statistical Institute 2. 2008. 2008: 1.000). 2006 : Rs. from December 1. for the purpose of carrying out scientific research in social or statistical science. 2010) to start in-house research. ► Expenditure on salary of research personnel from December 1. New Delhi. 2007. 3.

43. . if the scientific research is (a) related or (b) unrelated to the business of the assessee -firm. ► Capital expenditure on scientific research (not certified by the prescribed authority) – Expenditure Expenditure Incurred up to November 30. 2006 Incurred Between December 1.800).800 (out of which amount certified by the prescribed authority is Rs.►Expenditure on research material from December 1. Purchase of land for growing herbals for research Purchase of equipments for research Expenditure of capital nature for cultivation of herbals 50.000 4. 60.000 2.600 Determine the amount of deduction available to XY under section 35(1) for the assessment year 2008-09. 2006 and November 30.000 Rs. 46.000 30. 2009 Rs.000 40. 2006 to November 30. 2009 : Rs.

000 to and approved National Laboratory is qualified for weighted deduction (even if scientific research is not related to the business of assessee) [I.000 --- Cont… .500 1.25] 3.000 x 1. 40.e.000 x 1. Payment of Rs.. 90. Payment of Rs.12.000 50.000 1.25] 2.25] U/s 35 (2AA) 4. 60. 1.000 75. 60. Expenditure on salary (excluding perquisite) to research personnel and expenditure on material for scientific research incurred within 3 years before commencement of business Is deductible under section 35 Rs.000 x 1.e. 40.► SOLUTION: The amount of deduction under section 35 for the assessment year 2010 – 11 will be detrained as under -- Where the scientific research is Related to the business Unrelated to the business Rs. 90.e..500 75.000 50. Payment of Rs.70.12. Cost of laboratory building (excluding cost of land) 5.000 to an approved scientific research institution for carrying on research in natural science is qualified for a weighted deduction under section 35 (1) (ii) even if the research is not related to the business of asessee [ I.000 to and approved institution for carrying on scientific research in social science is qualified for a weighted deduction section 35(1) (iii) even if the scientific research is not related to the business of assessee [I. 1..

600 being cost of growing herbals is deductible if research is related to the business ► Amount deductible under section 35 for the assessment year 2008-09 4. 20.900 2.37.(1)(i) if the research is related to the business of the assessee --► Rs.28.600 -- 5. 40. 8.800 -40.500 . 42.000 NIL --- ► Cost of the land purchased for growing herbals (not deductible) ► Rs.800 being expenditure as certified by the prescribed authority on purchasing research material within 3 years before commencement of business is deductible if research is related to the assessee’s business NIL NIL 42.000 (being the cost equipment) is deductible if research is related to the business ► Rs. 4.000 being expenditure on providing perquisites to research personnel before commencement of business is not deductible even if research is related to the assessee’s business ► Rs. 34.000 being expenditure on salary and perquisites is not deductible as it is not incurred within 3 years before commencement of business ► Rs.000 NIL NIL NIL 34.000 being expenditure on salary to research personnel as certified by the prescribed authority within 3 years before commencement of business is deductible if research is related to the business of assesee ► Rs.

Thus.TAX DEDUCTED AT SOURCE Existing provision ► Section 40 (a) (ia): If assessee has deducted TDS under Sections193/194A/194 C/194H/194-I/194J in April-February of a previous year but failed to deposit within time allowed by section 200(1) Proposed provision Impact/Recommendations ► no disallowance will be made if after deduction of tax during the previous year. with effect from 01. ►the provisions have been further SIMPLIFIED as regards depositing TDS deducted to avoid disallowance.2010. this non-deposit is detected. the same may be deposited on or before 30-9-2010 to avoid disallowance . the same has been paid on or before the due date of filing of return of income specified in sub-section (1) of section 139. 2010. suppose assessee failed to deposit TDS deducted in February 2010 but during tax audit under section 44AB conducted in May.04.

It maintains books of account on the basis of March-February year (Accounting year starts on March 1 and ends on February 28/29 of the next calendar year. 1008.Provisions illustrated – consider the following cases -- Q. 2008).e.. within 2 months from the last date of the accounting year as permitted by section 200(1) read with rule 30(1)(b)(i)(1)]. By virtue of the provisions of section 40(a)(ia). then by virtue of section 40(a)(ia) it will be allowed as deduction for the previous year 2008 – 09 (and not for the year 2007 – 08. 2008.5 B Ltd. 3 lakh as commission to the account of broker in its books of account. Q.e. Income-tax Act does not require that books of account should be maintained on financial year basis). it transfers a sum of Rs.3 per cent under section 194H. 2008 (i. 2008 [i. Tax is deposited on April 20.3 Interest of 80. Suppose. Tax is deducted on the same day. before the due date of submission of return of income : September 30. tax is deposited on October 10. Tax is deposited with the government through internet banking on August 10. 3 lakh will be allowed as deduction for the previous year 2008-09 (and not for the previous year 2007-08 .. 2008. On March 10. it will be allowed as deducted for the previous year 2007 – 08. is a subsidiary of an overseas company. Tax is deducted at source at the rate of 10. On February 29.000 on company deposit is paid by Z Ltd. Rs.

04. it is proposed to retain the existing provision .01.2010 ►With a view to discourage the practice of delaying the deposit of tax after deduction.04.07.TAX DEDUCTED AT SOURCE Existing provision ► Section 201(1A): Interest on delay in remittance of TDS shall be 1% pm or part thereof Proposed provision Impact/Recommendations A person is liable to pay simple interest at ► 1% from the date on which tax is deductible to the date of which such tax is deducted ► 1.2010 ►Considering the fact that the TDS/TCS certificate constitutes an important document for the deductee / collectee. it is proposed to increase the rate of interest for non-payment of tax after deduction ► No TDS/TCS certificates are required to be issued by the deductor / collector on or after 01.2010 ► W r e f 01.2010 ► The deductor / collector will continue to furnish TDS/TCS certificates even after 01.5% from the date on which tax was deduced to the date of which such tax is actually paid W e f 01.

5 lacs . 1 lacs to Rs.TAX AUDIT Nature Existing Proposed Impact/Recommendations ► To reduce compliance burden Gross turnover criteria for applicability of tax audit u/s 44AB revised as follow: Business 40 Lakh 60 Lakh 15 Lakh Profession 10 Lakh of small businesses and professionals ► Turnover criteria for presumptive taxation u/s 44AD enhanced to Rs. ►Penalty u/s 271B increased from Rs. 1. 60 lakh.

► Carry forward and set-off of business loss and unabsorbed depreciation to successor LLP permitted ► Aggregate depreciation allowable to the predecessor company and successor LLP shall not exceed. 2008 shall not be regarded as a transfer for the purposes of capital gains tax under section 45. ► It is proposed that the transfer of assets on conversion of a company into an LLP in accordance with section 56 and section 57 of the Limited Liability Partnership Act. the depreciation calculated . the benefit availed by the company shall be deemed to be the profits and gains of the successor LLP chargeable to tax for the previous year in which the requirements are not complied with. ► Accumulated losses and unabsorbed depreciation of a private company or an unlisted public company to be allowed in hands of LLP subject to specified conditions. ► It is also proposed that if the conditions stipulated above are not complied with.LIMITED LIABLILITY PARTNERSHIP ► LLP to be taxed on par with partnership firm. subject to certain conditions. in any previous year.

LIMITED LIABLILITY PARTNERSHIP ► Actual cost of the block of assets in the case of the successor LLP shall be shall be the WDV of the block of assets as in the case of the predecessor company on the date of conversion ► The cost of acquisition of the capital asset for the successor LLP shall be deemed to be the cost for which the predecessor company acquired it ► No tax credit u/s 115JAA shall be allowed to the successor LLP .

Expln Proposed provision ► Bullion is included in the meaning of Property does not include .bullion properties for the purpose of taxability of gift in kind u/s 56.TAXATION OF CERTAIN TRANSACTIONS WITHOUT / INADEQUATE CONSIDERATION Existing provision ► Section 56. . ►No such provision exists ► Any shares of a private limited company received by a partnership firm or a private limited company without consideration or for an inadequate consideration will be taxed as per the provisions of section 56(viia) with effect from 01.06.2010.

will be apply only to those who obtain these bonds by application and allotment process and not to those who acquire it from an existing holder of these bonds.DEDUCTIONS Existing provision No such exists Proposed provision Impact/Recommendations provision ► Additional deduction ►The words “subscription” in of rupees 20. ►The No such exists Central Government Health Scheme (CGHS) is a medical facility available to serving and retired Government servants. provision ► Section 80 D to include contribution made to Central Government Health Scheme. .000 u/s proposed section 80CCF are 80CCF for investment in important. It seems deduction infrastructure bonds. This facility is similar to the facilities available through health insurance policies.

TDS-INCREASE IN THRESHOLD LIMIT Section 194B 194BB 194C Nature of Payments Winning Puzzles from Lotteries & Existing limit 5.000 2.000 increase 20.500 Proposed limit Impact 10.500 194 I 194J Rent on Immovable Property/Machinery/ Plant / Equipment/Furniture.000 5. etc Fees for Professional Technical Services / 120.000 180.000 the compliance burden of deductors & 30.000 -For aggregate transactions during financial year 194D 194H Insurance Commission Commission/Brokerage of the 50.000 .000 taxpayers limit is proposed to 75.000 2.000 5.000 30.000 To adjust for inflation and also to reduce 5.000 20.000 Winning from Horse Races Payment to Contractors: -For Single transaction 20.

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