Recent Amendments Finance Act 2011
Income Tax
- Upward revision of the income limit exempt from income tax.
Category Current (Rs) Amended (Rs) Savings p.a (Rs) Individuals below 60 years 160,000 180,000 2,060 Resident women below 60 years 190,000 190,000 Nil Senior citizens (Men) 60-64 Years 160,000 250,000 9,020 Senior citizens (Women) 60-64 Years 190,000 250,000 6,180 Senior citizens 65-79 Years 240,000 250,000 1,030 Very Senior citizens 80 Years & above 240,000 500,000 26,780
The real benefit of this of this measure would be for senior citizens between 60 and 64 years who will save Rs.9, 270 and persons 80 years and above who will save Rs.26, 780 p.a provided they have matching income at that age.
- Tax saving Investments
New pension Scheme (NSP) – Currenly, both employee’s and employer’s contributions to NPS are considered for overall ceiling of deduction of Rs 100,000 under sections 80c/ccc/ccc for tax saving instruments. Now employer’s contribution to NSP will no longer be a part of ceiling. Additionally, the employer can claim tax deduction for contribution up to 10percent of employee’s salary.
Infrastructure bonds- Deduction of Rs 20,000 available in respect of investment in long-term Infrastructure bonds extended by one year.
- Surcharge
Surcharge will be reduced – (i) domestic companies from 7.5 per cent to 5 per cent (ii) foreign companies from 2.5 per cent to 2 per cent it would result in a marginal reduction in the corporate tax rates as under.
- Minimum Alternate Tax (MAT)
Increase in mat from 18% to 18.5% with effective rate for (i) Domestic companies – 20.01% (from 19.93%), (ii) branches of foreign companies – 19.44 %( from 19.53).
The additional tax burden would offset reduction in surcharge foe MAT paying companies. However, foreign companies. Would see a marginal reduction. MAT for domestic companies at 20.01 per cent in Direct Tax Code (DTC).
- Dividend from Foreign Subsidiary Company
Dividend received by domestic companies from overseas subsidiaries will be taxed at 15% on gross basis.
- GST – Current State of Play
The Finance Minister, in his speech strongly reaffirmed his commitment to the introduction of GST. However, unlike for the DTC, which is now formally slated for introduction from 1st April 2012, the Finance Minister refrained from 1st announcing a date for roll out of the GST.
Nevertheless, the Finance Minister has detailed the action taken so for towards implementation of the GST, as below:
- The Constitution Amendment Bill, a necessary pre-cursor to the all roll of the dual GST, would be tabled in the current session of the parliament.
- Drafting of the modal legislation for the central and state GST is in progress.
- Necessary progress has been made on the national IT Infrastructure, which would be the backbone of the GST. The key business processes of registration, return and payments under of finalization and will be part of the infrastructure modules.
- The National Securities Depository Limited (NSDL) has been chosen as the technology partner for incubating the National information Utility. It is expected that by June 2011, the NSDL will set up a pilot prior to its roll out across the country.
- Excise Duty (Convent)
- Withdrawal of exemption and key rate changes
- Substantial amendments to CENVAT Credit Rules,2004
-
Adjudication provisions amended
- Service Tax
- Introduction of new services and expansion in the scope of existing services
- Changes in composition rates and abatement
- Point of Taxation Rules,2011 to be made effective from 1 April,2011
- Grant of exemption/refund on services provided to SEZ
- Fresh exemptions have been granted while a few existing notifications have been modified
- Procedural amendments
- Central Sales Tax
Contrary to the industry expectations of phasing out of the CST or at least a reduction in the rate thereof, the CST rate remains unchanged at 2 per cent. Further, taking a cue from the practice adopted by several state governments, the finance Minister has increased the rate on declared goods from 4 per cent to 5 per cent.
