• Minimum of 20% of Annual

purchases of CPSEs to be from

Micro, Small and Medium

Enterprises

• Senior citizens having no

i n c ome f r om bus i ness

exempted from Advance tax

• Turnover limit for Compulsory

tax audit of accounts of SMEs

raised to Rs. 1 Crore

• Al ternate Minimum Tax

extended to all persons other

than companies, claiming profit

linked deductions

• Introduction of compulsory

reporting requirement in case of

assets held abroad

• Full exemption of coal exports

from customs to power sector

• Exemption limit for personal

income tax enhanced to Rs. 2

Lakhs

• Disinvestment target of Rs. 300

billion in FY 2012-13

• 50% income tax exemption for

equity investors who invest up

to Rs. 50,000 and whose

annual income is less

than Rs. 10 lakhs

• IPOs of Rs. 10 Crore or more

mandated to be in electronic

form

• Shareholders' meeting by

e - v o t i n g t o be made

compulsory for top listed

companies

• Rs . 15 ,888 C ro re f o r

capitalization of Public sector

banks , RRBs inc lud ing

NABARD

• Reduction of STT to 0.1%

• Limit on tax free infra bonds to

be raised to 600 Crores

• Food security act to be fully

funded

• Service tax and Excise rates

raised to 12%

• Direct Import of Air Turbine

Fuel by Indian carriers

permitted to ease financial

crisis in aviation sector

• Establishment of Rs. 5,000

crore India Opportunities

Venture Fund for SMEs

An Overview

INS IDE TH IS

I S SUE :

Direct taxes 2

Excise & Customs 2

Service Tax 2

Revenue forgone 3

Promises

Vs

Performance

3

Foreign

Investment

Environment

3

Income-tax Slabs

UNION BUDGET

2012-13 1 6 . 0 3 . 2 0 1 2 A précis of India’s Fiscal Policy

• India’s GDP is

estimated to grow

at 6.9% in FY 2011-

12

• Allocation of funds

to National Health

Rural Mission to be

increased to

Rs. 20,822 Crore

• GST network as a

National

Information Unit to

be made operational

by August 2012

• Bharat Livelihoods

Foundation of India

to be established to

scale up civil society

FY 2011-12 FY 2012-13 Rate of tax (%)

Up to1,80,000 Up to 2,00,000 Nil

Up to 1,90,000 (for women) Up to 2,00,000 (for women) Nil

Up to 2,50,000

(for resident individual of 60

years or above)

Up to 2,50,000

(for resident individual of 60

years or above)

Nil

1,80,001 – 5,00,000 2,00,000 – 5,00,000 10

5,00,001 – 8,00,000 5,00,001 – 10,00,000 20

8,00,001 upwards 10,00,001 upwards 30

KEY PO INTS :

P A G E 2

“Proposals relating

to Indirect Taxes

are estimated to

result in a net

revenue gain of

Rs. 45,940 crore”

“Proposals on Direct

Taxes are estimated to

result in a net revenue

loss of Rs. 4500 crore”

Excise & Customs

Service tax

Direct taxes • Direct Tax Code to be

enacted at the earliest after

expeditious examination of

t h e r e p o r t o f t h e

Parliamentary Standing

Committee

• Exemption to individual tax

payers on Saving Bank

Interest up to Rs. 10,000 has

been provided

• Tax collection at source on

purchase in cash of bullion or

jewellery in excess of Rs. 2

lakhs

• Proposal to allow deduction

of up to Rs. 5,000 for

preventive Health check up

has also been provided

• Extension of the sunset

clause for tax holiday for

power sector undertakings

for another one year i.e. up

to March 31, 2013

• Taxation of unexplained

money, credits, investments,

expenditures etc., at the

highest rate of 30 per cent

irrespective of the slab of

income

• Repatriation of dividends

from foreign subsidiaries of

Indian companies to India at

a lower tax rate of 15%

allowed for one more year

• Capital gains tax on sale of a

r e s i d e n t i a l p r o p e r t y

exempted for SMEs, if the

sale consideration is used for

subscription in equity of a

m a n u f a c t u r i n g S ME

company for purchase of

new plant and machinery

• Exemption Wealth Tax for

residential house allotted to

employee of a company by

increasing Gross Salary

threshold to Rs. 10 Lakhs

to 40%

• Utilization of Input Tax credit

pe rm i t t ed t o remove

cascading effect

• A common s impl i f ied

registration form and a

common return for Central

Excise and Service Tax to be

introduced

• New concept of Negative List

comprising of 17 heads

Introduced; Service tax (ST)

to be levied on all services

except those in negative list

• Exemption from ST on

copyrights relat ing to

recording of cinematographic

films

• Abatement to hotels reduced

• Establishment of Revision

Application Authority and

Settlement Commission

proposed to resolve disputes

• Dual rate structure of

maximum service tax of

Rupees 150 and Rupees 750

in case of economy class

travel is being replaced by an

ad valorem rate of 12%

machinery and instruments

f o r s u r v e y i n g a n d

prospect ing in Mining

reduced to 2.5%

• Full exemption from Customs

duty for Aircraft spares, tyres

and testing equipment

• Effective excise duty on

branded apparels and made-

ups reduced from 4.5% to

3.6%

• Branded silver jewellery fully

exempted from Customs duty

• Basic customs duty on

imported bicycles increased

from 10% to 30%

• Full exemption from CVD on

plant and equipments used in

setting up solar energy

projects

• Basic customs duty on

MUVs/SUVs whose value

exceeds USD 40,000

enhanced to 75% ad valorem

• Merit Rate of Excise duty

increased to 6% and Lower

Merit Rate to 2% with few

exceptions

• Full exemption from basic

customs duty on waste

paper, LCD and LED TV

panels and memory cards

• Excise Duty on large cars

a t t rac t ing mixed ra te

increased to 27%

• Basic customs duty on

“Higher

excise duty to

pull down

margins”

U N I O N B U D G E T 2 0 1 2 - 1 3

Revenue forgone under the Central Tax System

P A G E 3 A PRÉCIS OF INDIA’S FISCAL POLICY

• Qualified foreign investors to be

allowed to invest Corporate bond

market

• Reduct ion in the rate of

withholding tax on interest

payments on ECB from 20% to

5% for 3 years for certain

infrastructure sectors

• ECB permitted for working capital

of Airline Industry for 1 year

period subject to total ceiling of

• FDI in Multi-Brand Retail up to

51% and Aviation Up to 49% are

under active consideration of

Government

• External Commercial Borrowings

(ECB) allowed as a funding option

for cost affordable housing

projects

• Proposal to allow ECB to part

finance the rupee debt of existing

power projects

US $ 1 Billion

• E C B f o r c a p i t a l

expenditure on the

m a i n t e n a n c e a n d

operations of toll systems

for roads and highways so

long as they are a part of

the original project

• Two way fungibility in

Indian depository receipts

permitted

Promises Vs. Performance

Foreign Investment Environment

“Access to low cost ECB

will help in bridging the

funding gap”

“Overview of the

announcements

made in the

previous budget as

against its

performance”

Special tax rates, exemptions, deductions, subsidies, rebates, deferrals and credits have an impact on Government revenue and are called as “tax

preferences”. The Statement below seeks to list the revenue impact of such tax incentives or tax subsidies that are a part of the tax system of the

Central Government.

Type of Sector FY 2010-11 (in Rs. crores)

Estimated in FY 2011-12 (in Rs. crores)

DIRECT TAXES

Corporate Sector 57912 51292

Non-Corporate [Firms/AOPs/BOIs] Sector 6173 6622

Individual Taxpayers 30653 35698

INDIRECT TAXES

Excise Duty 192227 212167

Custom Duty 172740 223653

DISCLAIMER

The above information is only indicative and solely for informational purpose and private circulation.

RANJ & Associates, Company Secretaries intend to, but do not guarantee or promise that it is correct, complete / up-to-date. We expressly

disclaim any liability to any person in respect of anything, and of consequences of anything done, or omitted to be done by any such person

in reliance upon the contents of this document.

The information in this document is as of March 16, 2012.