INVESTMENT_ENVIRONMENT_&_TAX_ASPECTS-BUDGET_2011
Transcript of INVESTMENT_ENVIRONMENT_&_TAX_ASPECTS-BUDGET_2011
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UNION BUDGET- INVESTMENT ENVIRONMENT & TAX ASPECTS
INTRODUCTIONThe Honble Finance Minister Shri Pranab Mukherjee on28.02.2011 in his Budget speech could only propose certainlimited amendments in Tax Laws and Investment environmentdue to the fact that the Government policy on Direct Taxes hasbeen outlined in detail in the Direct Tax Code (DTC) which isalready before the Parliament. The Finance Minister laid
emphasis on:
Opportunities and Challenges
Sustaining Growth
Improving Investment environment
Agriculture Development
Strategy for Black Money
Strengthening Inclusion and Improving governance
KEY ASSURANCES
Direct Taxes Code (DTC) to be finalized for enactmentduring FY 2011-12. DTC proposed to be effective fromApril 1, 2012.
Constitutional Amendment Bill proposed to be introducedin this session of Parliament on proposed Goods andServices Tax (GST).
Companies Bill to be tabled in Lokh Sabha during currentsession
The key Investment environment and Tax aspects proposed inBudget 2011 are summarized below. Take note that all thebelow mentioned changes shall come in effect w.e.f. April 1,2012 i.e. Assessment Year (A.Y.) 2012-13 unless specificallyspecified.
1. CORPORATE TAXATION
1.1.CORPORATE TAX RATES
1.1.1. For Domestic Companies
Tax rates have been kept same at 30%,
However, current surcharge has been
reduced to 5% from 7.5% (if Total Incomeexceeds Rs 1 cr.) and Education cess @ 3%
has remained unchanged.
Due date of Return for Transfer Pricing in
respect of international transactions extended
to November 30 of the Assessment Year.
TAX NEWSWIRE
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1.1.2. For Foreign Companies
Tax rates have been kept same at 40%, Surcharge
has been reduced from 2.5 to 2% (if Total Income
exceeds Rs 1 cr.) and Education cess @ 3% has
remained unchanged.
1.2.MINIMUM ALTERNATIVE TAX (Section 115JB)
Rate of MAT increased from 18% to 18.5%
MAT Levied on developers of SEZ and units
operating therein
Alternate Minimum Tax (AMT) levied in case of
Limited Liability Partnership (LLP) at same rate
applicable to MAT
Rules for Carry forward and set off of MAT creditremain unchanged.
1.3.DIVIDEND DISTRIBUTION TAX
Rates unchanged
w.e.f June 1, 2011 SEZ Developers would have to
pay tax on the dividends declared, distributed or
paid as is applicable to other Companies.
2. FIRM TAXATION (INCLUDING LIMITED LIABILITYPARTNERSHIP)
For Partnership Firms (including Limited
Liability Partnerships)
o Tax rates have been kept same at 30%
and Education cess @ 3%.
o Surcharge is not applicable, as before.
3. INDIVIDUAL TAXATION
3.1.For Individual Tax Payers
Total Income Tax Rate
For GENERAL Tax Payers
Income upto Rs 1.8 Lakhs NIL
Income above Rs 1.8 Lakh and uptoRs. 5 Lakhs
10%
Income above Rs 5 Lakhs and upto Rs.8 Lakhs
20%
Income above Rs 8 Lakhs 30%
For WOMEN Tax Payers
Income upto Rs 1.9 Lakhs NIL
Income above Rs 1.9 Lakh and uptoRs. 5 Lakhs
10%
Income above Rs 5 Lakhs and upto Rs.8 Lakhs
20%
Income above Rs 8 Lakhs 30%
For SENIOR CITIZENS
Income upto Rs 2.5 Lakhs NIL
Income above Rs 2.5 Lakh and uptoRs. 5 Lakhs
10%
Income above Rs 5 Lakhs and upto Rs.8 Lakhs
20%
Income above Rs 8 Lakhs 30%
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Note 1. For Senior Citizens eligibility, age reducedto 60 from 65 years.
Note 2. For Very Senior Citizens (80 years andabove), higher exemption limit of Rs 5 Lakhsapplicable
Note 3. w.e.f. June 1, 2011, for Salaried assesseenot having any other source of Income, CentralGovernment by notification exempt the requirementof filing of ROI.
3.2. INVESTMENT LINKED DEDUCTIONS/SUNSETCLAUSES
Under section 35AD of the Income Tax Act, two
new businesses have been specified for-
o Developing and building a housing projectscheme for affordable housing framed by
the Central Government/State
Government and
o Production of Fertilizer in India
EXTENTION OF SUNSET CLAUSE FOR TAX
HOLIDAY FOR POWER SECTOR
o Section 80-IA(4)(iv) has been proposed to
be amended to extend the terminal date
for further period of one year i.e. upto
March 31, 2012
SUNSET FOR TAX HOLIDAY IN COMMERCIAL
PRODUCTION OF MINERAL OIL
o It is proposed that the deduction u/s 80-
IB(9) would not be available for blocks
licenced under a contract awarded after
31st March 2011 under New Exploration
Licensing policy announced by GOI in
year 1999 or in pursuance of any law in
force.
INFRASTRUCTURE DEBT FUND (w.e.f.01.06.2011)
o Section 10 is proposed to be amended to
enable Central Government to notify any
infrastructure debt fund which is set up in
accordance with rules.
o The income of this infrastructure debt fund
would be exempt for tax subject to filing of
the ROI.
o In case of interest income paid to a non-
resident by a notified infrastructure debt
fund, the rates would be as prescribed
under new section 194LB @5%.
3.3.TAXATION OF CERTAIN FOREIGN DIVIDENDS ATREDUCED RATE
Lower tax of 15% is proposed on dividends
received by an Indian company from its foreign
subsidiary.
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3.4.REGULATORY CHANGES IN INVESTMENTENVIRONMENT
FDI Policy to be further liberalized
SEBI Registered Mutual Funds permitted to
accept subscriptions from foreign Investors for
Equity Schemes.
For Boost to Infrastructure sector, FII limit for
Investment in Corporate Bonds issued in
infrastructure sector being raised.
Financial Sector Legislative Initiatives
o Financial Sector Legislative Reforms
committee set up to rewrite and
streamline the financial sector laws, rules
and regulations.
o Amendment proposed to Banking
Regulation Act in field of additional
banking licenses to private sector players
Microfinance Institutions
o India Microfinance Equity Fund ofRs 100
crores proposed with SIDBI in interest of
small borrowers
o Womens SHGs Development Fund to
be created with corpus of Rs 500 crores.
Micro Small & Medium Enterpriseso Rs 5000 crores to be provided to SIDBI
for refinancing incremental lending by
banks to such enterprises
o Rs 3000 crores to be provided to
NABARD to provide support to handloom
weaver co-oerative societies which have
become financially unviable for
refinancing incremental lending by banks
to such enterprises facing debt crises
AGRICULTURE
o Removal of production and distribution
bottlenecks for items like fruits and
vegetables, milk, poultry and fish to be the
attention this year.
o Approval being given to set up 15 more
Mega Food Parks during FY 2011-12
o Augmentation of storage capacity through
private entrepreneurs and warehousing
corporations has been fast tracked.
INFRASTRUCTURE
o Allocation of Rs 214,000 crores for
infrastructure during FY 2011-12 @ 48.5%
of total plan allocation
o Tax free bonds of Rs 30,000 croresproposed for FY 2011-12
NATIONAL MANUFACTURING POLICY
o Share of manufacturing in GDP expected
to grow from 16-25% in next 10 years.
Government to come out with a
manufacturing policy.
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o Issues relating to reconciliation of
environment concern from various
departmental activities including those
related to infrastructure and mining to be
considered by Group of Ministers.
o Financial Assistance for Metro projects in
Delhi, Mumbai, Bengaluru, Kolkata and
Chennai.
o Capital Investment in Fertilizer Production
proposed to be included as an
infrastructure sub sector.
INDIAN STAMP ACT, AMENDMENT BILL
o It is proposed to introduce a Bill shortly
to amend the Indian Stamp Act, 1899
which would also remove the
ambiguity in stamp duty aspects onM&A.
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