- Individuals intending to avail housing loans from financial institutions upto Rs 25 lacs during the Financial Year (‘FY’) 2013-14, can avail additional deduction of Rs 1 lac (ie over and above existing deduction of Rs 1.5 lac) in the nature of interest on housing loan
- This additional interest deduction can be claimed for the FY 2013-14. If the limit of Rs 1 lac remains unexhausted, the same can be availed in the subsequent FY 2014-15 – in other words the additional deduction of Rs 1 lac can be availed over a period of 2 FYs
- With interest rate on home loans being unchanged (9.5% to 10% depending on the banks), it’s a good time to avail home loans
2. RGESS scheme liberalized
- The eligibility criteria of a new retail investor to avail RGESS benefit under Section 80CCG has been liberalized by increasing the minimum income limit of the investor from Rs 10 lac to Rs 12 lac, allowing more people to avail the deduction of Rs 25,000 u/s 80CCG
- Further, the deduction will be allowed not just for 1 year (as existing) but for 3 years (ie 2 more years)
3. Incentive for companies making huge investments
- Companies investing in projects of Rs 100 crores or more will be eligible to avail additional investment allowance @ 15% of the investments made
- Investment allowance would be over and above the depreciation allowance
- Investment Allowance would be available for a period of 2 yrs
4. Introduction of Tax Administration Review System
- The introduction is to review the tax policies on an ongoing basis
5. Income tax rates
- No change in income tax rates - 10%, 20% and 30% remain unchanged
- No change in income slab rates
- However, marginal relief of Rs 2,000 termed as ‘Tax Credit’ will be available for individuals earning less than Rs 5 lac – ie falling in the tax bracket of 10% (Rs 2 lac to Rs 5 lac)
- No change in education cess – remains @ 3%
- Surcharge for super rich – Additional surcharge @ 10% of the tax liability will be levied on individuals earning more than Rs 1 crore. However, the proposal is for only one year ie FY 2013-14 – in other words the maximum tax rate for super rich will increase from 30.9% to 33.99%
- Surcharge on domestic companies earning income of Rs 10 crores or more increased from 5% to 10%
- Surcharge on foreign companies earning income of Rs 10 crores or more increased from 2% to 5%
- No change in the rate of Minimum Alternate Tax (‘MAT’)
- No change in the rate of Dividend Distribution Tax (‘DDT’)
- However, surcharge to be added to MAT and DDT will be 10%, the increased rate
- No talks on tax on short term capital gains and long term capital gains – remains unchanged
- Increase in the tax rate on payments made in the nature of royalty and fees for technical services to non-residents from 10% to 25% - However, the benefit of Tax Treaties can be availed
- TDS @ 20% will be levied on profits distributed by unlisted companies to shareholders
- TDS @ 1% will be levied on sale of immovable properties however, sale of agriculture land exempted for TDS purposes
- Securities Transaction Tax (‘STT’) on equity transactions and Mutual Funds reduced to 0.017%
- Commodity Transaction Tax (‘CTT’) will be levied on non agricultural commodity transactions @ 0.1%
6. Indirect tax rates
Service Tax
- No change in the basic rate of service tax – remains at 12.36%
- All Air conditioned hotels to levy service tax – presently it was levied only by AC hotels serving liquor (@ 8.6%)
- Two new services included in the ‘Negative List’ of service tax – vocational courses offered by recognized institutes & testing activities on agricultural produce
- 1 time Voluntary Compliance Arrangement Scheme introduced to motivate all SSE’s to voluntary file their outstanding service tax returns and pay off the service-tax, if any – No interest and penalty will be levied on the service tax component to be paid. Service tax returns can be filed for the period April 1, 2007 to March 31, 2012
VAT
- No talks on Value Added Tax
Excise duty
- No change in the basic rate of excise duty
- Excise duty on cigarettes and cigars hiked to 18%
- Excise duty on mobile phones costing more than Rs 2,000 hiked to 6%
- Excise duty on SUV’s hiked to 30%
Custom duty
- No change in the basic rate of custom duty
- Custom duty on high end vehicles @ 100%
- Import duty on set top boxes @ 10%
- 2% Custom duty and Counter-veiling duty on steel and coal
- Duty free limit for gold increased to Rs 50,000 for male passenger and to Rs 100000 for female passenger
7. New Tax reforms
- Much talked about reform of General Anti Avoidance Rules (GAAR) to be implemented with effect from April 1, 2016 after consideration of reforms submitted by the Standing Committee
- Reforms for Direct Tax Code (‘DTC’) still under progress
- Reforms for Goods and Service Tax (‘GST’) still under progress
8. Other proposals
First India Women Bank
- To be set up as a public sector bank
- It will be funded with Rs 1,000 crore capital
- Expected to be set up by October 2013
National Institute of Sports Coaching Centre
- To be set up at Patiala
- It will be funded with Rs 250 crore over a period of 3 years
Skill development for youths
- Institute for skill development of youth to be set up with various institutes to be approached for offering courses
- Youths to give exams and receive certificate on completion of course and passing of examination
- To be motivated with monetary benefit of Rs 10,000 on completion of course
- Aimed towards development of youth to secure jobs in future or be self employed
CSR
- Funds to incubators within educational institutions will be counted as part of mandatory CSR spend. This should encourage more student enterprise as more funds will be available for student start-ups.
9. Infrastructure
- The Budget has announced that 3,000-km of road projects will be awarded in first 6 months of FY14 and a regulatory authority for the roads sector will be constituted
- Infra companies are allowed to float tax free bonds totalling upto Rs 50,000 crores during FY 2013-14
Prince Doshi
Chartered Accountant
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