Tuesday, March 2, 2010



ISSUE DATED 1.3.2010 Volume 25 Part 5 

Highlights of Finance Bill, 2010


Direct taxes

Rates of income-tax for assessment year 2011-12
F individuals, HUFs, AOPs and BOIs: up to Rs. 1,60,000 (Rs. 1,90,000 for women residents and Rs. 2,40,000 for senior citizens), nil; Rs. 1,60,001 to Rs. 5,00,000, 10 per cent.; Rs. 5,00,001 to Rs. 8,00,000, 20 per cent.; and above Rs. 8,00,000, 30 per cent.
F no change in rate of tax for firms, co-operative societies, local authorities and companies; surcharge on domestic companies reduced to 7.5%
Charitable purpose
F "the advancement of any other object of general public utility" remains "charitable purpose" if total receipts from activity in nature of trade, commerce or business, etc. do not exceed Rs. 10 lakhs in previous year: section 2(15): with retrospective effect from April 1, 2009
Registration of trusts
F Commissioner can cancel registration granted under section 12A: section 12AA: June 1, 2010
Weighted deduction for scientific research and development
F for expenditure on approved in-house research and development facility, increased from 150% to 200%: section 35(2AB)
F for payment to approved scientific research association or approved university, college or other institution and payment to a National Laboratory or a university or an Indian Institute of Technology, increased from 125% to 175%: section 35(1)(ii), (2AA): April 1, 2011
Weighted deduction on payments to associations engaged in research in social science or statistical research
F approved association undertaking research in social science or statistical research included: sections 10(21), (23C), 35(1)(ii), (iii), 80GGA: April 1, 2011
Investment-linked deduction for specified business
F business of building and operating a new hotel of two-star or above category, anywhere in India included: section 35AD: April 1, 2011
Deduction for subscription to long-term infrastructure bonds
F subscription to long-term infrastructure bonds notified by Central Government up to Rs. 20,000 deductible for individuals and HUFs in addition to existing limit of Rs. 1 lakh for tax saving investments: new section 80CCF: April 1, 2011
Deduction of contribution to Central Government Health Scheme
F contribution made to CGHS deductible: section 80D: April 1, 2011
Developing and building housing projects
F period for completion of project increased from 4 years to 5 years; built-up area of shops and commercial establishments in housing project to be three per cent. of aggregate built-up area of the housing project or 5,000 sq. ft., whichever is higher: 80-IB(10): April 1, 2010
Deduction of profits of hotel or convention centre in National Capital Territory
F date by which hotel has to start functioning or convention centre to be constructed extended from March 31, 2010 to July 31, 2010: 80-ID: April 1, 2011
Limit of turnover or gross receipts for compulsory audit of accounts and presumptive taxation
F threshold limit for compulsory audit of accounts from Rs. forty lakh to Rs. sixty lakh for business and from Rs. ten lakh to Rs. fifteen lakh for persons carrying on profession; maximum penalty for failure to get accounts audited or to furnish audit report increased from Rs. one lakh rupees to Rs. one lakh fifty thousand: sections 44AB, 271B: April 1, 2011
F threshold limit of total turnover or gross receipts for presumptive taxation increased from Rs. forty lakh to Rs. sixty lakh: section 44AD: April 1, 2011
Non-resident providing services or facilities in connection with prospecting for, or extraction or production of, mineral oil
F section 44BB not to apply to income covered under section 44DA: sections 44BB(1), 44DA, 115A: April 1, 2011
F income deemed to accrue or arise in India under section 9(1)(v) or (vi) or (vii) whether or not non-resident has a residence or place of business or business connection in India or non-resident has rendered services in India: section 9, Expln.: June 1, 1976
Conversion of company into limited liability partnership
F transfer of assets on conversion of company into LLP not transfer for purposes of capital gains tax subject to conditions; cost of acquisition for LLP to be cost for which company acquired asset: sections 47, 47A, 49: April 1, 2011
F depreciation allowable to company and LLP not to exceed depreciation calculated as if conversion had not taken place; actual cost of block of assets of LLP to be written-down value of block of assets of predecessor company on date of conversion: sections 32, 43(6): April 1, 2011
F carry forward and set-off of business loss and unabsorbed depreciation to the successor LLP which fulfills conditions: section 72A: April 1, 2011
F no tax credit under section 115JAA allowable to successor LLP: sections 115JAA: April 1, 2011
Transactions without consideration or for inadequate consideration
F transactions in shares of private company for inadequate consideration or without consideration where recipient is firm or private company included: transactions for business re-organization, amalgamation and demerger excluded: section 56(2)(vii): June 1, 2010
F value of such shares included in definition of income: section 2(24): June 1, 2010
F stock-in-trade, raw material and consumable stores of business of recipient excluded: section 56(2)(vii): October 1, 2009
F receipt of immovable property for inadequate consideration excluded: section 56(2)(vii): October 1, 2009
F transactions in bullion included: section 56(2)(vii): June 1, 2010
F reference to Valuation Officer for estimate of value of property received without consideration or for inadequate consideration: section 142A(1): July 1, 2010
Minimum Alternate Tax
F rate increased to eighteen per cent from fifteen per cent: section 115JB : April 1, 2011
Disallowance of expenditure for failure to deduction tax at source
F no disallowance if after deduction in previous year, it is paid on or before due date of filing return under section 139(1): section 40(a)(ia): April 1, 2010
F rate of interest for non-payment of tax after deduction increased from 1% to 1½% per month: section 201(1A): July 1, 2010
Deduction of tax at source
F threshold limit of payments for deduction of tax at source raised: sections 194B (winnings from lottery or crossword puzzle from Rs. 5,000 to Rs. 10,000), 194BB (winnings from horse race from Rs. 2,500 to Rs. 5,000), 194C (payment to contractors from Rs. 20,000 30,000 for single transactions and 50,000 to Rs. 75,000 for aggregate of transactions in a year), 194D (insurance commission from Rs. 5,000 to Rs. 20,000), 194H (commission or brokerage from Rs. 2,500 to 5,000), 194-I (rent from Rs. 1,20,000 to Rs. 1,80,000) and 194J (fees for professional or technical services from Rs. 20,000 to Rs. 30,000): July 1, 2010
Certificate of tax deduction and tax collection at source
F deductor/collector to continue to furnish TDS/TCS certificates to the deductee/collectee after April 1, 2010: sections 203(3), 206C(5): April 1, 2010
Settlement of cases
F proceedings as result of requisition of books of account or documents or assets included: additional amount of income-tax payable on income disclosed in application should exceed Rs. fifty lakh: time for completion of proceedings: sections 245A(b), 245C, 245D(4A) (sections 22A, 22D, Wealth-tax Act, 1957): June 1, 2010
Power of High Court to condone delay in filing appeals and reference applications
F High Court may admit appeal or application for reference after expiry of period specified, for sufficient cause shown: section 260A(2) (section 27A, Wealth-tax Act, 1957): October 1, 1998; section 256(2A) (section 27, Wealth-tax Act, 1957): June 1, 1981
Document Identification Number
F required to be issued on or after July 1, 2011: section 282B: October 1, 2010

Indirect taxes

Customs and Central Excise
F Articles of bedding made of quilt: Exemption from excise duty on articles of bedding made of quilt
F Automation of State commercial taxes: Mission Mode Project approved for computerisation of Commercial Taxes in States with an outlay of Rs. 1,133 crores of which the Centre's share is Rs. 800 crores; this will lay foundation for launch of goods and service tax
F Expanded scope of Settlement Commission: Settlement Commission will now cater to certain categories of cases that hitherto fell outside its jurisdiction
F Central excise duty on all non-petroleum products raised to 10% ad valorem; Portland cement and cement clinker raised proportionately
F Ad valorem component of excise duty on large cars, multi-utility vehicles and sports-utility vehicles increased to 22%
F Excise duty on automobile fuels raised: Basic duty of 5% on crude petroleum, 7.5% on diesel and petrol and 10% on other refined products restored. Central excise duty on petrol and diesel enhanced by Re. 1 per litre each
F Higher excise duty on tobacco products: Excise duty on all non-smoking tobacco such as scented tobacco, snuff, chewing tobacco, etc. to be enhanced. Compounded levy scheme to be made available for chewing tobacco and branded unmanufactured tobacco based on the capacity of pouch-packing machines
Concessional import duty
F Setting up of mechanised handling systems and pallet racking systems in mandis or warehouses meant for foodgrains and sugar accorded lower import duty of 5%
F Project import status at concessional customs duty of 5 per cent with full service tax exemption provided to the following for initial setting up and expansion:
F cold storage, cold room including farm pre-coolers for preservation or storage of agriculture and related sectors produce; and
F processing units for such produce
F provide full exemption from customs duty to refrigeration units required for the manufacture of refrigerated vans or trucks
F Central excise exemption extended to equipment meant for preservation, storage and processing of agriculture
F Full exemption from excise duty for trailers and semi-trailers used in agriculture
F Small-scale manufacturers permitted to take full credit of Central excise duty paid on capital goods in single instalment in year of their receipt and can pay Central cxcise duty on quarterly, rather than monthly, basis
F Clean energy cess to be levied on coal produced in India as well as on imported coal to create the corpus of the National Clean Energy Fund
F Concessional customs duty of 5% and Central Excise duty exemption extended to machinery, instruments, equipment and appliances etc. required for initial setting up of photovoltaic and solar/thermal power-generating units.
F LED lights accorded lower duty: Central excise duty on LED lights reduced from 8% to 4% at par with Compact Fluorescent Lamps (CFLs).
F Sop for automobiles: Nominal duty of 4% to be imposed on electric cars and vehicles to neutralise duty paid on the inputs and components used in such vehicles. Moreover, some critical parts of such vehicles; exempted from basic customs duty and special additional duty subject to actual-user condition.
F Import of compostable polymer exempted from basic customs duty.
F Project import status granted to 'Monorail projects for urban transport' at a concessional basic duty of 5%
F Mobile phone: Exemptions from basic, CVD and special additional duties extended to parts of battery chargers and hands-free headphones; exemption from special additional duty extended till March 31, 2011
F Watches and readymade garments also made exempt
Medical sector
F Uniform, concessional basic duty of 5%, CVD of 4% with full exemption from special additional duty prescribed on all medical equipments
F Certain inputs used in the manufacture of orthopaedic implants exempted from import duty
F Customs duty to be charged only on value of carrier medium of cinematographic film, whether electronic or film and music and gaming software imported for duplication
Rates on precious metals:

Customs Duty
Gold and platinum
Rs. 200 per 10 grams to Rs. 300 per 10 grams
Rs. 1,000 per kg to Rs. 1,500 per kg.
10% to 8%
Gold ore and concentrates
Rs. 140 per 10 grams of gold content with full SAD exemption.
Refined gold made from such ore or concentrate
Rs. 280 per 10 grams.
Other proposals
F No import duty on specified inputs or raw materials required for the manufacture of sports goods.
F Basic customs duty on magnetrons used in production of micro-wave ovens, reduced from 10 per cent to 5%
F Value limit on duty-free import of commercial samples as personal baggage enhanced to Rs. 3 lakh per annum.
F No penalty if excise duty and interest paid before issue of show-cause notice in cases which do not involve fraud, etc.
F Electrical energy supplied from SEZ to DTA and non-processing areas of DTA would attract duty of 16% with retrospective effect from 26.6.2009.
Other items

Central Excise duty lowered
Goods imported in a pre-packaged form for retail sale (includes mobile phones, watches and ready-made garments not imported in pre-packaged form)
Outright exemption from SAD
Replaceable kits for household-type water filters other than those based on RO technology
Corrugated boxes and cartons
Latex rubber thread
Goods covered under the Medicinal and Toilet Preparations Act
Solar cycle-rickshaws (soleckshaw)

Service Tax

New services to be included
F permitting commercial use or exploitation of any event organized by a person or organization
F copyright on cinematographic films and sound recording
F health services, namely, health check up for the employees of business entities; health services health insurance schemes offered by insurance companies where payment made directly by business entity or insurance company to hospital or medical establishment
F maintenance of medical records of employees
F service provided by Electricity Exchanges
F additional services provided by builder to prospective buyers on extra charges excluding provision of vehicle-parking space
F promotion of "brand" of goods, services, events, business entity, etc., whether provided to a business entity or any other under a contract
F promotion, marketing or organizing of games of chance, including lottery
F service tax proposals are expected to mop-up Rs. 3,000 crores
Existing services expanded or altered
F air passenger transport service to include domestic and international journeys in any class
F information technology software service to cover all cases irrespective of its use
F "commercial training or coaching service" to mean any training or coaching provided for consideration, whether or not for profit (with retrospective effect from July 1, 2003)
F " sponsorship service" to include sponsorship pertaining to sports
F construction of complex taxable unless entire consideration for property is paid after receipt of completion certificate from competent authority
renting of immovable property
F rent of vacant land where there is an agreement for undertaking construction on land for furtherance of business
F services provided entirely within the airport/port premises
F auctioneer's service: "auction by Government" to mean auction involving sale of Government property and not when Government acts as an auctioneer for sale of private property
F management of investment under ULIP service: value of taxable service to be actual amount charged by insurer for management of funds under ULIP or maximum amount of fund management charges fixed by the Insurance Regulatory and Development Authority (IRDA), whichever is higher
F statutory taxes charged by foreign Governments excluded from taxable value under air passenger transport service
F services relating to "erection, commissioning or installation" of (a) mechanized foodgrain handling systems etc.; (b) equipment for setting up or substantial expansion of cold storage; and (c) machinery/equipment for initial setting up or substantial expansion of units for processing of agricultural, apiary, horticultural, dairy, poultry, aquatic, marine or meat products
F pre-packaged I. T. software, with licence for right to its use
F transport by road by goods transport agency to include foodgrains and pulses in list of exempted goods
F Indian news agencies under "online information and database retrieval service" subject to specified conditions
F "technical testing and analysis service" and "technical inspection and certification service" provided by Central and State seed testing laboratories, and Central and State seed certification agencies
F transmission of electricity
Withdrawal or amendments of exemptions
F exemption to service provided in relation to transport of goods by rail withdrawn
F exemption to group personal accident insurance scheme provided by Government of Rajasthan to its employees, under General Insurance Service withdrawn
F exemption to commercial training or coaching service restricted to vocational training courses in the designated trades notified under the Apprentices Act, 1961
F condition in Export of Service Rules that service is provided from India and used outside India deleted
F construction and operation of installations, structures and vessels for prospecting or extraction or production of mineral oils and natural gas in the Exclusive Economic Zone and the Continental Shelf of India to be within the purview of the provisions of Chapter V of the Finance Act, 1994
Other amendments (Finance Act, 1994)
F no penalty where service tax with interest paid before issuance of notice by the Department: section 73(3), Expln.
F "business entity" to include an association of persons, body of individuals, company or firm but not an individual

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