Expectations from the BUDGET 2012 or PRANAB BABU

Priorities for Budget

• Promote the acquisition of further skills by unemployed and underemployed people
• Create more flexible mechanisms to meet the training, education and income support needs of people in atypical employment, including, in particular, people in casual self-employment
• Explore the concept of minimum income retention which would allow indebted families have a guaranteed minimally acceptable standard of living
• Develop initiatives to help sole traders/micro enterprises deal with indebtedness, including a mentoring service for sole traders in difficulty and a support unit along the lines of the UK’s Business Debtline.
• Maintain current levels of funding for core community care services
• Provide further supports to meet the educational costs for low-income families and work to reduce costs
• Continue to address the issue of fuel poverty in both the short and longer term

Personal Taxation

·         Expected Rate of Tax for FY 12-13: For all Resident assesses below age of 60 years

o   Below 2,50,000                  – NIL

o   2,50,000 to 5,00,000        - 10%

o   500,000 to 10,00,000       - 20%

o   10,00,000 and above       - 30%

1. The Surcharge, Education Cess and Secondary higher education cess on individuals shall be abolished.
2. Deduction u/s 80C : The overall existing ceiling limit of investments deductable u/s 80C Rs.1,00,000/- shall be increased to Rs. 1,50,000/-
3.  Deduction u/s 80CCF : The Deduction for investment in long term infrastructure bond shall be increased from Rs. 20,000/- to Rs. 50,000/-.
4. Children educational Allowances: The exemption limit for Children Education allowance shall be raised from Rs. 100/- per month to Rs. 1000/- per month per child for maximum 2 children or actual expenses, whichever is less.
5. Transport Allowance : The exemption limit for transport allowance to meet expenditures of commuting from residence to the place of work may be raised from Rs. 800/- to Rs. 1,600/- per month.
6. Reimbursement of Medical Expenses: The exemption limit of medical expenses reimbursement under section 17(2)(viii) was raised from Rs. 10,000 to Rs. 15,000 by Finance ( No.2) Act, 1998. In view of the rising cost of medical facilities and medicines, it is expected to increase the exemption limit from Rs.15,000 to Rs.30,000/-.
7. Revision of Leave Encashment Exemption limit: The maximum exemption limit of Leave encashment for non-government employees shall be revised from Rs. 3,00,000/- to Rs. 10,00,000/-in view of the lack of social security support to the retiring non-government tax payers.
8. Deduction of interest expenditure under the Head Income from House Property: Considering the fact that the overall increase in property prices, the existing deduction limit for self occupied property shall be increased from Rs. 1,50,000/- to Rs. 4,00,000/-.

Corporate Taxation

• Rate of tax: The Surcharge for Indian companies shall be reduced from 5% to 2.5% or alternatively can be abolished completely. Similarly the education cess and secondary higher education cess shall be removed.
• Minimum Alternative Tax (MAT) u/s 115JB: The MAT rate shall be reduced from 18.5% to 15%.
• Dividend Distribution Tax: Finance Act 2008 amended the provisions of Section 115-O of the Income-tax Act, 1961 (the Act), to mitigate the cascading effect of DDT in a single tier structure dividend, only up-to one level. However, cascading effect of DDT still continues  to be felt in case of second level and the further step-down subsidiaries. 
• Deletion of clause (c) of the newly inserted subsection (1A) will extend the benefit to a muti-tier structure and hence multiple incidence of DDT on up-flow of dividend from subsidiary company to holding company can be prevented in all cases.

In this regard, we expect that the clause (c) of the newly inserted subsection (1A) may be deleted so that the cascading effect of DDT can also be avoided in a multi-tier structure. Further, investment companies which do not necessarily have subsidiaries and invest in various companies in the open market should also be eligible for such deduction on further distribution of dividend on which DDT has been paid.

• Deduction for expenditure on Corporate Social Responsibility (CSR) : with a view to encourage the corporate toward the CSR activities, we are expecting that the government will come up with the insertion of new section allowing a weighted deduction @ 150% of the expenditure incurred for CSR activities by the corporate as well as non-corporate assesses.

Sundries / General Expectations

• Depreciation: The rate of depreciation for the general plant and machinery shall be enhanced from 15% to 20% or 25%. In order to avoid further litigation on whether the printed, scanned etc. are to be considered as computer or plant and machinery, we are expecting some clarification on the same.
• A clarification is expected whether the eligible assessees are allowed to claim the remaining 10% additional deduction in the second year, if in the year of purchase it had claimed only 10% depreciation i.e. being half rate.
• Rate of Interest on Tax Refunds – Sec 244A : A uniform interest rate may be 6% or 12% p.a. shall be applied for both refunds and tax dues payable by the Government and assesses respectively.
• Section 14A / Rule 8D Disallowance : Rule 8D shall be amended to provide that the amount of notional disallowance shall not exceed the exempt income.
• TDS on Service tax :  Necessary provision shall be brought into the Act for non deduction of TDS on the service tax component  of the professional fees and other services.
• Penalties u/s 271: Suitable remedial measures are shall be brought into the Act providing relief to the genuine hardship faced by the assessees on account of imposition of penalty even where there is no concealment of income.
• Advance Ruling for Residents : It is expected that the union budget shall have some scheme which would allow even few class of resident assessees for the Advance Ruling.
• Transfer pricing provisions: we expect that in the union budget government will come up with the industry specific rates of allowable variation u/s 92CA

Wealth Tax

• The threshold limit for levy if wealth tax shall be increased from the existing limit of 30,00,000/- to 50,00,000/-
• In case of individual and Hindu undivided families cash in hand in excess of Rs. 50,000/- is considered as an asset under the wealth tax Act, 1957. The said limit of Rs. 50,000/- shall be enhanced to Rs. 1,00,000/-

Central Excise

• Education Cess (EC) and Secondary and Higher Education Cess (SHEC) : EC and SHEC be subsumed in the excise duty.
• Online E-filing of weekly information by major duty paying unit : in view of the fact that the assessees are submitting monthly return regularly, the online E-filing of weekly information leads to undue hardship to the assessees. Hence, the said provision shall be removed.

·         Exemption / CENVAT credit to all excisable goods used for research & development (R& D): CENVAT Credit shall be allowed to all excisable goods used for research & development (R& D) including the capital goods deployed for R&D activities.

Customs

·         CENVAT Credit Rules shall be suitably amended to extend the CENVAT credit on capital goods from 50% to 100%.

Service Tax

•  Rate of Service Tax: The existing general rate of service tax shall be reduced from 10% to 7.5%. Further, the education cess and secondary higher education cess shall be removed.
• Segregation of manpower recruitment services and supply of manpower Services: The taxable services of manpower recruitment and manpower supply shall be segregated in two separate categories as it is more appropriate to classify manpower recruitment in Rule 3(iii) and manpower supply in Rule 3(ii) of the Taxation of Services (Provided from Outside India and Received in India) Rules, 2006. Similar approach shall also be adopted in case of Export of Services Rules, 2005.
• Works contract services : Rate of service tax under WCC Scheme be reduced from 4% to 3%.
• Practicing Chartered Accountants vis a vis legal professionals : In line with the legal services, individual Chartered Accountants shall also be exempted when providing professional services to individual service receivers.
• Carry forward of excess service tax actually paid in Form ST-3 : A worksheet for computing the excess service tax paid shall be incorporate which can be adjusted in the subsequent period in Form ST-3 itself.
• Tax Audit Report in service tax : In order to streamline the process with all VAT laws, it is suggested that the submission of audit report be made mandatory in service tax also along with audited annual accounts.

Central Sale Tax

·         Rate of Central Sales Tax  : Central Sales Tax rate of 2 per cent is effective from 1st June, 2008. The rate was expected to be reduced to 1 per cent w.e.f. 1st April, 2009 and to Nil on 1.4.2010 on implementation of Goods and Services Tax. However, the CST rate continues to be 2 per cent. Hence, It shall be reduce to 1 per cent at least.

       Hope PRANAB BABU delivers this time !!!!!