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KEY HIGHLIGHTS OF THE UNION BUDGET 2012-13

1] DIRECT TAX: Income tax exemption limit raised from Rs. 1,80,000/- to Rs. 2,00,000/-. Distinction between men and women has been removed so far as income exempt from tax is concerned. 10 % tax for 2-5 lakh income 20 % tax for 5-10 lakh income 30 % tax for income beyond Rs. 10 lakh Savings bank account interest up to Rs. 10,000/- exempted from tax. Deduction of upto Rs. 5000/- for preventive health check within health insurance benefit. Senior citizens are no longer required to pay advance tax, if they are not running any business/ profession.

2] SERVICE TAX: No change in corporate tax rate. Service tax rates, raised from 10 per cent to 12 per cent. No change in customs duty of 10 per cent on non-agriculture goods.

3] TAX REFORMS Direct Taxes Code (DTC) at earliest; GST network to be operational by August 2012. Central Excise and Service Tax being harmonized. A General Anti-Avoidance Rule (GAAR) to be introduced to counter aggressive tax avoidance. Tax relief for sectors like agriculture, infrastructure, mining, railways, roads, civil aviation, manufacturing, health and nutrition, and environment to get duty relief. Turnover limit for compulsory tax audit for SMEs has been raised from Rs 60 lakh to Rs 1 crore and exempt capital gains tax on sale of a residential property, if the sale consideration is used for subscription in equity of a manufacturing SME company for purchase of new plant and machinery. Greater scrutiny of closely-held companies for funds; Taxation of unexplained money, credits, investments, expenses at highest rate of 30 per cent irrespective of income slab.

4] SECURITY MARKET: Securities Transaction Tax [STT] reduced by 20 % (from 0.125 % to 0.1%) on cash delivery transactions. A new Rajiv Gandhi Equity Saving Scheme to allow income tax deduction to retail investors in stocks. Allowing Qualified Foreign Inventors (QFIs) to access Indian Corporate Bond market. Simplifying the process of issuing IPO and mandatory for companies to issue IPOs of Rs. 10 crore and above in electronic form through nationwide broker network of stock exchanges. Permitting two-way fungibility in Indian Depository Receipts subject to a ceiling with the objective of encouraging greater foreign participation in Indian Capital Market.

5] LAWS AND REGULATIONS: The Government proposes to bring following Bills in the Budget Session: The Micro Finance Institutions (Development and Regulations) Bill, 2012. The National Housing Bank (Amendment) Bill. 2012. The Small Industries Development Bank of India (Amendment) Bill, 2012. National Bank for Agriculture and Rural Development (Amendment) Bill, 2012. Regional Rural Banks (Amendment) Bill, 2012. Indian Stamp (Amendment) Bill, 2012. Public Debt Management Agency of India Bill, 2012.

6] GDP RATES: GDP growth rate pegged at 7.6 % in 2012-13. The current account deficit as a proportion of GDP for 2011-12 is likely to be around 3.6 % Subsidy Expenditure to be checked and higher tax revenues targeted; Rs. 30,000 crore to be raised from disinvestment.

7] FINANCE AND INFRASTRUCTURE SECTOR Introduction of Rajiv Gandhi Equity Saving Scheme: this scheme would allow for income tax deduction of 50 % to new retail inventors, who invest up to Rs. 50,000/- directly in equities and whose annual income is below Rs. 10 lakhs a scheme will have lock -in period of 3 years. Rs. 15,888 crore to be provided for capitalization of public sector banks and financial institutions. Infrastructure investment of Rs. 50 lakh crore in 12th plan period, with half from private sector; Tax free bonds of Rs. 60,000 crores to be allowed for financial infrastructure projects.

8] FOREIGN DIRECT INVESTMENT FDI in multi-brand retail and permitting foreign airlines invest in domestic players. External borrowings to the extent of USD one billion for aviation companies. Qualified Foreign Investors to get access to corporate bond market.

9] BUDGETED EXPENDITURE Total expenditure budgeted at Rs. 14,90,925 crore. Plan expenditure at Rs. 5,21,025 crore, 18 per cent higher than 2011-12 budget. Non-plan expenditure at Rs. 9,69,900 crore. 10] CERTAIN COMMODITIES TO COST MORE Cars: The finance budget has hiked the excise duty from 22% to 24% for cars with engines of between 1.2 and 1.5 litres. For cars powered by engines of 1.5 litres and above, the duty is now 27%. The custom duty has been increased from 60% to 75% for cars priced above $40,000/-. Auto companies may pass on the price hike to consumers. This hike might further impact the auto industry already reeling from a slowdown in sales. Imported bicycles: The basic customs duty on bicycles has been increased from 10% to 30%. Cigarettes: The basic excise duty on cigarettes, of more than 65mm length, has been increased by adding an ad valorem component of 10% to the existing specific rates. The ad valorem duty would be chargeable on 50% of the Retail Sale Price declared on the pack. Bidis: Increase in the basic excise duty on hand-rolled bidis from Rs. 8 to Rs. 10 per thousand and in respect of machine- rolled bidis from Rs. 19 to Rs. 21 per thousand. The existing exemption available to hand-rolled bidis for clearances up to Rs. 20 lakh bidis per annum is being retained. Jewellery: Branded silver jewellery has been exempted from excise duty. Excise duty of 1% was levied on branded precious metal jewellery in the last budget. Now, jewellery not bearing a brand name is also brought under its ambit. To simplify its operation and minimise its impact on small artisans and goldsmiths it has been proposed thato The duty is to be charged on the tariff value equal to 30% of the transaction value. o Small scale exemption to extend up to annual turnover not exceeding Rs. 1.5 crore for units having a turnover below Rs. 4 crore in the previous year o Turnover to be computed on the basis of tariff value o Onus of registration and payment is placed on the person who gets jewellery manufactured on job work 11] BLACK MONEY White paper on black money in current session of Parliament. Introduction of compulsory reporting requirement for assets held abroad. 3

Tax collection at source on high-value cash purchase of bullion, jewellery, immovable property, and trading in coal, lignite, and iron ore. The budget proposed relevant amendments in the law to compulsorily report assets and revenue held abroad and allowing for reopening of assessments up to 16 years in such cases.

12] AGRICULTURE Target for agricultural credit raised to Rs 5,75,000 crore. Interest subvention for short-term crop loans to farmers at 7 per cent interest continues; additional 3 per cent for prompt paying farmers. 13] TDS ON TRANSFER OF CERTAIN IMMOVABLEE PROPERTIES (OTHER THAN AGRICULTURAL LAND) TDS has been made mandatory for sale of immovable property of over Rs. 50 lakh in urban areas and Rs. 20 lakh in rural areas. For better compliance, it is also proposed to cover that registration officer appointed under the Indian Registration Act, 1908 (Registrar) shall not register the transfer of any immovable property where taxes are required to be deducted under this provision unless the transferee furnishes proof of deduction and payment of TDS.

14] RENTING OF IMMOVABLE PROPERTY SERVICE Constitutional validity of the levy of services tax on renting of immovable property has been the subject matter of litigation. The Judicial view, as is evident from various pronouncements of court judgments, is favourable towards revenue. Taking an overall view the Government has decided to waive the penalty for those taxpayers who pay the service tax due on the renting of immovable property service (as on06/03/2012) in full along with interest. For this purpose, a new section 80A is being inserted in the Finance Act, 1994. This scheme of penalty waiver will be open for a period of six months from the date of enactment of the Finance Bill, 2012.

15] INCOME FROM SALE OF SOFTWARE TO BE TAXED AS ROYALTY The Finance Bill, 2012 has introduced an amendment in Section 9 of the Income Tax Act, 1961 whereby an effort has been made to put an end to the contentious issue of taxation of royalties applicable to the software companies. The term royalty now specifically includes computer software. The effect of this amendment is that an Indian buyer, who buys software carrying a copyright from an overseas vendor for some consideration, will have to pay a withholding tax on such purchase. This amendment has been given a retrospective effect making it effective from 1st of June 1976.

16] PRICE HIKE LIKELY IN DRUG PRICES The duty on formulations has been increased from 5 per cent to 6 per cent, while on the active pharmaceutical ingredients (APIs) it has been raised by two per cent to 12 per cent. The service tax has also been hiked to 12%. The cumulative effect of this might result in pharmaceutical companies increasing the prices of drugs. The weighted average deduction on R&D continues to be at 200%, nothing new was added to this list. The government has now implemented Alternative Minimum Tax (AMT) for partnership firms as well and they would have to pay 18.5% AMT on book profits earned for the fiscal year. This would increase their tax outgo.

17] VODAFONE TAX CASE To get past the adverse court verdict in the Vodafone tax case on sale of capital assets in India outside the country, the government sought to amend the Income Tax Act retrospectively from 1962 to bring even 50-year-old deals under the scanner.

18] MEDIA INDUSTRY: Exemption of service tax on copyrights relating to recording of cinematographic films.

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