201213 Direct Tax amendments Impact on the Real Estate sector Tax rates Personal Personal incometax slabs proposed to be revised as under Minimum exemption limit for women changed from Rs 190000 to Rs 200000 the category of women below the age of 60 years has been removed ID: 236347
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Slide1
Union Budget 2012-13:Direct Tax amendmentsImpact on the Real Estate sectorSlide2
Tax rates - PersonalPersonal income-tax slabs proposed to be revised as under:
Minimum exemption limit for women changed from Rs 190,000 to Rs 200,000 (the category of women below the age of 60 years has been removed)
Limits remain unchanged for senior citizens (age of 60 years and above but less than 80 years) at Rs 250,000
Limits remain unchanged for very senior citizen (age of 80 years and above) at Rs 500,000
Education
Cess and Secondary and Higher Education Cess at 2% and 1% respectively to continue
Existing Slab
(Rs)
Revised Slab
(Rs)
Tax rate
(%)
Upto 180,000
Upto
200,000
NIL
180,001 to 500,000
200,001
to 500,000
10
500,001 to 800,000
500,001 to
1,000,000
20
Above 800,000
Above 1,000,000
30Slide3
Corporate Tax rates & GAARNo change in corporate tax rate
No change in Minimum Alternate Tax ('MAT') rate (18.5%)No change in surcharge for domestic companies (5%)No change in surcharge on foreign companies (2%)
Education
Cess
and Secondary and Higher Education
Cess at 2% and 1%, respectively to continueConcessional rate of 15% for dividend received from foreign subsidiary has been extended by 1 more yearGeneral Anti-Avoidance Rule (GAAR) introduced'Impermissible avoidance arrangement' whose main purpose is to obtain a tax benefit
Onus lies with the tax payer to prove that the main purpose of the arrangement was not to obtain tax benefit
This will take effect from AY 2013-14 (FY 2012-13)Slide4
Transfer Pricing provisions on domestic transactions Transfer Pricing guidelines proposed on "specified domestic transaction"Concept of "specified domestic transaction" proposed vide section 92BA
Transfer Pricing applicable only when aggregate of "specified domestic transactions" exceeds Rs 5 crores in the previous year
Specified domestic transactions will be required to adhere to arms length price
Following additional compliance will be required:
Maintenance and keeping of information and document
Certificate from CA in Form 3CEBSlide5
Fair Market Value to be considered as “full value of consideration”A new section 50D proposed to be inserted
under capital gains provision Transactions where sales consideration is not ascertainable/indeterminate – Fair Market
Value
(FMV) of
capital asset
on the date of transfer considered as “full value of consideration”Transactions that may be effected
Exchange
Collaboration with land ownersSlide6
Transfer of certain immovable properties under Tax Deducted at Source (TDS) net New section 194LAA is proposed – To deduct tax by way of TDS @ 1% on consideration for
transfer of immovable property (other than agricultural land)Provision applicable (from 1 Oct 12) to any person transacting with resident transferor
Higher
of
actual consideration
paid or stamp duty valuation would form the basis for TDSTDS would get triggered
where the
consideration exceeds
-
Rs
50 lakhs
if the property is situated in
specified areas
Rs
20 lakhs
in case of
other areas Slide7
Amendment to Section 35AD – Investment based deduction Affordable Housing ProjectAmendment to section 35AD
where weighted deduction of 150% of capital expenditure is proposed in affordable housing
Proposed to be effective from
FY 2012-13
Hotel owners/ operators
Currently
deduction under section 35AD available
to hotel owners only
if such owner himself operates the same
Now proposed that hotel owners of two star and above categories, will get deduction of capital expenditure even if such hotel owner transfers the operations of hotel to franchisee/hotel operator
Amendment inserted retrospectively with effect from
1
April 2011Slide8
Clarification in connection with 'cost to previous owner'Amendment in Section 49 to define the cost of assets (“COA”)
COA to company will be the cost to previous owner in the following cases:
Conversion of
sole proprietor into company
Conversion of
Firm into company Amendment to take effect retrospectively from assessment year 1999- 2000Slide9
Direct tax proposals – Interplay of section 47 and 49
Third Party
Firm merges with company
Company
Firm
Transfer between Firm to Company – Not taxable vide 47(v).
COA of
Capital Asset is books of Firm - Rs. 100
Sale of Capital asset @ 175
Company records Capital Asset in its books - Rs. 150
Capital Gain computation in the hands of Company for sale of Capital Asset
Sale consideration – Rs. 175
Less: COA (section 49) –
Rs. 100
Capital Gain Rs. 75Slide10
Beneficial tax rate for funding affordable housing projectsForeign currency loan to an Indian company in the business of developing and building a
notified affordable housing project loan taken between 1 July of 2012 and 2015TDS
on interest at the
beneficial rate of 5%
(plus applicable surcharge and
cess)ECB to be allowed for funding notified affordable housing projectsSlide11
Clarification in relation to amalgamation and demerger involving subsidiaryMerger of subsidiary company into holding company - For tax neutrality, consideration shares have to be issued to shareholders of the amalgamating companyDemerger of subsidiary company into holding company
- Similarly for demerger to be tax neutral, resultant entity has to issue shares to the shareholders of the demerging entity The above conditions are impossible
to achieve
as the holding company could not issue shares to
itself
The condition to issue shares in the above circumstances have been dispensed with amendments proposed in Finance Bill 2012Slide12
Removal of cascading effect of Dividend Distribution Tax (DDT) in multi-tier structureAmendment to Section 115-O to remove the cascading effect of DDT in multi-tier corporate structure
The condition of being “ultimate holding” removed for computing DDT to be paid
Amendment effective from
1
July 2012However for claiming the benefit the holding company is required to hold more than 50% equity share in subsidiary companySlide13
Removal of cascading effect of DDT in multi-tier structurePresent situation
Proposed situation
Intermediate co.
Subsidiary co.
Holding co.
Dividend – Rs. 100
DDT – Rs. 16.225
Dividend – Rs. 100
DDT
– Rs. 16.225
Holding co.
Intermediate co.
Dividend – Rs. 100
DDT –
NIL
Subsidiary co.
Dividend – Rs. 100
DDT – Rs. 16.225
DDT cost for the Group –
Rs. 32.45
DDT cost for the Group –
Rs. 16.225Slide14
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