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Union Budget - PPT Presentation

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

tax company section 000 company tax 000 section capital proposed ddt transfer subsidiary consideration firm rate effect holding 500 domestic hotel 2012

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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

© Walker, Chandiok & Co. All rights reserved.Disclaimer:This document is prepared for information purposes only. No reader should act on the basis of any statement contained herein without seeking professional advice. The firm expressly disclaims all and any liability to any person who has read this, document or otherwise, in respect of

anything, and of consequences of anything done, or omitted to be done by any such person in reliance upon the contents of this document.

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