UNION BUDGET 2011

Bharat Kumar Soni AAO

India Budget

The Union Budget of India also

called the General India Budget
Presented each year on the last
working day of February
It outlines all the economic planning
of the Government of India for the
next year.

Origin and History

The first general budget of India was

presented by the India's first Finance Minister
Sir R.K. Shanmugham Chetty on November
26, 1947.
28 Union Finance Ministers have been
presenting the budget year after year.
This is the 6th Budget of Mr. Pranab Mukherjee
Agricultural sector alone was focused initially,
but later on, the focus shifted to the many
sectors including the industrial, financial and
other sectors.

Passing of Budget

The annual India budget has to be passed

by the House of the parliament before it
can come into effect on April 1, the start of
India's financial year
The Indian parliament has one month to
review and modify the government's
budget proposals
If by April 1, the parliamentary discussion
on the budget has not been completed, the
budget as proposed by the minister of
finance goes into effect subject to
retroactive modifications after the
parliamentary review.

INFRASTRUCTURE
Allocation of Rs 2,14,000 crores for
infrastructure in 2011-12 at an increase
of 23.3 % over 2010-11- amounts to
48.5 % of total plan allocation.
Comprehensive policy for PPP projects.
To boost infrastructure development,
tax free bonds of Rs 30,000 crore
proposed to be issued by Government.

TAX REFORMS
DTC proposed to be effective from
April 1, 2012.
GST issues narrowed down with
states.
Companies Bill to be introduced in
Lok Sabha during the current
session.

SUBSIDIES

Subsidy for urea under

consideration.
Direct transfer of cash subsidy to
people living below poverty line for
better delivery of kerosene, LPG and
fertilizers

HOUSING SECTOR FINANCE

Existing scheme of interest subvention of

1% on housing loan further liberalised.
Housing loan limit enhanced to Rs 25 lakhs
for dwelling units under priority sector
lending.
Rural Housing Fund enhanced to Rs 3,000
crores.
Central Electronic Registry to prevent
frauds involving multiple lending on the
same immovable property.

BLACK MONEY

Five fold strategy to be put into operation

to deal with the problem of generation
and circulation of black money.
Membership of various international fora
engaged in anti money laundering,
Financial integrity and Economic
development, Exchange of information
for tax purposes and transparency to be
secured.

Various Tax Information Exchange

Agreements (TIEA) and Double
Taxation Avoidance Agreements
(DTAA) concluded. Foreign Tax
Division of CBDT has been
strengthened to effectively handle
increase in tax information exchange
and transfer pricing issues.
Enforcement Directorate strengthened
three fold to handle increased number
of cases registered under amended
Money Laundering Legislation

Finance Ministry has commissioned

study on unaccounted income and
wealth held within and outside the
country.
Comprehensive national policy to be
announced in near future to strengthen
controls over prevention of trafficking
on narcotic drugs

IMPROVING GOVERNANCE

IT Initiatives
Various IT initiatives for efficient tax
administration such as:e-filing and e-payment of taxes
adoption of Sevottam concept by CBEC
and CBDT
web based facility for tax payers to track
the refunds and credit for pre-paid taxes
augmentation of processing capacity.

 A new scheme with an outlay of Rs

300 crores to be launched to provide
assistance to States to modernise
their
stamp
and
registration
administration and roll out estamping in all the states in the next
three years.
A new simplified form Sugam to be
introduced to reduce the compliance
burden of small tax payers falling
within presumptive taxation

Three more benches of Settlement

Commission to be set up to fast track
the disposal of cases.
Steps initiated to reduce litigation and
focus attention on high revenue cases

CORRUPTION

Group of Ministers constituted to

consider measures for tackling
corruption.

FINANCE BILL 2011

DIRECT TAXES

Definition of charitable purpose

It is proposed to amend section

2(15) to enhance the current
monetary limit in respect of receipts
from ancillary activities from ten
lakhs rupees to twenty-five lakhs
rupees.
This amendment is proposed to take
effect from A.Y 2012-13

Exemption of certain perquisites of Chairmen

and Members of Union Public Service
Commission

It is proposed to amend section 10 to

extend benefit of exemption in respect of
specific perquisites and allowances, which
will be notified by the central government,
received by both serving as well as retired
Chairmen and Members of Union Public
Service Commission.
This amendment is proposed to take
effect retrospectively from 1st April,2008.

Exemption of specific income of notified body

or authority or trust or board or commission

A new clause in section 10 of the Incometax Act is being inserted to provide

exemption from income tax to any
specified income of a body, authority,
board, trust or commission which is set up
or constituted by a Central, State or
Provincial Act or constituted by the Central
Government or a State Government with
the object of regulating or administering
an activity for the benefit of the general
public, provided-

it is not engaged in any commercial activity,

is notified by the Central Government in
this behalf
The nature and extent of income to be
exempted will also be specified while
notifying such entity.
A consequential amendment is proposed in
section 139 to provide filing of the return of
income.
These amendments are proposed to take
effect from 1st June 2011

Infrastructure Debt Fund

In order to augment long term, low cost

funds from abroad for the infrastructure
sector, it is proposed to facilitate setting
up of dedicated debt funds, which will be
exempt u/s 10 of the IT Act, once notified
by the Central Government. It will
however, be required to file return of
income.

It is also proposed to amend section 115A

of the Income tax Act to provide that any
interest received by a non-resident from
such notified infrastructure debt fund shall
be taxable at the rate of 5% on the gross
amount of such interest income.
New section 194LB to provide that the tax
shall be deducted at the rate of 5% by
such notified infrastructure debt fund on
any interest paid by it to non-resident.
These amendments are proposed to take
effect from 1st June 2011.

Provisions relating to MAT and DDT

in case of SEZ

The above provisions were inserted in

the Income tax Act by the SEZ Act
w.e.f 10th February,2006.
It is proposed to sunset the
availability of exemption from
minimum alternate tax in the case of
SEZ Developers and units in SEZs in
the Income tax Act as well as the SEZ
Act.

This amendment to section 115JB of the

Income tax Act will take effect from 1st
April,2012.
It is further proposed to discontinue the
availability of exemption from DDT in the
case of SEZ Developers under the Incometax Act as well as the SEZ Act for
dividends declared, distributed or paid on
or after 1st June, 2011.
This amendment to section 115-O of the
IT Act will take effect from 1st June,2011

Weighted deduction for contribution

made for approved scientific
research programme

In order to encourage more contributions

to approved scientific research
programmes, it is proposed to increase
the weighted deduction u/s 35(2AA)
from 175 % to 200% ,in respect of
amounts paid to National Laboratories,
Universities, IITs etc for the purpose of
approved scientific research programme.
This amendment is proposed to take
effect from 1st April, 2012.

Tax benefit for New Pension

System (NPS)

It is proposed to amend section 80CCE so

as to provide that the contribution made
by the Central Government or any other
employer to a pension scheme u/s
80CCD(2) shall be excluded from the limit
of 1 lakh provided u/s 80CCE.

Currently, the contribution made by

the employer towards a recognised
provident fund, an approved gratuity
fund is allowable as a deduction from
business income u/s 36, subject to
certain limits. However, the
contribution made by an employer to
the NPS is not allowed as deduction.

It is, therefore, proposed to amend

section 36 so as to provide that any
sum paid by the assessee as an
employer by way of contribution
towards a pension scheme, as referred
to in section 80CCD(2) on account of an
employee to the extent it does not
exceed 10% of salary of the employee
in the previous year, shall be allowed as
deduction in computing the income
under the head Profits and gains of
business or profession
These amendments are proposed to
take effect from A.Y 2012-13.

Deduction for investment in longterm infrastructure bonds

It is proposed to amend section

80CCF to allow deduction on account
of investment in notified long term
infrastructure bonds for the A.Y
2012-13.

Extension of sunset clause for tax

holiday for power sector

It is proposed to amend section 80IA(4)(iv) to extend the terminal date

for a further period of one year, ie
upto 31/03/12.
This amendment will take effect from
1st April,2012

Rationalisation of provisions
relating to Transfer Pricing

It is proposed to amend section 92C

of the Act to provide that instead of
present variation of 5% in respect of
pricing in Intl transaction, the
allowable variation will be such
percentage as may be notified by the
Central Government in this behalf.
This amendment is proposed to take
effect from 1st April, 2012.

It is proposed to amend section 92CA

so as to specifically provide that the
jurisdiction of the transfer pricing
officer shall extend to the
determination of the ALP in respect of
other international transactions, which
are noticed by him ,subsequently in the
course of proceedings before him.
These international transactions would
be in addition to international
transactions referred to the TPO by the
Assessing Officer.

In order to enable the TPO to

conduct on -the-spot enquiry and
verification, it is proposed to amend
section 92CA (7) so as to enable the
TPO to also exercise the power of
survey conferred on the income- tax
authority u/s133 A of the Act.
These amendments are proposed to
take effect from 1st June 2011.

Corporate assessees face practical

difficulties in accessing contemporary
comparable data before 30th
September in order to furnish a report
in respect of their international
transactions. It is, therefore, proposed
to amend section 139 to extend the
due date of filing of income by such
corporate assesses to 30th November
of the AY.
This amendment is proposed to take
effect from 1st April 2011.

Tool Box of counter measures in respect of

transaction with persons located in a
notified jurisdictional area

In order to discourage transactions

by a resident assessee with persons
located in any country or jurisdiction
which does not effectively exchange
information with India, antiavoidance measures have been
proposed in the Income-tax Act.

New section 94A to be inserted in the

Act to specifically deal with transactions
undertaken with persons located in
such non co-operative country or area .
The proposed section provides :an enabling power to the Central
Government to notify any country or
territory outside India, having regard to
the lack of effective exchange of
information by it with India, as a
notified jurisdictional area

that if an assessee enters into a

transaction, where one of the parties
to the transaction is a person located
in a notified jurisdictional area, then
all the parties to the transaction shall
be deemed to be associated
enterprises and the transaction shall
be deemed to be an international
transaction and accordingly, transfer
pricing regulations shall apply to such
transactions;

that no deduction in respect of

any payment made to any
financial institution shall be
allowed unless the assessee
furnishes an authorization, in the
prescribed form, authorizing the
Board or any other income-tax
authority acting on its behalf, to
seek relevant information from
the said financial institution

that no deduction in respect of any

other expenditure or allowance
(including depreciation) arising
from the transaction with a person
located in a notified jurisdictional
area shall be allowed under any
provision of the Act unless the
assessee maintains such other
documents and furnishes the
information as may be prescribed;

that if any sum is received from a

person located in the notified
jurisdictional area, then, the onus
is on the assessee to satisfactorily
explain the source of such money
in the hands of such person or in
the hands of the beneficial owner,
and in case of his failure to do so,
the amount shall be deemed to be
the income of the assessee

that any payment made to a

person located in the notified
jurisdictional area shall be liable to
deduction of tax at the higher of
the rates specified in the relevant
provision of the Act or rate or
rates in force or a rate of 30 per
cent.
This amendment is proposed to
take effect from 1st June 2011

Taxation of certain foreign

dividends at a reduced rate

New section 115BBD to provide that where

total income of an Indian company
includes any income by way of dividends
received from a foreign subsidiary
company, then such dividends shall be
taxable at the rate of 15%. (plus
applicable surcharge and cess) on the
gross amount of dividends. No
expenditure in respect of such dividends
shall be allowed under the Act.
This amendment is proposed to take effect
from 1st April, 2012

Minimum Alternate Tax

It is proposed to amend section

115JB (1) to increase the rate of MAT
to eighteen and one-half per cent
from the existing rate of 18% of such
book profit.
This amendment will take effect from
1st April, 2012

Alternate Minimum Tax for Limited

Liability Partnership (LLP)

New Chapter XII-BA in the Incometax Act containing special provisions

relating to certain limited liability
partnerships.

Where the regular income-tax

payable for a previous year by a
LLP is less than the alternate
minimum tax payable for such
previous year, the adjusted total
income shall be deemed to be
the total income of such LLP and
it shall be liable to pay incometax on such total income at the
rate of eighteen and one-half per
cent..

Collection of information on requests

received from tax authorities outside
India

It is proposed to facilitate prompt

collection of information on requests
received from tax authorities outside
India in relation to an agreement for
exchange of information u/s 90 or
section 90A of the Income-tax Act.

Section 131(3) to be amended to

empower the tax authority, as
notified by the Board, to impound
and retain any books of account
and other documents produced
before it in any proceeding under
the Act.
These amendments will take
effect from 1st June, 2011

Exemption to a class or classes of

persons from furnishing a return of
income

In order to reduce the compliance burden on

small tax payers, it is proposed to insert subsection (1C) in section 139. This provision
empowers the Central Government to exempt, by
notification in the Official Gazette, any class or
classes of persons from the requirement of
furnishing a return of income, having regard to
such conditions as may be specified in that
notification
These amendments will take effect from 1st June
2011

Notification for processing of returns

in Centralised Processing Centers

It is proposed to amend section

143(1B) to extend the existing time
limit for issue of notification to 31st
March 2012.
This amendment will take effect
retrospectively from 1st April 2011

Extension of time limit for

assessments in case of exchange of
information

It is proposed to exclude the time

taken in obtaining information from
the tax authorities in jurisdictions
situated outside India, under an
agreement referred to in section 90
or section 90A, from the statutory
time limit prescribed for completion
of assessment or reassessment.
These amendments will take effect
from 1st June, 2011

Modification in the conditions for

filing an application before the
Settlement Commission

It is proposed to expand the criteria

for filing an application for
settlement by a tax payer in whose
case proceedings have been initiated
as a result of search or requisition of
books of account in the case of his
relative.

It is proposed to insert a new clause (ia)

in the proviso to section 245C(1). This
stipulates that an application can also be
made, where the applicant
is related to the person in whose case
proceedings have been initiated as a
result of search and who has filed an
application; and
is a person in whose case proceedings
have also been initiated as a result of
search in the hands of his relative.
the additional amount of income-tax
payable on the income disclosed in his
application exceeds ten lakh rupees

Omission of the requirement of

quoting of Document
Identification Number

Considering the practical difficulties

due to non-availability of requisite
infrastructure on an all India basis, it
is proposed to omit section 282B of
the IT Act requiring every IT
Authority to allot DIN.
This amendment will take w.r.e.f 1st
April 2011

Reporting of activities of liaison

offices

It is proposed to seek regular information

from non-residents regarding the
activities of their liaison offices in India. A
new section 285 is proposed in the
Income-tax Act mandating the filing of
annual information, within sixty days from
the end of the financial year, in the
prescribed form and providing prescribed
details by non-residents as regards their
liaison offices.
This amendment is proposed to take effect
from 1st June, 2011

INDIRECT TAXES
Service Tax

Standard rate of Service Tax retained

at 10 per cent, while seeking a closer
fit between present regime and its
GST successor.
Hotel accommodation in excess of Rs
1,000 per day and service provided
by air conditioned restaurants that
have license to serve liquor added as
new services for levying Service Tax.

Service Tax on air travel both

domestic and international
raised.
Services provided by life
insurance companies in the area
of investment and some more
legal services proposed to be
brought into tax net.

Tax on all services provided by

Hospitals with 25 or more beds with

facility of central air conditioning.
Diagnostic services being provided by
a clinical establishment with the aid of
laboratory of other medical
equipment.
Service provided by Doctor, not being
an employee of a clinical
establishment, from the premises of
such establishment

All individual and sole proprietor tax

payers with a turnover upto Rs 60
lakh freed from the formalities of
audit.
To encourage voluntary compliance
the penal provision for Service Tax
are being rationalised. Similar
changes being carried out in Central
Excise and Custom laws

TO COST MORE

TO COST LESS

Medicines
Medical Equipments

Life Saving Drugs,

Homoeopathy
Medicine, Sanitary
Napkins, Diapers
Syringes/Needles
Gold Bars

Branded Gold
Computer, CD Rom,
CD Drive, Hard Disk
Drive, DVD Writer

Electronic Hardware,
Printer, Mobile
Phone, Battery
Charger

Clothes
Text Books, Note
Books, Fountain Pens,
Pencils, sharpners etc

Agarbathis

Food in A/c Bar, Hotel

Accommodation
Air Travel, Pastry,
Cake, Chocolates
Hospital Expenses,
Litigation costs

Electric Car

Agricultural
Equipments

AAM ADMI
Below is the actual price list of a canteen
and that too in India
Tea

Rs. 1.00

Soup

Rs. 5.50

Dal

Rs. 1.50

Meals

Rs. 2.00

Chapati

Rs. 1.00

Chicken

Rs.24.50

Dosa

Rs. 4.00

Veg Biryani

Rs. 8.00

Fish

Rs.13.00

These items are meant for POOR

PEOPLE and are available at Indian
Parliament Canteen. The MPs who have
access to the canteen earn
Rs. 80,000/- per month along with
other perks

Now Judge for yourself as to

who is the AAM ADMI

THANK YOU