Key Tax Proposals of Budget – 2013

  • Investment allowance for high value investments, for investments above Rs 100 Cr. will get 15% more deduction in addition to depreciation. Investment allowance for investments made between FY 13-15.

Individual Taxes

  • No change in tax slab or rate.
  • For Rs. 2 lakh to Rs. 5 lakh income slab, tax credit of Rs. 2000 to be provided, 1.8 cr tax payers to benefit.
  • Individuals – 10% surcharge on taxable income above Rs. 1cr.
  • Liberalized Rajiv Gandhi Equity scheme, Extended to investments in Mutual Funds. Eligible people to include people with income upto INR 12Lacs.

Corporate Taxes

  • Corporate tax surcharge, DDT surcharge increase from 5% to 10% Education cess to continue @ 3%.
  • Foreign Cos – surcharge to increase from 2.5% to 5%
  • 80IA benefit for power sector extended by 1 year.
  • Securitisation trust to be exempt from income tax.
  • Lower tax on dividend from foreign subsidiary to continue @ 15% for 1 more year;
  • No DDT on further distribution to shareholders.
  • Pass through status for AIF (angel investors) and specified funds

TDS

  • 1% TDS on transfer of immovable properties above Rs. 50 lakhs
  • 20% TDS on profit distribution by unlisted companies through share buy-back…. FM says this has become a tax avoidance route.
  • Royalty & FTS rate for payment to Non-residents to be increased from 10% to 25%, subject to DTAA provisions.
  • Commodities Transaction Tax on non-agro futures at 0.01%. CTT will be treated as non-speculative, will be allowed as deduction.

GAAR to be effective from 1 April 2016.

  • Propose to incorporate Govt acceptance of Shome committee recommendations on GAAR. 

Transfer pricing:

  • Safe harbour rules will be issued soon. Separate circular on Taxation of Development Center based on Rangachary Committe report to be issued soon.

Looking Forward

  • DTC is work in progress.
  • DTC intended to be new code, in line with best international practices… FM says will work with Standing Committee and will endeavour to bring DTC bill in budget session itself!
  • Tinckering with STT rates
  • FM again gives thrust to FDI, says doing business in India must be seen as easy, friendly and mutually beneficial.
  • Tax free bonds limit doubled from 25k cr to 50k cr
  • Tax Administration Reforms Commission to review tax policy and tax laws.

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Before the Budget: Know your taxes how they were till now. For the financial year 2012-13

Calculate your current taxes here. We’ll explain how they’ve changed as the finance minister unfolds it in his speech.

Follow the link. Click here

Our newer posts will talk about what your taxes will be next year and how they’ll change.

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TheFinanceBite- Your Bud to the Budget!

Big day tomorrow! The BUDGET will be out!  TheFinanceBite team will help you decode it as it goes. We’ll help you understand how it’ll affect your pockets and your businesses.

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We’re going live with your queries tomorrow evening at 7 p.m.(IST). We’ll take all your queries on the comment boxes.

Sound us on just about anything you want to know about the budget. You could reach us through the comment box below or our facebook page or twitter

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Transfer pricing aspects of Marketing intangibles

Key take home from the ameliorating LG Electronics Ruling of the Special Bench

A trademark is considered to be an intangible asset when a license is granted for its use; tantamounting to a transfer of value which is subjected to transfer pricing (TP) rules.intangibles

The controversial Advertising, Marketing and Promotion (AMP) activities undertaken by enterprises not owning a trademark (but retaining it) has long been a focus issue for TP audits. In such cases, the tax authorities have argued that the licensor needs to compensate the licensee for undertaking exorbitant AMP activities. Where it is perceptible that the marketing spend is extraordinary or the use of an intangible is obligatory; in such cases a marketing intangible or economic ownership may be considered to have been created.

The recent ruling of the Special Bench of Delhi Tribunal in the case of LG Electronics India Pvt. Ltd. that ingenuously discusses the creation and compensation for marketing intangibles, only comes to underline this trend. The Special Bench concluded that TP adjustment in relation to AMP spend by the licensee for creating/ improving marketing intangibles for and on behalf of an Associated Enterprise (AEs) or the licensor is permissible and that earning a markup from the AEs in respect of AMP expenses incurred for and on behalf of the AE is allowable.

From the treasury standpoint, local AMP expenditure adds value to the trademark and as such, the licensee should be compensated at arm’s length compensation for its elevation. This is bed-racked on the notion that AMP investment leads to the trademark becoming more recognizable and valuable in the marketplace.

In a nutshell, adjustment on account of licensee’s expenses in connection with promotion of marketing intangibles, which even the licensor relishes is perceived to be a virtual reality after the Special Bench ruling (or at least until such time the principles are overturned or balanced in appeal before higher appellate forums).

- The Author is a transfer pricing expert and is on-board TheFinanceBite team. You can write in to address your case specific queries at thefinancebite@gmail.com

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Your rescue from crippling “February” and choking personal taxes

Its that time of the year when most of us are reminded about savings to our incomes, that time when we’re made to realise that ELSS saving were infact better choices than dolling that money out on night-outs and (oh-that-sexy) expensive tablet you just bought. That time when your faces drown as you look at the tax computations bankroll the Income tax Babu’s Pockets.

TheFinanceBite- Personal taxes guide

TheFinanceBite- Personal taxes guide

Or quite simply, that time when our savings declarations are due to our employers for more/no tax deduction from our remaining existence on the planet.

Fret not, People! TheFinanceBite gives you a guide to save taxes that easy way.

To move forward, each must understand that there are atleast 2 simple ways to save taxes on salaries; the deductions and the exemptions

The exemptions: These are the incomes (allowances) that the government exempts upto a threshold limit.

eg: Make sure you have these before you compute your taxes and declare your incomes

Travel allowance: 800(for a normal healthy person) or 1,600(for a handicapped person, not esentially severely handicapped)

House Rent Allowance(the infamous HRA): The least of 3 is exempt- HRA component in the salary/rent paid-10%of basic salary/50%(40% if living in a non metropolitan city) of basic salary.

Medical Allowance: 15,000 a year (medical bills that support expenditure, exempt them to a max of 15,000 a year). This is typically different from the medical insurance policy you pay.

Children’s education allowance: Rs. 100 per child per month (that rounds off the Rs. 2,400 per annum)

The Deductions: These are based on actual evidences and the government’s way of showing appreciation for contributing to the economy’s health.

Your 80C falls here and so do your mediclaim policy payments.

We all have some bit of knowledge about the 80C way of saving taxes. We’ll let you know of some of the lesser known expenses you can put in under your 80c dclarations. read on:

Tuition fee: Your child’s tuition fees component is exempt under this section. (mind you, only tuition fee, no building/development/lab fund).
But Why this? Remember, its the government’s way of thanking you, because “Padhega-tabhi-to-badhega-India”

Bank Interest: Interest earned during the year upto Rs. 10,000 is exempt in a year under section 80C

Health Insurance: A deduction of up to Rs 15,000 can be claimed in respect of the health insurance premium covering you and your wife and dependent children. You can claim an additional exemption of Rs 15,000 on premium payments made for parents and a higher deduction of up to Rs 20,000 if one of your parents is a senior citizen. This is in addition to Rs. 1Lac 80C deduction.

no taxesDeduction for rent paid if you are not availing HRA: You can claim a deduction for rent paid to the extent of INR 2,000 per month even if your salary doesnot have a HRA component from your employer or you are self-employed. This deduction, available under Section 80GG, is subject to some conditions.


To more suggestions on your peculiar queries and burdening taxes, write to us at thefinancebite@gmail.com. We’ll rescue you from being the guy above to the dude here>. (Our services are free, we don’t need to remind you again)

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TheMonthlyGrub, November edition: Up for Grabs!

Its here! TheMonthlyGrub- November, 2012 is ready for download.

To receive a free copy in your inbox, Register Here!

-TheFinanceBite Team!

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Happy Diwali!

People! Well wishes for the festive season. A Very Happy Diwali to everyone

-TheFinanceBite Team!

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