Corporate Tax
- No changes in basic tax rates and education cess However surcharge for domestic companies increased to 10% in case taxable income exceeds INR 100 million; Foreign companies to pay a surcharge of 5% on similar level of income.
- 10% surcharge instead of 5% on DDT and other distributions to investors Effective tax of 16.995% on Dividend distribution Companies proposing to declare dividends for FY 2012-13 may be advised to declare dividends before the rate increase;
- Withholding tax on Royalty and Fees for Technical Services paid to non-residents sought to be steeply increased to 25% subject to DTAA benefits, if any;
- 15% investment allowance for encouraging substantial investment in plant and machinery by manufacturing companies Investment of INR 1,000 million envisaged during Apr 1, 2013 to Mar 31, 2015;
- Sunset date for power sector for availing tax holiday under section 80 IA advanced to March 31, 2014;
- 15% taxation on dividend from specified foreign companies (in which recipient has shareholding of 26% or more) extended for one more year. No DDT on distribution of such dividends received from foreign subsidiaries;
- 20% distribution tax (effectively 22.66%) imposed on companies undertaking buy-back of shares; Tax to be levied on the buy-back consideration less the price received for issue of such shares.
- Concessional rate of 5% withholding tax on foreign investors subscribing long-term infrastructure bonds issued by an Indian company in India (rupee denominated); Interest on CCDs payable outside India would continue to attract withholding tax at normal rates.
- Consideration for transfer of immovable property in the course of their business by Real Estate companies holding them as stock-in-trade to be not less than the stamp valuation – else stamp valuation would be considered as the full value of consideration.
- Deduction for additional wages under section 80JJA restricted in respect of new employees in factory;
- Tax Residency Certificate is a necessary but not sufficient condition for claiming DTAA benefits.
Individual Tax
- No change in tax rates and income slabs.
- Marginal tax rebate/ credit of upto INR 2,000 extended to individuals having a total income in the range of INR 200,000 to INR 500,000.
- Individuals earning taxable income in excess of INR 10 million to be levied a surcharge of 10%.
- Interest deduction of upto INR 100,000 (cumulative in FY 2013-14 and 2014-15) on housing loan for individuals not holding any other house. Loan sanctioned after April 1, 2013 to not exceed INR 2.5 million and value of house not to exceed INR 4 million. Deduction for same amount cannot be claimed under house property income;
- Individuals to comply with withholding tax obligations viz. obtaining TAN, filing WHT returns in case they purchase immovable property (other than agricultural land) of value more than INR 5 million;
Other Important developments
- TDS @ 1% on transfer of immovable property (other than agricultural land) beyond a threshold of Rs 5 million.
- GAAR to come into force from FY 2015-16 Provisions moderated;
- Directors of private companies liable to pay tax interest and penalty in the event of non-recovery from the company if same is attributed to any gross neglect, etc. of the Director;
- E-filing of Wealth Tax Returns to be mandated
