India: Budget for 2013–14 – detailsMarch 6, 2013
The Budget for the fiscal year 2013–14 was presented on 28 February 2013. Generally, the direct tax proposals take effect when passed and ratified by Parliament, while the indirect tax proposals take effect immediately.
In his speech, the Finance Minister noted the need for greater clarity in the tax laws, a stable tax regime, a non-adversarial tax administration, fair mechanisms for dispute resolution and an independent judiciary to provide assurance to taxpayers.
In addition, the Finance Minister announced that a Tax Administration Reforms Commission will be established.
Some of the more significant taxation proposals announced in the Budget are detailed below.
The main direct taxation proposals are as follows:
- A tax credit of INR2,000 will be given to individual taxpayers with a taxable income of up to INR500,000.
- A surcharge of 10% will be charged to persons (other than companies) whose taxable income exceeds INR10 million.
- The surcharge on domestic companies whose taxable income exceeds INR100 million is to be increased to 10% (currently, the rate is 5% on income exceeding INR10 million).
- The surcharge on foreign companies whose taxable income exceeds INR100 million is to be increased to 5% (currently, the rate is 2% on income exceeding INR10 million).
- The surcharge is to be increased from 5% to 10% in all other cases, e.g., dividend distribution tax.
- The above increases in surcharge are expected to be in force for one year only.
- The concessionary tax rate of 15% on dividends received by an Indian company from a foreign subsidiary will be extended for a year.
- A final withholding tax of 20% is to be imposed on profits distributed by unlisted companies to shareholders via share buy-backs.
- A withholding tax of 1% is to be imposed on the value of the transfer of immovable property where the consideration exceeds INR5 million.
- The tax on royalty and technical service fee payments to non-residents is to be increased from 10% to 25%.
- The current securities transactions tax rates are to be reduced in respect of certain transactions.
- A commodity transactions tax is to be introduced although agriculture commodities will be exempted.
- A 15% investment allowance is to be provided to manufacturing companies that invest more than INR1 billion in plant and machinery during the period 1 April 2013 to 31 March 2015.
- Securitization trusts are to be exempted from income tax. The tax will, however, be levied at the time of distribution to the investors.
- Safe harbor rules are to be introduced once the recommendations made by recent committees are considered.
- The general anti-avoidance rules are to take effect from 1 April 2016.
Some of the indirect taxation proposals are as follows:
- The current normal/basic rates for excise duty (12%), service tax (12%) and custom duty (10% for non-agriculture products) will remain unchanged.
- The excise duty rates were decreased for a number of products including for the garment industry (0% for cotton fiber and 12% for man-made fiber used in spun yarn); handmade carpet and textile flooring (exemption for such products made out of coir and jute); and the shipbuilding industry (exemption from excise duty on ships and vessels, and removal of countervailing duty on imported ships and vessels).
- The specific excise duty on cigarettes and other tobacco products was increased by 18%.
- The excise duty was increased on sports utility vehicles (27% to 30%), and marble (INR30 to INR60 per square metre). Additionally, the excise duty on mobile phones priced at more than INR2,000 was increased to 6%.
- Vocational courses offered by approved institutions and testing services for agricultural produce were added to the service tax negative list, while air-conditioned restaurants will come under the service tax ambit.
- The customs duty exemption for specified parts for electric and hybrid vehicles was extended to 31 March 2015.
- The customs duty was decreased for a number of products, including specified machinery for the manufacture of leather goods (7.5% to 5%), and pre-forms of precious and semi-precious stones (10% to 2%).
- The customs duty was increased on a number of products, including set-top boxes (5% to 10%), raw silk (5% to 15%), high-end motor vehicles, motorcycles and yachts.
- The duty-free limit for the importation of gold has been increased to INR50,000 for male passengers and INR100,000 for female passengers.
- Customs duty concessions will be provided to the aircraft maintenance, repair and overhaul industry.
- The Government remains committed to the introduction of the goods and services tax and will continue its work on the constitutional amendment and laws for the introduction of the tax.
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