Budget 2012 – Highlights of Tax Proposals
Finance Budget 2012-13: Presented at the Parliament by Mr.Pranab Mukherjee, the Finance Minister of India, on 16th March 2012.
Article contributed by CA Varun Nirmal
• DTC rates proposed to be introduced for personal income tax. • Exemption limit for the general category of individual taxpayers proposed to be enhanced
• From INR 1,80,000 to INR 2,00,000 giving tax relief of INR2,000.
• Upper limit of 20 per cent tax slab proposed to be raised from INR 8 lakh to INR10 lakh.
• Proposal to allow individual tax payers, a deduction of upto INR10,000 for interest from
savings bank accounts.
• Proposal to allow deduction of upto INR 5,000 for preventive health check up.
• Senior citizens not having income from business proposed to be exempted from payment
of advance tax.
• To provide low cost funds to stressed infrastructure sectors, rate of withholding tax on interest payment on ECBs proposed to be reduced from 20 per cent to 5 per cent for 3
years for certain sectors.
• Restriction on Venture Capital Funds to invest only in 9 specified sectors proposed to be removed.
• Proposal to continue to allow repatriation of dividends from foreign subsidiaries of Indian companies at a lower tax rate of 15 per cent upto 31.3.2013.
• Investment link deduction of capital expenditure for certain businesses proposed to be
provided at the enhanced rate of 150 per cent.
• New sectors to be added for the purposes of investment linked deduction.
• Proposal to extend weighted deduction of 200 per cent for R&D expenditure in an inhouse
• Facility for a further period of 5 years beyond March 31, 2012.
• Proposal to provide weighted deduction of 150 per cent on expenditure incurred for
• Proposal to extend the sunset date for setting up power sector undertakings by one year
for claiming 100 per cent deduction of profits for 10 years.
• Turnover limit for compulsory tax audit of account and presumptive taxation of SMEs
to be raised from `60 lakhs to `1 crore.
• Exemption from Capital Gains tax on sale of residential property, if sale consideration
is used for subscription in equity of a manufacturing SME for purchase of new plant and
• Proposal to provide weighted deduction at 150 per cent of expenditure incurred on skill
development in manufacturing sector.
• Reduction in securities transaction tax by 20 per cent on cash delivery transactions.
• Proposal to extend the levy of Alternate Minimum Tax to all persons, other than
companies, claiming profit linked deductions.
• Proposal to introduce General Anti Avoidance Rule to counter aggressive tax avoidance scheme.
• Measures proposed to deter the generation and use of unaccounted money.
• A net revenue loss of `4,500 crore estimated as a result of Direct Tax proposals.
• Service tax confronts challenges of its share being below its potential, complexity
in tax law, and need to bring it closer to Central Excise Law for eventual transition
• Overwhelming response to the new concept of taxing services based on negative
• Proposal to tax all services except those in the negative list comprising of 17
• Exemption from service tax is proposed for some sectors.
• Service tax law to be shorter by nearly 40 per cent.
• Number of alignment made to harmonise Central Excise and Service Tax. A common simplified registration form and a common return comprising of one page are steps in this direction.
• Revision Application Authority and Settlement Commission being introduced in Service Tax for dispute resolution.
• Utilization of input tax credit permitted in number of services to reduce cascading of taxes.
• Place of Supply Rules for determining the location of service to be put in public domain for stakeholders’ comments.
• Study team to examine the possibility of common tax code for Central Excise and Service Tax.
• New scheme announced for simplification of refunds.
• Rules pertaining to point of taxation are being rationalised.
• To maintain a healthy fiscal situation proposal to raise service tax rate from 10 per cent to 12 per cent, with corresponding changes in rates for individual services.
• Proposals from service tax expected to yield additional revenue of `18,660 crore.
Other proposals for Indirect Taxes
• Given the imperative for fiscal correction, standard rate of excise duty to be raised from 10 per cent to 12 per cent, merit rate from 5 per cent to 6 per cent and the lower merit rate from 1 per cent to 2 per cent with few exemptions.
• Excise duty on large cars also proposed to be enhanced.
• No change proposed in the peak rate of customs duty of 10 per cent on non-agricultural goods.
• To stimulate investment relief proposals for specific sectors – especially those under stress.
Agriculture and Related Sectors
• Basic customs duty reduced for certain agricultural equipment and their parts; Full exemption from basic customs duty for import of equipment for expansion or setting up of fertiliser projects upto March 31, 2015.
• Proposal for full exemption from basic customs duty and a concessional CVD of 1 per cent to steam coal till 31st March, 2014.
• Full exemption from basic duty provided to certain fuels for power generation.
• Full exemption from basic customs duty to coal mining project imports.
• Basic custom duty proposed to be reduced for machinery and instruments needed for surveying and prospecting for minerals.
• Basic custom duty proposed to be reduced for equipments required for installation of train protection and warning system and upgradation of track structure for high speed trains.
• Full exemption from import duty on certain categories of specified equipment needed for road construction, tunnel boring machines and parts of their assembly.
• Tax concessions proposed for parts of aircraft and testing equipment for third party maintenance, repair and overhaul of civilian aircraft.
• Relief proposed to be extended to sectors such as steel, textiles, branded ready made garments, low-cost medical devices, labour-intensive sectors producing items of mass consumption and matches produced by semi-mechanised units.
Health and Nutrition
• Proposal to extend concessional basic customs duty of 5 per cent with full exemption from excise duty/CVD to 6 specified life saving drugs/vaccines.
• Basic customs duty and excise duty reduced on Soya products to address protein deficiency among women and children.
• Basic customs duty and excise duty reduced on Iodine.
• Basic customs duty reduced on Probiotics.
• Concessions and exemptions proposed for encouraging the consumption of energy-saving devices, plant and equipment needed for solar thermal projects.
• Concession from basic customs duty and special CVD being extended to certain items imported for manufacture for hybrid or electric vehicle and battery packs for such vehicles.
• Proposal to increase basic customs duty on imports of gold and other precious metals.
Additional resource mobilisation
• Proposals to increase excise duty on ‘demerit’ goods such as certain cigarettes, hand-rolled bidis, pan masala, gutkha, chewing tobacco, unmanufactured tobacco and zarda scented tobacco.
• Cess on crude petroleum oil produced in India revised to INR 4,500 per metric tonne.
• Basic customs duty proposed to be enhanced for certain categories of completely built units of large cars/MUVs/SUVs.
• Excise duty rationalised for packaged cement, whether manufactured by mini-cement plants or others.
• Levy of excise duty of 1 per cent on branded precious metal jewellery to be extended to include unbranded jewellery. Operations simplified and measures taken to minimise impact on small artisans and goldsmiths.
• Branded Silver jewellery exempted from excise duty.
• Chassis for building of commercial vehicle bodies to be charged excise duty at an ad valorem rate instead of mixed rate.
• Import of foreign-going vessels to be exempted from CVD of 5 per cent retrospectively.
• Duty-free allowances increased for eligible passengers and for children of upto 10 years.
• Proposals relating to Customs and Central excise to result in net revenue gain of INR 27,280 crore.
• Indirect taxes estimated to result in net revenue gain of `45,940 crore.
• Net gain of INR 41,440 crore in the Budget due to various taxation proposals.