FSIA Budget 2010-11 dt March 02, 2011

 

Rajive Chawla

President, FSIA

 

 

Sangeet Kr Gupta

Hon. Consultant, FSIA

BUDGET 2010-11

 

 

Newspaper Coverage

Serial no

News paper

 ( Newspaper coverage ) 

1

 click here Dainik Jagran

2

 click here Dainik Bhaskar

3

 click here Hindustan Times (Hindi)

4

 click here Nav Bharat Times Times of India Group

5

 click here Nai Dunia

6

 click here NBT

 

  

For the Fourth Consecutive Time in the history of Faridabad, we had an Instant and LIVE Budget Analysis, with a panel of Experts,

 

·         We had Chartered Accountants from the Faridabad C.A. Branch of NIRC of Institute of Chartered Accountants of India, We also had the media, We had eminent Bankers, from Financial Institutions, including Mr Ajay Garg, Director of Corporation Bank. We had our own FSIA panel of Consultants. We had our own Mr Rajive Chawla, who later in the day was panel speaker and voice of SME at the CNBC, Zee Business TV Channel and many other TV channels

 

·        And we had …….. the dynamic businessmen of Faridabad ,.

 


 

 

 

 

It was Mr Pranab Mukherjee LIVE, via the Giant Television, in the Hotel Delite , before all the members of the FSIA.

 

It was a successful event,

As always

.

 

 

Dear Members,

 

The Budget 2011 came in, on 28th Feb as per schedule. And many more finer nuances have become apparent in the fine print. More will be discovered in the coming days. But till then, some big points à and our FSIA analysis on à How they effect you ?

 

 

So, let us start our review in two parts

 

Part 1

Major Highlights in this Budget 2010

Part 2

Things you might have Missed

Unknown, unseen, things, in the “Fine Print”,

Which Media does not discuss…

 

 

1.    Excise Rates “No Change”

a.    We all expected a change in rates

b.    But thankfully, there is No increase or Decrease

 

2.    Excise on Garments for “Local Sales”

a.    New 130 products added at 1% only

b.    Some more like Garments at 10%

 

 

 

 

3.    Service Tax:

a.    No Rate Change.

b.    But, Many new services added / extended.

 

FSIA notes = All newspapers are saying this is bad, and against public. However we at FSIA also bring to your notice that now the benefit is that all of these get ready to embrace the GST. And they also get MODVAT of 100% of the service tax/excise paid on their inputs. So the actual effect on the provider will not be too much.

 

 

4.    Service tax big change

a.    Payment of Service Tax Shifted from “Receipt Basis to Accrual Basis

 

Cut off date is 1.4.2011 ( as per Point of Taxation Rules 2011) Notification no 18/2011.ST

What will happen to the bills already issued and not collected ???    = to be finalised

 

 

5.    Service tax New change

a.    Look at this

                                  i.    When a CA bills you, he charges service tax

                                 ii.    When a CS bills you, he also charges you the service tax

                                iii.    But when an Advocate bills you, he did not charge you service tax till now.

b.    No more

c.    From now,

                                  i.    As per the newly inserted clause no zzzzm, all business advice/ sales tax consultancy / excise consultancy / ESI-EPF consultancy / tribunal / appeal consultancy / by “any body” is included

d.    Tax rate = same 10%

e.    Modvat

                                  i.    if you are a excisable entity

·         You get full Modvat of this against your excise

                                 ii.    if you are a service provider entity

·         You get full Modvat of this against your service tax

 

 

 

6.    Service tax Returns – Late Filing Penalty

a.    Till now the late fee (penalty) was only upto Rs 2000. Now the “Late filing fee limit” increased 1000% à to Rs 20000

b.    The rate of interest on delay now increased from to 18% p.a.

 

 

7.    Prosecutions in Service tax – Made Stiff

a.    Now, if somebody is caught, stealing the service tax ( in any form, sec 89), then, he shall be prosecuted. Imprisoned for between 1 year to 3 years.

b.    And this imprisonment will not be less than 6 months, except in case of just 4 exceptions, like age, first timer etc.

c.    So, beware.

 

 

8.    Income Tax  Rates changed, Small reduction for most Tax payers

a.    Basic Slabs

Basic Rates 

 

Rate

 

Upto Rs. 1,80,000

Nil

 

Rs. 1.80 lac - Rs.5.00 lac

10%

 

Rs. 5.00 lac - Rs.8.00 lac

20%

 

Rs. 8.00 lac onwards

30%

 

 

 

 

 

Surcharge

 

NIL

 

Education Cess , & SHE cess ( continues)

3% for all.

 

b.    Basic exemption limit (till which, you do not have to pay any tax). This will be as follows :

                                  i.    For Gents                          : Rs. 1,80,000

                                 ii.    For Ladies                         : Rs. 1,90,000

                                iii.    For Senior Citizens           : Rs. 2,50,000  ( 60 yr to 80 yr )

                               iv.    For Very Senior Citizens   : Rs. 5,00,000  ( over 80 years )

 

c.    So, ??  Most of you save a small value in Income TAXES = Savings are upto Rs. 2060. per person

 

 

Please observe == effective Tax Rates, have become further, very very low

 

Table 1 = Tax % has come down to very very low.

 

Income

Savings - section 80C, 80CCF (suppose)

Net taxable income after 80C

rate

Cess

Income Tax

Effective  Tax %

100,000

0

100,000

0

0

0

0.00%

200,000

50,000

150,000

0

0

0

0.00%

300,000

75,000

225,000

4,500

135

4,635

1.55%

500,000

100,000

400,000

22,000

660

22,660

4.53%

800,000

120,000

680,000

68,000

2,040

70,040

8.76%

1,000,000

120,000

880,000

116,000

3,480

119,480

11.95%

 

Note : We have “assumed” some savings in Section 80C, and new section 80CCF ( new infrastructure bonds ). Actual savings vary from person to person. And, please note, apart from this, you can take benefit of Mediclaim, HRA, conveyance allowance, and perks etc also.

 

Table 2 = TDS per month,  has come down too, to pity amounts.

 

 

Income

Tax reqd per month

100,000

0

200,000

0

300,000

386

500,000

1,888

800,000

5,837

1,000,000

9,957

Above Table 2 is based on the Table 1

 

Also, please see that a person who earns, say Rs. 42000 per month, has to pay TDS of just 1888 per month.

 

Similarly, for an Income of Rs. 25000 p.m. his tax could be just 380 p.m..

 

And for Income of 20000 p.m. his TDS could be just around Rs NIL month

 

 


 

 

9.    MAT ( Minimum Alternate Tax ) – Section 115JB

 

a.    What ? – The companies, who have book profits but don’t pay income tax due to some deductions / exemptions,  They have been forced to pay heavier taxes. 

b.    Have a look  !!

 

MAT

till 2008 budget

in 2009 budget

in 2010 budget

in 2011 budget

Basic MAT Rate

10.00%

15.00%

18.00%

18.50%

Surcharge

1.00%

1.50%

1.35%

0.93%

Cess

0.33%

0.50%

0.58%

0.58%

Total Effective MAT Tax

11.33%

17.00%

19.93%

20.01%

 

 

 

 

 

 

c.    The increase has been tremendous and pretty sharp.

 

d.    Whom does this apply to ?

                                  i.    Many companies who set up plants in backward areas, like Himachal, Uttaranchal etc

                                 ii.    Many companies who had EOU units

                                iii.    And also now, all the SEZ units too

 

 

10.  SEZ Taxation  :   Bubble Burst

a.    Suddenly = MAT is yes ( same 20.01% )

b.    Suddenly Dividend tax is also YES ( 15% + sc+ cess ) = 16.22%

c.    Look , for a SEZ unit with a profit of Rs. 1 crores, now income tax payable shall increase from NIL lakhs (upto  2010-11) to Rs. 19.93 lakhs(in AY 2011-12)  

d.    Loss to Jaipur SEZ / Noida SEZ units

 

e.    Gain to IMT Faridabad . . .

                                  i.    and all the Industrial sectors in Faridabad, Palwal, Noida, Manesar Gurgaon, and all normal locations.

                                 ii.    Idea= Why go so far . . .when you are taxable anyway  ??

 

 

11. CST raised from 4% to 5% for all declared goods

a.    Section 15 of CST Act, 4% will be replace with 5%

b.    Example of items =

 

Almost all varieties of Iron and Steel like

i. Ingots, slabs , rounds, rods, squares, angles, channels, tees,

ii. discs, rings, forgings and steel castings ;

iii. tool, alloy and special steels of any of the above categories ;

iv. steel melting scrap in all forms including steel skull, turnings and borings ;

v. steel tubes both welded and seamless, of all diameters and lengths,

Applicable for all FSIA members, who are either make Steel (Sales), or Steel components ( their Purchase).

 

Almost all varieties of Man-made fabrics

 

Some varieties of petroleum products

 

 

12.  Some “Non co-operative” countries will be “notified”

 

This is a measure for black money management.

  • And, If you receive any funds from anybody in this country,

    • even if it is loan, it will be treated as your income

  • If you pay anybody, you have to keep special records

    • Else, If you incur any expense, it will be DISALLOWED

  • And you have to deduct the TDS

    • At highest TDS rate of 30%

    • Or rate notified, whichever is higher

 

The Effect = If any Govt does not help à we can BAN them

Logic : The “Attractive pull” factor of these “dark hidden secret areas” goes down

 

 

 

13.  MAT is coming closer - for non corporates also

 

Law

  • MAT = minimum alternate tax

  • Example – if a company is running a unit in tax free area, its income is normally tax free. But due to MAT rules, that co will have to pay the tax of 20% . ( at least )

Fact

  • In india, apart from the company form, others don’t have to pay the MAT

  • But, in USA etc, individuals and firms also pay the MAT

The Change

  • As a small beginning, the Govt has put the MAT of same 18.5% on the LLP also

  • LLP are Limited liability Partnership firms

 

FSIA message

Note the language of section 115JC. This is exactly based on the language and tenor of the laws in USA. Infact even the MAT is now called AMT ( Alternate Minimum Tax = This is the same nomenclature as used by the Government of USA ).

 

Beware, in coming years, normal partnerships and even proprietorships may also be covered in MAT , as in USA. 

 

For details, refer to our previous e circular on this subject. Click link below

http://www.finsys.co.in/ecirculars/073_FSIA_Ecircular_18th_Jan_2011_MAT_is_18percent+cess.pdf

 

See the Wikipedia site for this at http://en.wikipedia.org/wiki/Alternative_Minimum_Tax

see the Govt of USA – IRS dept website for this at http://www.irs.gov/taxtopics/tc556.html

 

 

 

 

 

Final Message from the FSIA Team

India is growing at 20.3% ( GDP-Current prices ).

We are a part of this growth Story. Come our Time is now.

As somebody said at the C I I Meeting last month,

 

It was always good to be born in India, But, mark my words .…..

This is the best time to be in India.

Source Economic Survey 2011

Govt of India. Click here

GDP Growth %  (at Current Prices)

 

 

 

 

For queries, suggestions and feedback , you can e-mail us at :

 

Sangeet Kumar Gupta

FCA, ICWA, PGDMM, B.Com(Hons)

Honorary Consultant,

Faridabad Small Industries Association

93126-08426

Info [at] finsys.in

Camp Off : SCF no 70, Sector-16A Market, Faridabad

FSIA Off : FSIA Park , Opp. Plot No.23, Sector- 24, Faridabad- 121005

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Notes & disclaimer

For private circulation. Intended for recipient only. This is only for personal information of the members.  Based on information & interpretations available as on Wednesday, March 02, 2011 8.36 am.  Please contact your Consultant / Chartered Accountant / counsel for his  final opinion, if deemed fit.

 

 

 

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