Direct Tax Proposals 2012 : Personal Taxation (Individual / HUF)

Personal Taxation ( Individual & HUF)

    Benefits for Senior Citizens

Eligible age of Senior Citizen reduced for various exemption & deductions:

Present Age Limit          : 65 Years

Proposed Age Limit       : 60 Years 

Senior Citizen will get Benefits of Reduced Age Limit in the following Sections:

·         80D               : Deduction of INR 20,000 for premium paid towards health insurance policy

·         80DDB                       : Deduction of INR 60,000 for treatment of specified disease

·         197A              : No TDS for Interest income earned after furnishing Form 15H 

Resident senior citizen will exempt for Advance Tax payment if no business or professional income

    Exemptions

Sec	Existing Provision	Proposed Changes
10 (10D)	Any Sum received under Life Insurance policy is exempt subject to condition ·  Premium not in excess of 20% of actual capital sum assured.	Exemption allowed if premium not in excess of 10% of Actual capital sum assured. Actual capital sum assured shall be minimum amount assured under the policy at any time during the term of policy not taking into amount -          Value of any premiums agreed to be returned Any benefit by way of bonus or otherwise over and above actual sum assured.
54B	ü Assessee being Individual or HUF ü Land used for agricultural purpose in preceding two years from sale date ü Used by Assessee or parents ü Capital Gains exempt if entire capital gains reinvested in Agricultural land ü Reinvestment within two years of sale	ü Used by Assessee or parents or HUF
54 GB	To encourage Capital Investment in Small and Medium Enterprises (SME) in the manufacturing Sector, a new Section 54GB is proposed, the features of which is as under: v  Assessee being Individual & HUF sold residential house property ( including plot of land) v  Sale consideration reinvested in Equity of a new start up SME company in manufacturing sector v  Reinvestment will be made on or before due date as per 139(1) v  Will hold either 50% of the share capital or 50% of voting power v  SME utilised the proceeds for purchase of New Plant & Machinary v  Lock in period of 5 years for transfer of shares / plant & machineries

Comment:

Insurance Sector in India has witnessed substantial growth in last few years. Ceiling limit of 20% of premium was introduced few tears ago, which is now proposed to reduce to 10%, which is a welcome move.

The Government had announced National Manufacturing Policy (NMP) in 2011, one of the goals of which is to incentivise investment in the Small and Medium Enterprises (SME) in the manufacturing sector. For achieving this goal, section 54GB is proposed, which is again a good move. 

    Definition of Relative Expanded to Include HUF [Section 56 2(vii)]

Present Law	Proposed Changes
ü Any sum or property received by Individual or HUF ü For Inadequate / without Consideration. ü Deemed as Income chargeable under Other sources Exception ü Receipts from relatives are excluded ü Relative defines only in relation to an individual	ü Relative defines in relation to HUF also and includes its members ü Retrospective Amendment w.e.f. 01-10-2009 Clubbing Provisions may be applicable.

Comment:

The said amendment principally affirms Rajkot ITAT decision in case of Vineet Kumar Raghavji Bhai (46 SOT 97), in which ITAT had ruled that HUF is a Relative for Gift purpose as ‘HUF is nothing but group of close family members.    

This clarificatory amendment is a welcome move taken by the Revenue.

    Deduction under Chapter VI-A

Sec	Existing Scenarios	Proposed Changes
80C	v  Eligible Assessee being Individual & HUF v  Premium paid for Life Insurance v  Maximum Deduction INR 1,00,000 v  Deduction allowed for premium not in excess of 20% of actual capital sum assured.	Deduction allowed for premium not in excess of  10% of Actual capital sum assured Actual capital sum assured shall be minimum amount assured under the policy at any time during the term of policy not taking into amount -          Value of any premiums agreed to be returned -          Any benefit by way of bonus or otherwise over and above actual sum assured
80D	Premium Paid towards Health Insurance Policies       Assessee, Spouse & Dependent Children Covered       Maximum Deduction INR 15,000       Addition Deduction of INR 15,000 for Parents       Premium should be paid other than CASH	Premium Paid for Preventive Health Care also included       Maximum Deduction INR 5,000 for all       Premium can be paid in CASH also
80CCD	ü  Assessee being individual, HUF ü  Subscription of Specified Infrastructure bonds ü  Maximum Deduction INR 20,000 ü  Subscription till 31 March 2012	Deduction withdrawn  as time limit not extended
80TTA	New Section	ü  Assessee being individual, HUF ü  Interest on Saving Bank account (excluding time deposit) with specified banks, co-operative societies and post offices ü  Maximum Deduction INR 10,000
80G	ü  Donation to certain funds, charitable instutitutions etc subject to certain conditions ü  Donations in any mode including cash	Donation in Cash Exceeding INR 10,000 will be not eligible for deduction
80GGA	ü  Donations for Scientific research, universities, colleges, other institutions subject to certain conditions ü  Donations in any mode including cash	Donation in CASH exceeding INR 10,000 will be not eligible for deduction

Comment:

In aggregate, all the proposed amendment in Chapter VI-A is beneficial for the assessee except withdrawal of 80CCD.

Amendment in section 80G / 80GGA will prevent the cash donations received by Trusts or institutions.

    Deduction for Retail Investors under Equity Saving Scheme

v Applicable to retail Investors only

v Total Income of Investor should be below INR 10,00,000

v Maximum Investment upto INR 50,000

v Eligible deduction 50% of Investments. i.e. Maximum limit INR 25,000

v Lock in Period for 3 Years

v Details may be provided in the Finance Act 2012

    Exemption to Residential house allotted to Employee under Wealth Tax

Present Law	Proposed changes
ü As per Section 2 of the Wealth tax the specified assets for levy of wealth tax do not include a residential house allotted by a company to an employee or an officer or a whole time director ü If the gross annual salary of such employee or officer, etc. is less than INR 5,00,000	ü Limit Extended to INR 10,00,000