Karnataka VAT changes wef 01.04.12 (Special Summary)

Clarifications given in Circular No. GST/CR.11/2011-12 dt.3.4.2012 issued by the Commissioner of Commercial Taxes, Govt. of Karnataka - on the modifications and changes under different tax enactments effective from 1.4.2012:

Input Tax Restrictions – Sec.11 [amended]

• Amendment is made to avoid double deduction by a dealer executing works contract.

Deduction of tax at source in the case of certain goods: Sec. 18-A• This section is omitted in view of the judgment of the Hon’ble High Court of Karnataka in the case of Suman Enterprises, Shimoga.

Credit Notes & Debit Notes - Sec.30This section is omitted.
• Any document issued by dealers is sufficient to explain any subsequent changes in the amounts originally shown in the tax invoice.
• Deduction from the total turnover towards goods returned by the purchasers within 6 months from the date of delivery of goods provided under Rule 3(2)(d) of K VAT Rules, 2005 would continue.
• It is sufficient if such deductions are supported by accounts of the seller.
• Due to omission of Sec.30(3) – dealers are not required to declare the credit note or debit note in the Return.
• Change of turnovers should be declared in the Revised Return within a period of 6 months.
• In case of additional consideration demanded and received should be declared in the Return
• Credit Note/Debit Note – provision is valid only upto 31.3.2012.

Returns - Sec.30:•
A Dealer is now permitted to file ‘Revised Return’ for a month only within 1 month from the date of original filing of Return. e.g., Return for the month of April is filed on 20th May. The Revised Return should be filed within 20th June.
• If the dealer desires to file a Revised Return after the above date, then he has to get permission of LVO or VSO. With the above permission, he can file the Revised Return within 6 months.
• Similar changes are made for the Quarterly Return also.

Period of Limitation for Assessment - Sec.40
Existing
Assessment or reassessment is within a period of 4 or 5 years after the end of the relevant tax period
Revised
Assessment or re-assessment for any tax period during the period from 1.4.2005 to 31.3.2007 may be made within a period of 8 years.
Existing
In case of un-registered dealers, assessment or reassessment is within a period of 8 or 10 years
Revised
Assessment or re-assessment in case of Unregistered Dealer can be made within a period of 10 years.

Check-post procedures - Sec.53•
Empowering the Commissioner to notify the website in which the particulars prescribed to be contained in the declaration.
• Declaration of particulars in the website is mandatory. Any contravention or non-compliance would attract penalty under sub-section 12.

Transit of goods by road through the state and issue of transit pass – Sec.54•
Empowering the commissioner to notify the goods in respect of which transit pass should be mandatorily obtained by the driver or person-in-charge of the vehicle carrying the goods through the state.

Appeals – Sec.62•
Joint commissioner (Appeal) will admit the appeal, if the undisputed amounts are paid before filing the appeal. Deposit of 50% + Balance in Bank Guarantee procedure will continue. Appeals should be disposed of within 60 days from the date of issue of stay orders.

Rectification of mistakes – Sec.69•
All applications for rectifications should be disposed of within 60 days from the date of their receipt.
Penalties relating to Returns and assessment – Sec.72•
Prosecution of dealers who fail to file Return continuously for period of 3 months or 2 quarters. Charge sheet should be filed by the LVOs & VSOs concerned.
Penalties relating to keeping of records - Sec.74•
Penalty for non maintenance of proper books of accounts increased from Rs.2000 to Rs.5000/- in respect of first offence
• In respect of subsequent offence, penalty increased from Rs.5000 to Rs.10000/-.
Penalties relating to production of records and furnishing of information – Sec.75
• Maximum penalty for non production of records and non furnishing of information by dealers and other persons has been increased from Rs.5000 to Rs.10000/-
Amendment to First Schedule:•
All varieties of Fabrics are exempted - excluding HDPE and other plastic woven fabrics.

Amendment to Third Schedule:

• HDPE and other plastic woven fabrics are taxable @ 5% VAT.

Amendment to sixth schedule•
New Sl. No.7 inserted wherein the turnover in respect of transfer of property in goods in execution of works contract of manufacture and supply of ready-made garments etc., now liable to be taxed @ 5% instead of earlier rate of 14%.

Budget Highlights 2012

Income Tax & Exemptions, Deductions:

IT Exemption Limit hiked to Rs 2 lakh
Income from Rs 2 lakh to Rs 5 lakh – 10 per cent tax
Income from Rs 5 lakh to Rs 10 lakh – 20 per cent tax
Income above Rs 10 lakh – 30 per cent tax
Senior citizens to be exempt from advance tax payments
Health insurance deduction upto Rs 5000 for preventive health checkup
Remove cascading effect of dividend distribution tax
Interest income from banks tax-free upto Rs 10,000
No change in corporate tax rate
Sale of residential property exempted from capital gains if invested in equity or equipment of an SME
To introduce Rajiv Gandhi Equity Scheme for retail investors. New equity savings scheme to provide for income tax deduction of 50 percent for those who invest Rs.50, 000 in equity and whose annual income is less than Rs.10 lakh
Income Tax deduction of 50 per cent on investments of up to Rs 50,000 in savings scheme named after Rajiv Gandhi. 3-year lock-in period exemption under Rajiv Gandhi scheme
Investment upto Rs 50,000 in stock markets to get concessions
Tax exemption on individual share investment below Rs 10 lakh

Service Tax:

All services to be taxed except those in negative list, Negative list to include pre-school and high school education, entertainment services, Service tax net widened; to include most sectors
Service tax rates hiked from 10 per cent to 12 per cent, Service tax to yield additional revenue of Rs 18,650 crore
Common 1-page return for excise and service tax
Industry taxes Excise, Custom:
GST to be operational by Aug 2012
Direct Tax Code (DTC) Bill to be enacted at the earliest
Withholding tax on external commercial borrowings reduced from 20 percent to five percent for power, airlines, roads, bridges, affordable houses and fertiliser sectors
Common 1-page return for excise and service tax
Propose common tax code for service tax and excise
Standard excise duty rate raised from 10 per cent to 12 per cent

General:

India expected to grow at 6.9 per cent
2.5% growth in agriculture this year
Exports grew by 23% in the First Quarter
Inflation is expected to moderate in a few months and then stabilize
Current account deficit 3.6 percent in 2011-12; this put pressure on exchange rate
International crude oil prices may cross $ 115 per barrel. This will impact the Fuel Subsidy Bill. Subsidies have hit fiscal balance
Food and fertilizer subsidy largest expenditure
India's slowdown attributed to weak industrial growth
The Nandan Nilekani panel recommendation on direct transfer of subsidy accepted. FY13 subsidy to be under 2% of GDP, Food security subsidy to be fully provided
Direct cash subsidy for LPG, kerosene. Direct transfer of subsidies to retailer & farmer on fertilizers
Government examining new ways of providing subsidies for LPG, kerosene
Rs 30,000 crore divestment target next year
Aadhar-enabled payment of select government schemes in 50 districts
Budget to provide Rs 15,888 crore for recapitalization of PSU banks, regional rural banks .Govt to create Financial Holding Company to meet financial needs of PSU banks
Increase in investments in infrastructure through PPP. Infrastructure investment in 12th Plan to go up to Rs 50 lakh crore; half of it to come from private sector
FY13 tax free bonds of Rs 10000 cr for NHAI, Allocation for national highways up 14 per cent 8,800 km of highways to be developed under National Highway Development Project in 2012-13
Bills on micro-finance institutions, national land bank and public debt management among those to be introduced in 2012-13
Government actively considering 49 per cent FDI in aviation, Airlines allowed to tap foreign loans on working capital now, External commercial borrowings to the extent of $ 1 billion to be allowed for aviation sector for next year
India to become self sufficient in manufacturing sector by next year, Enhanced production will take place
India to become self sufficient in urea production in five years
National Population Register to be completed in two years

Allocations & proposals:

Rs 242 crore project with World Bank assistance to improve dairy production
UID allocation at Rs 14,232cr in FY13c
FY13 midday meal scheme outlay at Rs 11937 crore
Government to set up company to finance minor irrigation works
National Mission on Food Processing to be started in 2012-13
Rs 12,040 cr for backward area projects in FY13
6,000 schools have been proposed to be set up in 12th Year Plan
Allocation for rural drinking water and sanitation scheme increased from Rs 11,000 crore in FY 12 to Rs 14,000 crore in 2012-13
Rs 15,850 crore to be allocated to Integrated Child Development Scheme in 2012-13 as against Rs 10,000 crore this fiscal
Propose credit guarantee fund for education loans
Maternal and child nutrition scheme to be launched in 200 districts ICDS to get 58 per cent
NRHM allocation increased to Rs 20,820 cr
Allocation of Rs.200 crore for research on climate change
Rs 20,000 crore to be spent on rural infrastructure development, including Rs 5,000 crore for creating warehousing facilities
National Backward Region Grant scheme outlay raised by 22 per cent to Rs 12,040 crore
FY13 National Social Assistance Scheme outlay at Rs 8447 crore
Rs 1,000 crore to be provided for National Skill Development Corporation in 2012-13
Interest subvention of 7 per cent to women self groups for loans up to Rs 3 lakh, additional 3 per cent for those making timely repayment
Mahatma Gandhi rural employment scheme has been positive
ECB for Rupee-debt of power co positive for all power cos
Rs 193,407 crore provision made for defence services in 2012-13
Allots Rs 24,000 crore for rural road plan in FY13
Rs 3,915 crore to be spent on National Rural Livelihood Mission
7 medical colleges to be upgraded to All India Institutes
Rs 200 crore for Research Rewards for agricultural researchers for breakthroughs
4000 residential quarters to be constructed for paramilitary forces with an allocation of Rs 1,185 crore
40 crore Aadhar enrollment in year beginning April 2012
Total expenditure outlay for FY13 at Rs 15 lakh crore
FY13 market borrowing at Rs 4.79 lakh cr

Black Money:

Information on black money stashed abroad has started flowing in, prosecution to be executed in some cases, Proposes to bring white paper on black money in the current Parliament session

Other Duty changes:

No change in peak custom duty
Large cars duty raised from 22% to 24%
Exemption of customs duty of 5% on equipment for fertiliser plants
Introduction of compulsory reporting of assets held abroad
Import of aircraft parts exempt from basic customs duty
Customs duty on import of parts of aircraft, tyres and testing equipment fully exempted
Full exemption from basic customs duty for equipment for road and highway construction
AC, fridge and most urban services to cost more
Full exemption from basic customs duty on natural gas, LNG, uranium for generation of electricity for two years
Bicycles to get expensive, duty raised to 30% from 10%
Full exemption from basic customs duty for equipment for road and highway construction
Solar power lamps, LED bulbs to become cheaper
Duty on CFLs reduced
Excise duty on handmade and semi-mechanized matches reduced from 10 to 6 per cent.
Iodized salt, match-boxes, soya products to become cheaper
Gold to be more expensive
Cigarettes, gold, diamonds, imported cycles to cost more
Customs duty on bicycles and parts increased
Customs duty on standard gold raised from 2 per cent to 4 per cent
Oil cess on domestic crude raised to Rs 4,500 per ton from Rs 2,500 per ton.
Raise customs duty on some vehicle imports to 75% from 50%
Raise customs duty on some vehicle imports to 75% from 50%
Solar power lamps, LED bulbs to become cheaper
Excise duty on handmade and semi-mechanized matches reduced from 10 to 6 per cent
Gross taxes estimated at 10.6 per cent of GDP, tax collection up by 15% Net tax receipts of the Centre in 2011-12 stands at Rs 7,71,071 crore
Direct tax collection fell short by Rs 32,000 crore in current fiscal
Fiscal deficit at 5.9 per cent of GDP in revised estimates for 2011-12
Non-plan expenditure Rs 9, 69,900 crore in 2012-13; 8.7 per cent higher than current year

Panel suggests to Raise IT Exemption Limit to 3 lac & Savings to 2.5 lac

A Parliamentary panel scrutinising the Direct Taxes Code – DTC Bill has suggested raising the income tax exemption limit to 3 lakh rupees from the present 1.8 lakhs. It has also suggested hiking of deduction on savings to 2.5 lakh rupees.

According to PTI, the Parliamentary Standing Committee on Finance has also suggested three tax slabs at 10 per cent, 20 per cent and 30 per cent for personal income tax. It has advocated to keep the Corporate Tax at the present rate of 30 percent. The committee adopted its report at its meeting today. The report will be submitted within a week before the Budget presentation.

The DTC seeks to replace the Income Tax Act, 1961 and modernise the direct tax structure in the country. It was referred to the Committee headed by senior BJP leader and former Finance Minister Yashwant Sinha for scrutiny in August 2010.

Now Access IT Return on Mobile

Soon you will be able to access details about your income tax returns (ITR) and its processing on your cellphone. As the income tax (I-T) department is all set to enhance host of taxpayer-related services and shift to a new e-return filing platform in the coming months. The new platform will come with various services, including one which will allow tax payers to check details such as refunds, deductions and tax demands on their cellphone.

The new software, which allows taxpayers to access details of his ITR on smart phone, is being developed with the help of TCS. The new service will be part of the upgraded online return filing portal which will be launched in the next couple of months. The department already hosts services like viewing of tax credits, Annual Information Return (AIR), Tax Deducted at Source (TDS) status, various tax related forms and Tax Return Preparer Scheme (TRPS).

“The new platform will also have a new service called ‘Form View’ wherein after filling required details for ITR one can view how the system would process the form and also make corrections if needed which is expected to reduce the errors and rectification applications.

PF Withdrawl before 5 Years Taxable ?

Withdrawal of Provident Fund may attract Income Tax. The Income Tax Department recently told EPFO (Employees Provident Fund Organisation) to deduct Tax (TDS) from the withdrawal amount, if the withdrawal happened before completing five years of subscription. Tax officials have cited a rule in the 1961 Income-Tax Act that taxes PF withdrawals by employees before completing five years of contributions into the EPF is taxable.

In most cases, the accumulated PF balance is withdrawn at the time of retirement, and therefore, not taxable in the hands of the individual. However, in certain cases like change in employment, an individual may even withdraw the PF balance earlier. The point one needs to remember is that the amount received from such PF is not exempt from tax in all cases. Only under the circumstances listed below will the amount withdrawn from PF be eligible for such exemption from tax.

If the employee has rendered continuous service with the employer for five years or more. Again, if the balance includes amount transferred from the individual’s PF account maintained by previous employer(s), then the years of continuous service rendered to the former employer(s) would be included for the purpose of computing the five-year period.
If the employee has not rendered continuous service of five years, but the service is terminated by reason of the employee’s ill health or discontinuance of the employer’s business or reasons beyond the control of the employee, the amount will be tax-exempt.
Another tax-exempt case is when, on the cessation of the employment, the employee finds another job and the the accumulated PF balance is transferred to his individual PF account maintained by the new employer.

In short, where the PF amount is withdrawn before five years of continuous service, it may be taxable in the hands of the individual as if the fund was not recognised from the start of the contributions. In such a case, payment received by the individual in respect of the employer’s contribution along with the interest accrual thereon is taxed as “salary”. Interest on the employee’s contribution is taxable as “other income”. Payment received in respect of the employee’s own contribution is exempt from tax (to the extent not claimed as a deduction earlier).

I-T provisions provide that the trustees of a recognised PF or any person authorised by the regulations of the fund to make the payment of the accumulated balance to the employee should deduct tax at source while paying the amount. Further, the person liable to deduct tax has to issue the certificate of tax deducted at source (Form 16) within the specified time frame to the employee depicting the details of taxes withheld from the accumulated PF balance and also comply with other salary-related compliance necessities. So the next time you think of withdrawing your PF, you must as an individual also assess whether the same is taxable or exempt.

I worked with a private company for four and years and nine months. I have given a provident fund (PF) withdrawal request to my ex-employer. Will the PF amount be taxable?

We understand that the PF maintained by your former employer was a recognized PF. As per the provisions in the Income-tax Act, if the employee has rendered continuous service with his employer for five years or more, then the withdrawal of accumulated balance from such PF is not taxable at the time of termination.

Since the period of your services with the ex-employer is four and a half years which is less than five years, you shall be liable to tax on the amount withdrawn from your PF. In addition to the normal tax payable by you, you will be required to pay all the tax concessions availed by you so far on account of contribution to such recognized PF. Further, the total employer’s contribution plus interest thereon, which was not taxed earlier, shall be taxable as profits in lieu of salary.

However, if the accumulated balance in your PF account is transferred to your recognized PF account maintained by the new employer, no tax liability shall arise due to such transfer.

No Need to File IT Return if ...Read New Notification

NOTIFICATION NO 9/2012, Dated: February 17, 2012

In exercise of the power conferred by sub-section (IC) of section 139 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby exempts the following class of persons, subject to the conditions specified hereinafter, from the requirement of furnishing a return of income under sub-section (1) of section 139 for the assessment year 2012-13, namely:-

1. Class of persons.- An Individual whose total income for the relevant assessment year does not exceed five lakh rupees and consists of only income chargeable to income-tax under the following head,-

(A) “Salaries”;
(B) “Income from other sources”, by way of interest from a saving account in a bank, not exceeding ten thousand rupees.

2. Conditions,- The individual referred to in para 1,-
i) has reported to his employer his permanent Account Number (PAN);
ii) has reported to his employer, the incomes mentioned in sub-para (B) of para I and the employer has deducted the tax thereon;
iii) has received a certificate to of tax deduction in Form 16 from his employer which mentions the PAN, details of income and the tax deducted at source and deposited to the credit of the Central Government;
iv) has discharged his total tax liability for the assessment year through tax deduction at source and its deposit by the employer to the Central Government;
v) has no claim of refund of taxes due to him for the income of the assessment year, and
vi) has received salary from only one employer for the assessment year.

3. The exemption from the requirement of furnishing a return of income tax shall not be available where a notice under section 142 (1) or section 148 or section 153A or section 153C of the incometax Act has been issued for filing a return of income for the relevant assessment year.

4. This notification shall come into force from the date its publication in the Official Gazette.

Is Health Insurance Necessary ?

When taking health insurance, what we have noticed is that most people don't actually do any sort of structured research. Luckily, that's what we're here for. This article will go into the salient features of a mediclaim policy that you need to know, address types of mediclaim policies (individual and floater), and also run a brief comparison between mediclaim policies from some popular insurers - all in easy-to-read FAQ format. Remember, insurance is a vital part of living a healthy financial life. Let's get started.
What is a Mediclaim policy? A Mediclaim policy is a health insurance policy which covers all medical treatment expenses up to the sum assured in case you are hospitalized due to an illness / accident. Mediclaim policies are issued for a period of one year and are renewed annually.
What are Pre - Hospitalization Expenses? These are expenses you incur before you are hospitalized. They can include doctor's consultation fees, medical tests, medication, and related expenditures. Mediclaim policies generally cover 30 days expenses immediately before you have to be hospitalized.
What is Post - Hospitalization Expenses? These are expenses you incur once you are discharged from hospital. They can include things such as doctor's consultation fees, medication, further tests (checkups), and even physiotherapy. The medical expenses you incur in the 60 days immediately after you are discharged from the hospital are usually covered by your mediclaim.
What is the Tax Benefit of taking mediclaim? While this is not a reason for taking mediclaim, it does help that you also get a tax benefit on your health insurance. The premium paid for these policies are deductible under section 80 D of Income Tax Act up to a maximum limit of Rs. 15,000 and Rs. 20,000 in case the person insured is a senior citizen. In case an individual pays health insurance premium for his or her dependent parents then an additional deduction up to a maximum limit of Rs.15, 000 is allowed and in case parents are senior citizen then Rs. 20,000 is allowed. So if you are paying for yourself and your senior citizen parents, you can claim a maximum of Rs. 35,000 p.a. under Section 80D.
What are Cumulative Bonus / No Claim Bonus? In short, it is the insurer's way of rewarding you for paying a premium and not making any claim. Generally Mediclaim policies provide an additional cover of 5% of Sum Assured in the subsequent renewal of the policy in case there is no claim in the current policy year. This increase in sum assured of 5% every year is restricted to a maximum of 50% of the initial Sum Assured for most policies. If there is a claim in the policy then this additional cover is decreased by 10% on the next renewal. These percentages can vary depending on the insurer and the policy you choose.
What are the types of mediclaim policies available? Mediclaim policies are of two types:
a. Individual Mediclaim PolicyIndividual policy covers only one single person under one policy. The premium in this type of policy is calculated according to the age of the person to be covered under the policy. Under this policy, if the sum assured is Rs. 5 Lakhs then the person insured can claim up to the maximum limit of Rs. 5 Lakhs.
b. Family Floater Mediclaim PolicyFamily floater policy covers the entire family i.e. self, spouse and the dependent children under one single policy. The premium under this type of policy is calculated according to the member with the highest age in the family. Under this policy, if the sum assured is Rs. 5 Lakhs then any one person individually or the entire family jointly can claim up to the maximum limit of Rs. 5 Lakhs.
What is a Top Up plan? Earlier, most insurance companies limited their mediclaim to Rs. 5 lakhs. This is no longer the case, there are many insurance companies which allow even more than Rs. 10 lakhs of health insurance cover. However, this was not always the case. And also, some of the companies that allow higher cover might not be your first choice of insurer. So earlier, if you wanted more than Rs. 5 lakhs cover, your best option was to go for a Top Up Plan. Top Ups provide you additional coverage at a low cost. Top up plan covers medical treatment cost over and above the actual Mediclaim policy and thus increase the total sum assured. Top up plan can be taken for an individual as well as for the entire family. However top up plans are available only if the sum assured taken in the Mediclaim policy is between Rs. 3 to Rs. 5 Lakhs.

For example: Our favourite fictional character, Mr. Sharma has taken a Mediclaim policy for a sum assured of Rs. 3 Lakhs and a top up plan for Rs. 7 Lakhs, so his total sum assured is Rs. 10 Lakhs. If a claim arises for a sum of Rs. 8 Lakhs then the first 3 Lakhs has to be borne by the Mediclaim insurance company and next Rs. 5 Lakhs is to be paid by the company from which top up plan has been taken. Remember that the Insurance Company from which the top up plan has been taken will not be responsible for claims arising up to the sum of Rs. 3 Lakhs. Top up insurance plans are targeted by insurance companies to those customers who already have Mediclaim insurance policies but find their cover to be low and hence these customers want to add additional cover. Now, if you are also thinking that your Mediclaim policy is not sufficient to cover your expenses in case of hospitalization and the present insurer is not ready to increase the cover, then a top up policy from another insurer is the solution for you.

Conclusion:Remember, there is absolutely no reason to not have enough mediclaim insurance. The costs you will incur on increasing medical expenses as inflation continues and as you grow older can be greatly reduced by the right insurance policy.