Times guide to corporate tax

Proposal: Alternate Minimum Tax on partnership firms, sole proprietorships, association of persons, etc, that are claiming profit-linked deduction.
Impact:
Now, partnership firms, sole proprietorships, association of persons claiming tax holiday shall have to pay minimum tax @ 20.01% if the adjusted total income exceeds Rs 20 lakh.
P: Credits in the nature of share capital, share premium, etc , to be taxable in the hands of private companies unless source of income in the hand of shareholder is explained .
I: This amendment casts burden on private companies receiving funds to satisfy the tax authorities of the source of the funds of the investor.
P: Up to 90% penalty leviable on undisclosed income found during search proceedings.
I: At present, undisclosed income found during search proceedings is only subjected to tax and interest. It’s now proposed that penalty between 10% to 90% of the undisclosed income could be levied in such cases.
P: Share premium received in excess of FMV of shares is taxable as income in the hands of private companies .
I: Onus on private companies to substantiate the FMV of its shares. That the funds received are not in excess of such FMV; else such excess would become taxable.
P: Tax on interest on ECB raised by companies engaged in specified infrastructure sector lowered from 20% to 5%.
I: This will augment long-term , low cost funds from abroad for specified infrastructure companies.
P: Dividends received from foreign subsidiaries continues to be taxed at reduced effective rate of 16.22%.
I: This will incentivize Indian companies to repatriate excess cash lying in overseas subsidiaries to India.
P: Cascading effect of DDT on multi-tier structure rationalized.
I: This will avoid multiple levy of DDT for corporate groups with multi-layer structure. At present, only the first tier subsidiary could claim a DDT.
P: Weighted deduction of 200 % on in-house R&D facilities extended by 5 years.
I: This will encourage corporate sector to continue to spend on in-house research.
P: Exemption limit for mandatory tax audit increased for SMEs to Rs 1 crore and professionals to Rs 25 lakh.
I: This should reduce the compliance burden on SMEs and small professionals.
P: Sunset clause extended to 31 March 2013 for claiming deduction under section 80IA to power sector undertakings.
I: This would incentivize investments in power sector, ie, generation and distribution of power, transmission or distribution lines and renovation and modernization of existing lines.
P: Certain domestic transactions between related parties to also be subjected to transfer pricing scrutiny .
I: Currently, only international transactions are covered under transfer pricing ambit. It is proposed to also include domestic transactions aggregating Rs 5 crore in a year between related parties under transfer pricing.
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Full Coverage on Budget 2012: Budget 2012, Budget News 2012