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One year deferment of GAAR, equity savings scheme & some TCS concession likely to be announced in Finance Bill today!

              Taxpayers are bound to keenly watch the Lok Sabha proceedings today, as the FM rises to move some amendments in the Finance Bill, 2012, which is slotted for discussion and approval of the House on May 7 & 8.


              Will there be any rollback on the highly controversial and hotly debated GAAR is the big question doing the rounds. One thing is sure and that is, the FM has indeed realized the serious implications of GAAR as proposed. Even the Parliament’s Standing Committee on Finance, in its report on the Direct Taxes Code (DTC) has seriously urged the Finance Ministry to deal with a whole package of its recommendations on GAAR. Whereas the FM is unlikely to announce any blanket withdrawal, it is very likely that he may announce atleast a one year deferment in the implementation of GAAR, so that many grave concerns and several important aspects in this regard can be examined. It is also expected that the highly iniquitous provision in relation to the burden of proof placed on the taxpayer may be knocked off and the constitution of the Approving Panel for GAAR may be designed in a more objective manner, with a view to dispel the critical reservations regarding the fairness of its implementation.


               While presenting his Budget Speech on 16th March, 2012, the FM announced that to encourage flow of savings in financial instruments and improve the depth of domestic capital market, it was proposed to introduce the new ‘Rajiv Gandhi Equity Savings Scheme’. Quite surprisingly, however, there were no legislative provisions in the Finance Bill as then proposed. It is likely that the lapse may be made up in the amendments to be announced today.

              Based on some broad indications as per the FM’s Budget address, some key provisions of this new incentive likely to be announced today are as under:

  • The benefit of this deduction will be available to any resident individual, who is a new retail investor and who acquires listed equity shares. As such, this will be only a one time deduction and that too available only to first time equity investors.

  • The benefit of this deduction will be available only to a taxpayer, whose Gross Total Income (GTI) does exceed Rs.10 lakh.

  • The quantum of deduction shall be 50% of the amount invested in such equity shares, subject to a maximum deduction of Rs.25,000. Keeping in view the aforesaid condition that GTI of the taxpayer does not exceed Rs.10 lakh (attracting tax rate of 20.6%), the maximum tax saving possible by investing Rs.50,000 would work out to Rs.5,150 (at 20.6% of the eligible deduction Rs.25,000).

  • A lock in period of three years for the above referred investment in respect of which the benefit of deduction is availed by the concerned taxpayer is also likely to be provided.


             There has been a lot of wishful thinking for rollback of the proposed provision in relation to 1% TDS out of sale consideration of immovable properties exceeding Rs.20 lakh (Rs.50 lakh in case of specified urban agglomeration), but the FM may not disturb this proposal slated to be effective from 1st October, 2012.

              However, keeping in view the fervent demand of goldsmiths and jewellery artisans, who even went on a nationwide strike for 20 days, the FM is expected to announce some concessions in regard to the 1% TCS proposed to be collected from purchasers of bullion and jewellery, where such purchases over Rs.2 lakh are made in cash. While the proposal may not be dropped altogether, it is expected that the FM may reduce its rigour, by announcing a hike in the limit for cash purchases and also by excluding some small items of purchase.

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