v No change
in the basic exemption limit and the tax rates.
v Additional
surcharge @ 2% being levied on income exceeding Rs. 1 crore (currently if an individual having income above Rs 1 crore, surcharge would be
leviable @ 10% of Income tax). This surcharge would be levied in place
of Wealth-tax which is proposed to be abolished.
v No change in Exempt-Exempt-Exempt (EEE) tax benefit proposed for
assessee having a girl child and investing under the Sukanya Samriddhi Account Scheme. The investments made in the
Scheme will be eligible for deduction under section 80C of the Act, the
interest accruing on deposits in such account will be exempt from income tax
and the withdrawal from the said scheme in accordance with the rules of the
said scheme will be exempt from tax.
v In view
of continuous rise in the cost of medical expenditure, section 80D is proposed
to be amended to raise the limit of deduction from 15,000 to Rs. 25,000.
Further, the limit of deduction for senior citizens is also proposed to be
increased from Rs. 20,000 to Rs. 30,000.
v As a
welfare measure towards very senior citizens, a deduction under section
80D is proposed for any payment made on account of medical expenditure
in respect of a very senior citizen, subject to a limit Rs. 30,000.
v The limit for deduction under
section 80DDB is proposed to be increased to Rs. 80,000 in respect of amount
paid for medical treatment of very senior citizen. Section 80DD and section 80U is proposed to be
amended to increase the limit from 50,000 to Rs. 75,000 and from Rs. 1 lakh to
Rs. 1.25 lakh, as the case may be.
v In order to promote social
security, deduction section 80CCC(1) which provides for deduction of amount
paid or deposited to effect or keep in force a contract for any annuity plan of
LIC or any other insurer for receiving pension from a fund set up under a
pension scheme is proposed to be amended to raise the limit of deduction from 1
lakh to Rs. 1.5 lakh, within the overall limit provided in section 80CCE.
v Section 80G is proposed to be
amended to provide for 100% deduction in respect of donations made to the
National Fund for Control of Drug Abuse.
v With a view to encourage and
enhance people’s participation in the national effort to improve sanitation
facilities and rejuvenation of river Ganga, section 80G is proposed to be
amended so as to provide 100% deduction for donations made by any donor to the
Swachh Bharat Kosh and to Clean Ganga Fund.
SYNOPSIS OF DIRECT TAXES PROPOSALS FOR CORPORATES
v Corporate
tax rates proposed to be reduced from 30% to 25% over the next four years,
starting from next financial year. (i.e. F.Y. 2015-16)
v Change
in the rate of surcharge.
|
If
net income does not exceeds Rs 1 crore
|
If
net income exceeds Rs 1 crore but less than Rs.10 crore
|
If
net Income exceeds 10 crore
|
Domestic company
|
Nil
|
7%
|
12%
|
Foreign company
|
Nil
|
2%
|
5%
|
v MAT rate is to continue @ 18.5%
v The
education cess to continue at 3 percent.
v It
is proposed to amend section 92BA by increasing the limit of specified domestic
transactions entered into by the assessee from 5 Crores to 20 Crores rupees.
v Incentive for setting
up of Manufaturing units in the State of Andhra Pradesh and the State of
Telangana: A new section 32AD is proposed to be
inserted to provide for an additional investment allowance of an amount equal
to 15% of the cost of new asset acquired and installed by an assessee, if—
(i) he sets up an undertaking or
enterprise for manufacture or production of any article or thing on or after
1st April, 2015 in any notified backward areas in the State of Andhra Pradesh
and the State of Telangana; and
(ii) the new assets are acquired
and installed for the purposes of the said undertaking or enterprise during the
period beginning from the 1st April, 2015 to 31st March, 2020.
This deduction shall be available
over and above the existing deduction available under section 32AC of the Act.
Further, in order to incentivise
acquisition and installation of plant and machinery for setting up of
manufacturing units in the notified backward area in the State of Andhra
Pradesh or the State of Telangana, it is proposed to allow higher additional
depreciation at the rate of 35% (instead of 20%) in respect of the actual cost
of new machinery or plant (other than a ship and aircraft) acquired and
installed by a manufacturing undertaking or enterprise which is set up in the
notified backward area of the State of Andhra Pradesh or the State of Telangana
on or after the 1st day of April, 2015.
To remove the discrimination in the
matter of allowing additional depreciation under section 32(1)(iia) on plant or
machinery used for less than 180 days and used for 180 days or more, it is
proposed to provide that the balance 50% of the additional depreciation on new
plant or machinery acquired and used for less than 180 days which has not been
allowed in the year of acquisition and installation of such plant or machinery,
shall be allowed in the immediately succeeding previous year.
v There is
no express provision under the Income-tax Act, with regard to value to be
considered as cost of acquisition of a capital asset in the hands of resulting
company on transfer of capital assets acquired on demerger. Accordingly,
section 49 is proposed to be amended to provide that the cost of acquisition of
an asset acquired by resulting company shall be the cost for which the
demerged company acquired the capital asset as increased by the cost
of improvement incurred by the demerged company.
v TDS: It is proposed to amend the provisions of section
195 of the Act to provide that the person responsible for paying any sum,
whether chargeable to tax or not, to a non-resident individual or foreign
company, shall be required to furnish the information of the prescribed sum in
such form and manner as may be prescribed.
It is further proposed to insert
a new provision in the Act to provide that in case of non-furnishing of
information or furnishing of incorrect information under sub-section (6) of
section 195(6) of the Act, a penalty of one lakh rupees shall be levied.
It is also proposed to amend the
provisions of section 273B of the Act to provide that no penalty shall be
imposable under this new provision if it is proved that there was reasonable
cause for non – furnishing or incorrect furnishing of information under
sub-section (6) of section 195 of the Act. These amendments will take effect from
1st June, 2015.
v Definition of charitable purpose: The
definition for charitable purpose provided under section 2(15) is proposed to
be amended to include the activity of Yoga as a special category of activity to
be considered as charitable purpose on the lines of education.
The definition is proposed to be
further amended to provide that the advancement of any other object of general
public utility shall not be a charitable purpose, if it involves the carrying
on of any activity in the nature of trade, commerce or business, or any
activity of rendering any service in relation to any trade, commerce or
business, for a cess or fee or any other consideration, irrespective of the
nature of use or application, or retention, of the income from such activity, unless,-
(i) such activity is undertaken
in the course of actual carrying out of such advancement of any other object of
general public utility; and
(ii) the aggregate receipts from
such activity or activities, during the previous year, do not exceed 20% of the
total receipts, of the trust or institution undertaking such activity or
activities, for the previous year .
INTERNATIONAL
TAXATION
v It
is proposed to reduce the rate of tax provided under section 115A on royalty
and fees for technical service (FTS) payments made to non-residents from 25% to
10%.
v Place
of effective Managaement (POEM) is proposed to be introduced for determining
the residential status of company which is in line with DTAA. It is proposed to
amend the provisions of section 6 to provide that a person being a company
shall be said to be resident in India in any previous year, if-
(i) it is an Indian company; or
(ii) Its place of effective
management, at any time in that year, is in India. (Earlier the provision was –
during that year, the control and management of its affairs is situated wholly
in India).
Further, it is proposed to define
the place of effective management to mean a place where key management and
commercial decisions that are necessary for the conduct of the business of an
entity as a whole are, in substance made.
v Clarity relating to Indirect transfer
provisions – Further clarification to Explanation 5 in section 9(1)(i): Currently
The Explanation 5 in section 9(1)(i) clarified that an asset or capital asset,
being any share or interest in a company or entity registered or incorporated
outside India shall be deemed to be situated in India if the share or interest
derives, directly or indirectly, its value substantially from the assets
located in India.
The
share or interest of a foreign company or entity shall be deemed to derive its
value substantially from the assets (whether tangible or intangible) located in
India, if on the specified date, the value of Indian assets,-
a)
exceeds the amount of ten Crore rupees ; and
b)
Represents at least fifty per cent. of the value of all the assets owned by the
company or entity.
Value
of an asset shall mean the fair market value of such asset without reduction of
liabilities, if any, in respect of the asset.The specified date of valuation
shall be the date on which the accounting period of the company or entity, as
the case may be, ends preceding the date of transfer.
v In
the case of a non-resident, being a person engaged in the business of banking,
the PE in India of such non-resident shall be obligated to deduct tax at source
on any interest payable to either the head office or any other branch or PE,
etc. of the non-resident outside India. Further, non-deduction would result in
disallowance of interest claimed as expenditure by the PE and may also attract
levy of interest and penalty in accordance with relevant provisions of the Act.
OTHER DIRECT TAX PROPOSAL IN BUDGET
2014-15
v Measures
to curb black money
In order to curb
generation of black money by way of dealings in cash in immovable property
transactions, section 269SS is proposed to be amended so as to provide that no
person shall accept from any person, any loan or deposit or any sum of money,
whether as advance or otherwise, in relation to transfer of an immovable
property otherwise than by an account payee cheque or account payee bank draft
or by electronic clearing system through a bank account, if the amount of such
loan or deposit or such specified sum is twenty thousand rupees or more.
Similarly,
section 269T also is proposed to be amended so as to provide that no person
shall repay any loan or deposit made with it or any specified advance received
by it in relation to transfer of an immovable property whether or not the
transfer takes place, otherwise than by an account payee cheque or account
payee bank draft or by electronic clearing system through a bank account, if
the amount or aggregate amount of loans or deposits or specified advances is twenty
thousand rupees or more.
v The
implementation of General Anti Avoidance Rule (GAAR) is proposed to be deferred
by two years. Accordingly, it would be applicable for the financial year
2017-18 (A.Y. 2018-19) and subsequent years. Further, it is also proposed that
the investments made upto 31.03.2017 shall not be subject to GAAR.
