BUDGET 2014-15 DIRECT TAX PROPOSALS

SYNOPSIS OF MAJOR DIRECT TAXES PROPOSALS FOR INDIVIDUALS

v Individual Income-tax exemption limit raised by 50,000/- that is, from 2 Lakh to 2.5 lakh in the case of individual taxpayers, below the age of 60 years. Exemption limit raised from 2.5 lakh to 3 lakh in the case of senior citizens.

Analysis

For Individual below 60 yrs of age having taxable income Rs.5 Lakh or less	Exemption limit Rs.2,50,000 Add: Rebate u/s 87 A Rs.20,000/-
For Individual below 60 yrs of age having taxable income above Rs. 5 Lakh	Exemption limit Rs.2,50,000 Rebate u/s 87 A Rs.20,000/- (Not available)
For Individual above 60 yrs but below 80yrs of age having taxable income Rs.5 Lakh or less	Exemption limit Rs.3,00,000 Add: Rebate u/s 87 A Rs.20,000/-
For Individual above 60 yrs but below 80yrs of age having taxable income above Rs. 5 Lakh	Exemption limit Rs.3,00,000 Rebate u/s 87 A Rs.20,000/- (Not available)

v  No change in rate of surcharge for Individuals i.e. if an individual having income above Rs 1 crore, surcharge would be leviable @ 10% of Income tax.

v  The education cess to continue at 3 %.

v Investment limit under section 80C of the Income-tax Act, 1961 raised from 1 lakh to 1.5 Lakh. Investment in PPF can be made up to Rs. 1.5 lakh. (applicable from A.Y. 2015-16)

v Deduction limit u/s 24(b) of Income Tax Act, 1961 on account of interest on loan in respect of self-occupied house property raised from 1.5 lakh to 2 lakh. (applicable from A.Y. 2015-16)

v  A new section in the Act is to be inserted w.e.f 01^st October, 2014 to provide for deduction of tax at the rate of 2 per cent. on sum paid under a life insurance policy, including the sum allocated by way of bonus, which are not exempt under section 10(10D) of the Act. In order to reduce the compliance burden on the small tax payers, it has also been proposed that no deduction under this provision shall be made if the aggregate sum paid in a financial year to an assessee is less than Rs.1, 00,000.

v CAPITAL GAINS (applicable from A.Y. 2015-16)

Ø Amendment in Section 2(42A), existing provision provide that in case of share held in a company or any other security listed in a recognised stock exchange in India or a unit of the Unit Trust of India or a unit of Mutual fund or a Zero coupon bond, if the period of holding for is more than 12 months then these assets qualifies as Long term capital asset. Now Section 2(42A) is amended to provide that an unlisted security and a unit of mutual fund (other than equity oriented mutual fund) shall be a Short term capital asset if it is held for not more than 36 months.

Ø Amendment in Section 112, existing provision provide that in case of transfer of capital asset being listed securities or Mutual Funds or units of Unit Trust of India or zero coupon bond if tax payable on long-term capital gain exceeds 10% of the amount of capital gain before allowing indexation adjustment, then such excess shall be ignore. To remove tax arbitrage, rate of tax on long term capital gains increased from 10 % to 20 % on transfer of units of Mutual Funds or units of Unit Trust of India.

Ø Advance for Capital asset, such sum shall be chargeable to income-tax under the head ‘income from other sources’ if such sum is forfeited and the negotiations do not result in transfer of such capital asset. A consequential amendment in clause (24) of section (2) is also being made to include such sum in the definition of the term 'income'.

SYNOPSIS OF MAJOR DIRECT TAXES PROPOSALS FOR CORPORATES

v Corporate tax rate to be continued at the same rate as specified in F.Y. 2013-14

v No 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	5%	10%
Foreign company	Nil	2%	5%

v The education cess to continue at 3 %.

v TDS (applicable from A.Y. 2015-16)

Ø  In case of non-deduction of tax on payments, 30% of such payments will be disallowed instead of 100 %.

Ø  In order to improve the TDS compliance in respect of payments to residents which are currently not specified in section 40(a)(ia), it is proposed that the disallowance under section 40(a)(ia) of the Act shall extend to all expenditure on which tax is deductible under Chapter XVII-B of the Act. Under existing provision of 40a(ia) only Interest, Commission or brokerage, Fees for technical services, Fees for professional services, Payment to Contractors/subcontractors, Payment of rent, Payment of Royalty to a resident is covered.

v Investment allowance at the rate of 15 % to a manufacturing company that invests more than ` 25 crore in any year in new plant and machinery. The benefit to be available for three years i.e. for investments upto 31.03.2017.

v 80-IA sunset date for the power sector extended to the undertakings which begin generation, distribution and transmission of power by 31.03.2017.

v The eligible date of borrowing in foreign currency extended from 30.06.2015 to 30.06.2017 for a concessional tax rate of 5% on interest payments. Tax incentive extended to all types of bonds instead of only infrastructure bonds.

v Concessional rate of 15% on foreign dividends without any sunset date to be continued.

v In order to provide certainty on the issue of CSR referred to in section 135 of the Companies Act, 2013 it is clarified that any expenditure incurred by the assessee on the activities referred to in section 135 of the Companies Act, 2013 shall not be deemed to have been incurred for the purpose of business and hence shall not be allowed as deduction u/s 37. However, the CSR expenditure which is of the nature described in section 30 to section 36 of the Act shall be allowed as deduction under those sections subject to fulfilment of conditions, if any, specified therein. (applicable from A.Y. 2015-16)

v TRANSFER PRICING (applicable from 01^st October, 2014)

Ø Introduction of a “Roll Back” provision in the Advanced Pricing Agreement (APA) scheme so that an APA entered into for future transactions is also applicable to international transactions undertaken in previous four years in specified circumstances.

                                                                                                                   

Ø Introduction of range concept for determination of arm’s length price in transfer pricing regulations.

Ø To allow use of multiple year data for comparability analysis under transfer pricing regulations.

v Income and dividend distribution tax to be levied on gross amount instead of amount paid net of taxes (applicable from 01^st October, 2014).

OTHER DIRECT TAX PROPOSAL IN BUDGET 2014-15

v  Conducive tax regime to Infrastructure Investment Trusts and Real Estate Investment Trusts to be set up in accordance with regulations of the Securities and Exchange Board of India.

v  Investment linked deduction extended to two new sectors, namely, slurry pipelines for the transportation of iron ore, and semi-conductor wafer fabrication manufacturing units.

v  Income arising to foreign portfolio investors from transaction in securities to be treated as capital gains.

v  60 more Ayakar Seva Kendras to be opened during the current financial year to promote excellence in service delivery

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INCREASE IN TAX AUDIT LIMIT FOR CHARTERED ACCOUNTANT'S

INCREASE IN TAX AUDIT LIMIT FOR CHARTERED ACCOUNTANT'S 

On its 331st Meeting of Institute of Chartered Accountants of India held on 10th to 12th February 2014, it is decided to increase the limit of "specified number of Tax audits assignments" for practicing Chartered Accountants from 45 to 60. This limit will be effective for the audits conducted during the financial year 2014-15 i.e. A.Y. 2015-16 and onward.

Now In the Council General Guidelines, 2008

The Council guidelines No. 1- CA(7)/02/2008, dated 08th August 2008, in Chapter VI "Tax audit assignments under Section 44AB of the Income Tax Act, 1961", in Explanation given in Para 6.1, in sub para (a) and sub para (b), the figure "45" be substituted by figure "60".

Disclaimer: The above post is only for sharing information between friends & professional colleagues. Professional consultancy must be sought before entering into any transaction related with above post. 

Any discussion/ improvement/ correction in above post is heartily appreciated.

TDS ON SERVICE TAX COMPONENT OF A BILL

CBDT had issued a Circular no. 1/2014 dated 13-01-2014 where it is clarified that wherever in terms of the agreement between the payer and payee, the service tax component comprised in the amount payable to a resident is indicated separately, tax shall be deducted at source under Chapter XVII-B of the Act on the amount paid/payable without including such service tax component.

Earlier Board had issued  a Circular No.4/2008 dated 28-04-2008 wherein it was clarified that tax is to be deducted at source under section 194-I of the Income-tax Act, 1961 (hereafter referred to as 'the Act'), on the amount of rent paid/payable without including the service tax component.

As per the author’s opinion on clear reading of first mentioned circular the circular is applicable to whole chapter XVII B i.e. to all the sections under which TDS is liable to be deducted. Hence TDS is not required to be deducted on service tax component of bill w.e.f 13.01.2014 provided the Service tax component is separately mentioned in Invoice and payment is made to resident.

Disclaimer: The above post is only for sharing information between friends & professional colleagues. Professional consultancy must be sought before entering into any transaction related with above post.

ENTITLEMENT OF DEPRECIATION ON VEHICLE REGISTERED IN THE DIRECTOR'S OR OTHER OFFICER

It is observed that in many instances Vehicles purchased by Companies were registered in the name of Director's or other officer's of company under the Motor Vehicles Act, 1988 (generally for ease of insurance claim settlement)

So question arise whether Companies were entitled to claim depreciation on vehicles registered in the name of its directors's or other officer of company.

In the case of SWAGAT INFRASTRUCTURES v. JCIT-2013 (Ahd.) tribunal held that claim of depreciation cannot be denied to the taxpayer as long as it is proved that the asset is under its dominion control and is being utilised for the business purpose of assesse, even though the tax payer is not registered owner of the asset.

Companies should ensure the following to use the above mentioned judgement.

1. A resolution should be passed by the Company to purchase and register these vehicle in the name of the Director or other officer of the company.

1. Proper documentation should be prepared to substantiate that the vehicles were utilized for business purposes. 

Disclaimer: The above post is only for sharing information between friends & professional colleagues. Professional consultancy must be sought before entering into any transaction related with above post.

EFFECTIVE PROVISIONS OF COMPANIES ACT, 2013 with Sections headings from 12th September, 2013

Dear Professional friends & colleagues

Thanks for your generous response to this blog and I apologies for not updating for sometime due to my exams.

List of 98 sections coming into effect from 12/9/2013

2    - Definitions – Certain parts

19  - Subsidiary Company not to hold shares in Holding Company

21  - Authentication of documents, proceedings and contracts

22  - Execution of bills of exchange, etc.

23  - Public offer and private placement. (Partly effective)

24  - Power of Securities and Exchange Board to regulate issue and transfer of securities, etc. 

25  - Document containing offer of securities for sale to be deemed prospectus (Partly effective) 

29  - Public offer of securities to be in dematerialised form. 

30  - Advertisement of  Prospectus 

31  - Shelf Prospectus

32  - Red herring prospectus

33  - Issue of Application form for Securities  (Partly effective)

34  - Criminal liability for misstatements in prospectus

35  - Civil liability for misstatements in prospectus (Partly effective)

36  - Punishment for fraudulently inducing persons to invest money.

37  - Action by affected persons

38  - Punishment for personation for acquisition,  etc., of securities.

39  - Allotment of securities by Company (Partly effective)

40  - Securities to be dealt with in stock exchanges. (Partly effective)

44  - Nature of shares or debentures.

45  - Numbering of shares

49  - Calls on shares of same class to be made on uniform basis.

50  - Company to accept unpaid  share capital, although not called up.

51  - Payment of dividend in proportion to amount paid up

57  - Punishment for personation of shareholder.

58  - Refusal of registration and appeal against refusal.

59  - Rectification of register of members.

60  - Publication of authorised, subscribed and paid-up capital.

65  - Unlimited company to provide for reserve share capital on  conversion into limited company.

69  - Transfer of certain sums to capital redemption reserve account.

70  - Prohibition for buyback (Partly effective)

86  - Punishment for contravention

91  - Power to close register of members or debentureholders or other security holders.

100- Calling of EGM (Part)

102- Statement to be annexed to notice

103- Quorum for meetings

104- Chairman for meetings (Partly effective)

105- Proxies (Partly effective)

106- Restriction on voting rights.

107- Voting by show of hands

111- Circulation of members’ resolution.

112- Representation of President and Governor in meetings

113-Representation of corporations at meeting of companies and of creditors. (Partly effective)

114- Ordinary & Special resolutions

116- Resolutions passed at adjourned meeting

127-Punishment for failure to distribute dividends.

133-Central Government to prescribe accounting standards.

161-Appointment of additional director, alternate director and nominee director. (Partly effective)

162-Appointment of directors  to be voted individually.

163-Option to adopt principle of proportional representation for appointment of directors. 

176–Defects in appointment of directors not to invalidate actions taken.

180- Restrictions on powers of Board

181–Company to contribute to bona fide and charitable funds, etc.

182-Prohibitions and  restrictions regarding political contributions.

183-Power of Board and other persons to make contributions to national defence fund, etc. 

185- Loans to Directors, etc 

192-Restriction on non-cash transactions involving directors.

194-Prohibition on forward dealings in securities of company by director or key managerial personnel.

195-Prohibition on insider trading of securities.

202-Compensation for loss of office of managing or whole-time director or manager.

379-Application of Act to foreign companies.

382-Display of name, etc., of foreign company.

383-Service on Foreign Company

386-Debentures, annual return, registration of charges, books of account and their inspection. (Partly 

       effective)

394-Annual reports on Government companies.

405-Power of Central Government to direct companies to furnish information or statistics.

407 to 414 – NCLT – Constitution, etc

439- Offences to be non cognizable

443- Power of Central Government to appoint company prosecutors.

444- Appeal against acquittal

445-Compensation for accusation without reasonable cause.

446- Application of fines

447- Punishment for fraud

448- Punishment for false statement

449-Punishment for false evidence

450- Punishment where no specific penalty or punishment is provided.

451-Punishment in case of repeated default. 

452-Punishment for wrongful withholding of property.

453-Punishment for improper use of “Limited” or “Private Limited”.

456-Protection of action taken in good faith.

457-Nondisclosure of information in certain cases.

458-Delegation by Central Governemnt of its powers and functions.

459-Powers of Central Government or Tribunal to accord approval, etc., subject to conditions and to 

       prescribe fees on applications.

460-Condonation of delay in certain cases.

461-Annual report by Central Government.

462-Power to exempt class or classes of companies from provisions of this Act.

463-Power of court to grant relief in certain cases.

467-Power of Central Government to amend Schedules.

468-Power of Central Government to amend Schedules.

469-Power of Central Government to make rules.

470- Power to remove difficulties.


For complete Companies Act, 2013 follow this click here

Best regards

SEC 50C NOT APPLICABLE ON LEASEHOLD LAND & BUILDING

SEC 50C NOT APPLICABLE ON LEASEHOLD LAND & BUILDING

One of the relevant ingredients for invoking S.50 C is that there is a payment of stamp duty in respect of transfer of capital assets being land or building or both.


Payment of stamp duty is required only when transfer of capital asset is registered under theRegistration Act. If payment of stamp duty for the purpose of the transfer is not required, then there is no occasion to look into other conditions as mentioned in S.50 C . Therefore, in those cases of transfer where agreement or sale deed is not registered and stamp duty is not paid, or capital gain is simply charged by deeming certain transactions as transfer as per other provisions of the act or some transactions of transfer are not registered or are not legally required to be registered under the Registration Act, S.50′C’ cannot be put into operation.

The above view has been adopted in following judgments :  

1. ACIT Vs. Shrikishan Dass, ITA No. 915/ Del/ 2012, Date of pronouncement: 07.06.2013, ITAT – Delhi Bench 
   
   
2. Carlton Hotels (P) Ltd. Vs ACIT, 35 SOT 26(lucknow) ,122 TTJ 515

Disclaimer: The above post is only for sharing information between friends & professional colleagues. Professional consultancy must be sought before entering into any transaction related with above post.

SERVICE TAX ON CHARITABLE TRUST

Applicability of Service tax is described as answers to questions as follows:

1) Whether CHARITABLE TRUST (CT) are liable to pay ST?

     Yes. Refer to charging section i.e. Section 66B which reads as follow:

     ’66B. There shall be levied a tax …. provided ….. by one person to another…….

 What is a “person”?

‘Person’ has been defined in Section 65 B. It includes following entities:

  ♦  an individual

  ♦  a Hindu undivided family

  ♦  a company

  ♦  a society

  ♦  a limited liability partnership

  ♦  a firm

  ♦  an association or body of individuals, whether incorporated or not

  ♦  Government

  ♦  a local authority, or

As can be seen, the term “person” is wide and includes Association of Persons whether incorporated or not.

2) Does it mean that CT will have to pay ST on services provided by it?

Yes. Since section 66D containing Negative List (NL) is not having any specific reference to services provided by CT. Hence, services provided by CT are taxable.

3) Whether CT will have to pay ST on all the types of services provided by it?

No. For the purpose of determining tax liability, one will have to refer to Notification No. 25/2012 where under various types of services have been declared exempt.

Clause No. 4 of Notification No. 25/2012 provides as follow:

Services by an entity registered under section 12AA of the Income tax Act, 1961(43 of 1961) by way of charitable activities;

As can be seen from above, exemption granted has two important conditions to be complied with viz. (i) CT should have been registered under section 12AA of Income Tax Act (AGA Khan Fondation is registered u/s 12AA of IT Act)  and (ii) the activities carried on should be charitable activities. Thus, all the activities carried on by the CT per se are not exempt. Exemption granted is restrictive.

4) What are “charitable activities”?

Clause 2(k) of Notification No. 25 / 2012 defines it as follow:

(k)  “charitable activities” means activities relating to -

 (i)  public health by way of -

(a)  care or counseling of (i) terminally ill persons or persons with severe physical or mental disability, (ii) persons afflicted with HIV or AIDS, or (iii) persons addicted to a dependence-forming substance such as narcotics drugs or alcohol; or

(b)  public awareness of preventive health, family planning or prevention of HIV infection;

(ii) advancement of religion or spirituality;

(iii)  advancement of educational programmes or skill development relating to,-

(a)  abandoned, orphaned or homeless children;

(b)  physically or mentally abused and traumatized persons;

(c)  prisoners; or

(d)  persons over the age of 65 years residing in a rural area;

(iv)  preservation of environment including watershed, forests and wildlife; or

(v)  advancement of any other object of general public utility up to a value of,-

(a)  eighteen lakh and seventy five thousand rupees for the year 2012-13 subject to the condition that total value of such activities had not exceeded twenty five lakhs rupees during 2011-12;

(b) twenty five lakh rupees in any other financial year subject to the condition that total value of such activities had not exceeded twenty five lakhs rupees during the preceding financial year;

Disclaimer: The above discussion is made for services excluding services which were not falling under Sec.66D (Negative list) & services which were not exempt under Mega exemption no. 25/2012.