In our view the Union Budget 2015 on the
whole is a favorable budget. The budget has been presented with the following
objectives:
A.
Measures
to curb black money;
B.
Job
creation through revival of growth and investment and promotion of domestic
manufacturing and ‘Make in India’;
C.
Minimum
government and maximum governance to improve the ease of doing business;
D.
Benefits
to middle class taxpayers;
E.
Improving
the quality of life and public health through Swachch Bharat initiatives; and
F.
Stand
alone proposals to maximise benefits to the economy.
Budget Highlights
a.
Corporate Tax:
The
corporate tax has been reduced from 30% to 25%. However, various kinds of tax
exemptions and incentives for corporate taxpayers have been removed.
Exemptions
to individual taxpayers will, however, continue since they facilitate savings
which get transferred to investment and economic growth.
Comments: would there be a large number of
tax disputes due to the removal of tax exemptions and incentives?
b. Individual tax payers benefit
Tax benefit upto Rs 4,44,200
as detailed below:
-
No change in the rate of personal income-tax and the rate of tax
for companies in respect of income earned in the financial year 2015-16,
assessable in the assessment year 2016-17.
-
Surcharge @12% on individuals, HUFs, AOPs, BOIs, artificial
juridical persons, firms, cooperative societies and local authorities having
income exceeding Rs 1 crore.
-
Domestic companies income exceeding Rs 1 crore upto Rs 10 crore
@ 7%
-
Domestic companies income exceeding Rs 10 crore. @ 12 %
-
Foreign companies the surcharge will continue to be levied @2%
if the income exceeds Rs 1 crore and is upto Rs 10 crore, and @5% if the income
exceeds Rs 10 crore.
-
Surcharge @12% (current 10%) on additional income-tax payable by
companies on distribution of dividends and buyback of shares, or by mutual funds
and securitisation trusts on distribution of income
-
Education cess and 1% of additional surcharge called ‘Secondary
and Higher Education Cess’ on tax proposed to be continued for the
financial year 2015-16 for all taxpayers.
c. Benefits to middle class tax payers.
-
Health Insurance increased
from Rs 15,000 to Rs 25,000.
-
For senior citizens
o Increase
in limits from 20,000 to 30,000
o Senior citizens of age 80 yrs or more, who are
not covered by health insurance, deduction of Rs 30,000 towards expenditure incurred
on their treatment will be allowed.
o Very
senior persons: for specified diseases
of serious nature the health insurance is enhanced from 60,000 to Rs 80,000.
o For
differently abled persons: addition deduction of Rs. 25,000. (under Section
80DD and Section 80U of the Income-tax Act).
-
Deduction on account of contribution to a
Pension Fund and the New Pension Scheme is increased from Rs 1 lakh to Rs 1.5
lakh.
-
To provide social safety net and the facility
of pension to individuals, an additional deduction of Rs 50,000 is proposed to
be provided for contribution to the New Pension Scheme under Section
80CCD.
-
Investments in Sukanya Samriddhi Scheme is
already eligible for deduction under Section 80C. All payments to the
beneficiaries including interest payment on deposit will also be fully exempt.
-
Transport allowance exemption is being
increased from Rs 800 to Rs 1,600 per month.
-
For the benefit of senior citizens, service
tax exemption will be provided on Varishta Bima Yojana.
d.
Employee Benefit
1. The employees may opt for either
Employees Provident Fund (EPF)
or
New Pension Scheme (NPS).
2. Employees below a certain
threshold of monthly income: contribution to EPF should be optional, without
affecting or reducing the employer’s contribution.
3. With respect to ESI, the
employee should have the option of choosing either ESI or a Health Insurance
product, recognized by the Insurance Regulatory Development Authority (IRDA).
e. Foreign Investment
The Foreign portfolio investments and
foreign direct investments is proposed to be replaced with composite caps.
Note: The
sectors which are already on a 100% automatic route would not be affected.
f.
Quoting of PAN for purchase
or sale exceeding the value of Rs. 1 Lakh
The Finance Bill includes a
proposal to amend the Income-tax Act to prohibit acceptance or payment of an
advance of Rs 20,000 or more in cash for purchase of immovable property.
Quoting of PAN is being made mandatory for any
purchase or sale exceeding the value of Rs 1 lakh. To improve
enforcement, CBDT and CBEC will leverage technology and have access to
information in each other’s database.
Comment: will all the customers have a PAN. Does that mean the company cannot
carry on the transaction with such customers who do not have a PAN? If yes,
would’int it affect the business of a company?
g.
GAAR
The applicability of General Anti Avoidance Rule
(GAAR) has been deferred by two years. Further, it has also
been decided that when implemented, GAAR would apply prospectively to
investments made on or after 01.04.2017.
h.
Income tax on royalty and
fees for technical services
Reduction on rate of income
tax on royalty and fees for technical services from 25% to 10%.
i.
Reduction in customs duty
The customs duty on certain inputs, raw
materials, intermediates and components (in all 22 items) is proposed to be
reduced.
j.
Abolition of wealth tax and
imposition of 2% additional surcharge on certain class of rich people
The existing wealth tax is
proposed to be abolished and replaced with an additional surcharge of 2% on the
super-rich people.
k.
Domestic transfer pricing limits increased
Increase in threshold limit from Rs 5 crore
to Rs 20 crore.
l.
Central Excise Duty hiked
The general rate of Central
Excise Duty of 12.36% including the cess is being rounded off to 12.5%.
m. Domestic
leather footwear
To give a boost to domestic leather
footwear industry, the excise duty on footwear with leather uppers and having
retail price of more than Rs 1000 per pair is being reduced to 6%.
n.
Central Excise and Service
Tax registration
-
Online central excise and service tax registration will be done
in two working days.
-
The assessees under these taxes will be allowed to issue
digitally signed invoices and maintain electronic records.
-
Time limit for taking CENVAT credit on inputs and input services
is being increased from six months to one year.
o.
GST
-
Increase
in the present rate of service tax plus education cesses from 12.36% to a
consolidated rate of 14%.
-
Introduction
of place of effective management concept.
-
GST
will be put in place by 1st April, 2016.
p.
100 % deduction Swachh Bharat
Abhiyan (Not covered under CSR)
100% deduction for
contributions for non-CSR contributions, to the Swachh Bharat KoshWill be made available.
q. NBFC
NBFCs
registered with RBI and having asset size of Rs 500 crore and above will be
considered for notifications as ‘Financial Institution’ in terms of the
SARFAESI Act, 2002.
r.
Stand alone proposals
relating to taxation
-
Service tax exemption has been extended to certain pre cold
storage services in relation to fruits and vegetables so as to incentivize
value addition in this crucial sector.
-
An additional investment allowance (@15%) and additional
depreciation (@15%) to new manufacturing units set-up during the period
01.04.2015 to 31.03.2020 in notified areas of Andhra Pradesh and Telangana.
s. Yoga included in the ambit of Charitable
purpose under Sec 2 (15) of IT Act
Yoga is
now considered to be within the ambit of charitable purpose under Section 2(15)
of the Income-tax Act. Further, the ceiling on receipts from activities
in the nature of trade, commerce or business is being extended to 20% of the
total receipts from the existing ceiling of Rs 25 lakh.
Others:
i.
Gold Monetization Scheme
In
order to monetize gold lying idle in various forms, the Gold Monetization Scheme has been
introduced.
Features
of the scheme:
(i)
This scheme would allow the depositors of gold to earn interest in their metal
accounts and the jewelers to obtain loans in their metal account.
Banks/other dealers would also be able to monetize this gold.
(ii) Also develop an alternate financial asset, a Sovereign Gold Bond, as an
alternative to purchasing metal gold. The Bonds will carry a fixed rate
of interest, and also be redeemable in cash in terms of the face value of the
gold, at the time of redemption by the holder of the Bond.
(iii) Developing an Indian Gold Coin, to
reduce the demand for coins minted outside India and also help to recycle the
gold available in the country.
Comments: Will the consumers be willing to
park the gold in the metal accounts. Over a period of time what would happen to
the gold that which they park?
ii. Curbing Black Money
Concealment of income and assets and evasion of tax in relation
to foreign assets will be prosecutable with punishment of rigorous imprisonment
upto 10 years. Further,
· this offence will be made non-compoundable;
· the offenders will not
be permitted to approach the Settlement Commission; and
· penalty for such concealment of income and assets shall be levied at 300% .
(2) Non filing of return or filing of return with inadequate disclosure of
foreign assets will be liable for prosecution with punishment of rigorous
imprisonment up to 7 years.
(3) Income in relation to any undisclosed foreign asset or
undisclosed income from any foreign asset will be taxable at the maximum
marginal rate. Exemptions or deductions which may otherwise be applicable
in such cases, shall not be allowed.
(4) Beneficial owner or beneficiary of foreign assets will be
mandatorily required to file return, even if there is no taxable income.
(5) Abettors of the above offences will be liable for
prosecution and penalty.
(6) Date of Opening of foreign account would be mandatorily required to be
specified by the assessee in the return of income.
(7) The offence of concealment of income or evasion of tax in relation to a
foreign asset will be made a predicate offence under the Prevention of
Money-laundering Act, 2002 (PMLA). This provision would enable the enforcement
agencies to attach and confiscate unaccounted assets held abroad and launch
prosecution against persons indulging in laundering of black money.
(8) The definition of ‘proceeds of crime’ under PMLA is being
amended to enable attachment and confiscation of equivalent asset in India
where the asset located abroad cannot be forfeited.
(9) The Foreign Exchange Management Act, 1999 (FEMA) is also being amended to
the effect that if any foreign exchange, foreign security or any immovable
property situated outside India is held in contravention of the provisions of
this Act, then action may be taken for seizure and eventual confiscation of
assets of equivalent value situated in India. These contraventions are
also being made liable for levy of penalty and prosecution with punishment of
imprisonment up to five years.
iii. Benami
Transactions (Prohibition) Bill
A
new and more comprehensive Benami Transactions (Prohibition) Bill will be
introduced in the current session of the Parliament which will enable
confiscation of benami property and provide for prosecution especially in real
estate.
