DSK Budget Highlights 2014-15

8/11/2019 DSK Budget Highlights 2014-15

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BUDGET 2014 HIGHLIGHTS


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Table of Contents

Direct Tax es

IndividualTaxation

CorporateTaxation

International Taxation

Indirect Taxes

ServiceTax

Excise Duty

CustomsDuty


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Direct Tax

Individual Taxation

Income Tax Rates for the year ending March 31, 2015,effective upon the enactment by the parliament:

Individuals (resident as well as non residents):

Total income Rate

Not exceeding Rs 250,000 Nil

Over Rs 250,000 but not exceeding Rs 500,000 10%

Over Rs 500,000 but not exceeding Rs 1,000,000 20%

Over Rs 1,000,000 30%

Residents above the age of sixty years but less than eightyyears:

Total income Rate


Over Rs 300,000 but not exceeding Rs 500,000 10%


Over Rs 1,000,000 30%

Residents above the age of eighty years:

Total income Rate



Over Rs 1,000,000 30%

Surcharge and education cess rates are the same as was in

previous year.

The investment limit for deduction under section 80C has beenincreased from Rs. 100,000 to Rs. 150,000.

The deduction on account of interest paid on housing loan forself-occupied property has been increased from Rs. 150,000 toRs. 200,000.

Earlier, in case, an individual or a HUF was not be liable tocapital gain tax if he/it invested the gain arising from transferof resident property or any other capital assets, in a residentialhouse. Now it has been proposed that investment can be madeonly in one resident and that only in India.

Corporate Taxation:

There is no change in the corporate tax rates.

It has been clarified that expenditure incurred by the assesseefor corporate social responsibility clause of the Companies Act,2013 shall not be allowed as deduction from business income.

Relief to FIIs: Any security held by FIIs in accordance withSEBI regulations shall be treated as capital assets andtherefore, any gain arising from transfer of such securities shallbe liable to capital gain tax. So the profit shall be categorisedas capital gain or business income has now been resolved.

Business Income

Deduction in respect of Investment in new plant or machinery:In order to boost the manufacturing sector, it has beenproposed to allowed additional deduction of 15% to amanufacturing company, on the amount of actual cost of newplant & machinery, if the investment in such new assetsexceeds Rs. twenty five crores (Indian rupees 250 million).Earlier the limit was Rs one hundred crore (Indian rupees onebillion). The deduction is available only in the year when thenew assets have been acquired. Further, this deduction shallbe available only up to Financial Year 2016-17.


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Section 35AD allows deduction in respect of the whole of

capital expenditure incurred wholly or exclusively, for thepurpose of specified business. Now the business in the natureof laying and operating a slurry pipeline for the transportationof iron ore and setting up and operating a semi -conductorwafer fabrication manufacturing unit have also been proposed

to be included in the category of specified business. Besidesan additional condition regarding use of such capital assets fora minimum period of eight years has also been proposed.

It has been proposed that the deduction under section 80IAshall be available to an undertaking, which (i) is setup forgeneration or generation and distribution of power, (ii) startstransmission or distribution lines, or (iii) undertakes substantialrenovation and modernization of existing network oftransmission or distribution lines, on or before 31st March2017. Earlier the dead line was 31st March 2014.

MAT: It has also been proposed that In case of MAT (asapplicable to an assessee other than a company), thededuction allowed under Section 35AD (after reducing theamount of allowable depreciation) shall be added back in totalincome for the purpose of calculating MAT.

Transfer Pricing

It has been proposed that the advance pricing agreemententered between the CBDT and assessee may provide for theconditions, procedure and manner, so that it can also apply fordetermining the arms length price during any period not

exceeding four previous years preceding the first previous yearfor which the agreement is being effective.

Withholding Tax

Earlier, no deduction of expense was allowable whilecalculating business profit, in case the assesse fails to withholdtax while making payment of such expenses or fails to depositthe tax so withheld. Now, it has been proposed that in case ofpayment to non-resident, the payment can be made on orbefore the due date for filing the income tax return. Further, incase of payment to a resident, only 30% of such expense shall

be disallowed as deduction instead of 100% of the expenseprovided earlier.

The money (including the bonus) to be received under a life

insurance policy, if not exempt from tax shall be liable towithholding of tax at the rate of 2%. However, no withholdingshall be made if the money does not exceed Rs. one (1) lakh(Indian rupees hundred thousand)

The Indian company is liable to withholding tax at the rate of5% on the interest payable in respect of money borrowed inforeign currency, under a loan agreement or long-terminfrastructure bonds, on or before 1st July 2015. Now thebenefit of lower tax has been extended to loan or long termbonds (including infrastructure bonds) taken on or before 1stJuly 2017.

Capital Gain

Earlier any transfer of shares, listed securities or units etc.,which is held by the assessee for less than twelve (12) months

were treated as short term capital assets. Now, only the listedsecurities and the units of equity oriented fund, which is heldfor less than twelve (12) months were treated as short termcapital assets. In allother cases, the time period shall be thirtysix (36) months.

Earlier the long term capital gain in case of listed securities orunits or zero coupon bonds was liable to 10% capital gain taxin case the benefit of indexation is not availed. Now, thisbenefit is restricted only to listed securities (other than units)or zero coupon bonds. It means that units (mutual funds units)shall be liable to capital gain tax at normal rate i.e. 20%.

The transfer of capital asset, being government securitycarrying periodic interest, by a non-resident to a non-residentoutside India, shall not be treated as transfer and therefore,shall not be liable to capital gain tax.

Other Provisions

Dividend From a Foreign Company: The dividend incomereceived by an Indian company, up to Financial Year 2013-14,from a foreign company in which the Indian company holds26% or more shares was chargeable to tax at the rate of 15%

in the hands of Indian company. Now it has been proposed todone away with this sunset date.


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Dividend Distribution Tax: It has been proposed that for the

purpose of calculating DDT or the tax on distributed income tothe unit holders by a mutual fund, the tax shall be grossed upfor the purpose of calculating tax.

Forfeited Advance Money: Any money, taken as advance fortransfer of capital assets, in case forfeited, shall be treated as

income from other source. Now, this advance so forfeitedshall not be deducted from the cost of acquisition for thepurpose of calculating capital gain.

It has been proposed that every mutual fund, securitizationtrust, venture capital company or venture capital fund shall beliable to file its return of income, if its income exceedsmaximum amount which is not chargeable to tax withoutgiving effect to the exemption under Section 10 of the IncomeTax Act.

Business Trust

A trust registered as an infrastructure investment trust or areal estate investment trust under the SEBI regulations and

whose units are listed on a recognized stock exchange shall betermed as Business Trust. Such trust shall acquire the incomebearing assets by acquiring controlling or other specified assetsin an Indian SPV from the sponsor.

The units of Business Trust to be allotted to the sponsor inexchange of shares of SPV shall not be regarded as transferand therefore, shall not be liable to capital gain tax.

For the purpose of calculating capital gain, at the time oftransfer of units of Business Trust by the sponsor, the timeperiod of holding the shares in the SPV shall be added in thetime period of holding the units in the Business Trust. Similarly,the cost of acquisition of the Units in the Business Trust, shallbe the cost at which the shares in the SPV were acquired bythe sponsor.

In case of transfer of units of the Business Trust by thesponsor is liable to security transaction tax (STT):

the long term capital gain shall not be exempt from tax

the short term capital gain shall be liable to normal rate of

tax (and not he reduced rate of 15%)

The income to be distributed by the Business Trust to the unitholder shall have the pass through status. That means:

Interest Income shall be exempt in the hands of Business

Trust, but shall be liable to tax in the hands of unit holder.

The capital gain shall be chargeable in the hands ofBusiness Trust at the maximum marginal rate, however theportion of capital gain (as distributed to the unit holders)shall be exempt in the hands of unit holders.

The interest income to be distributed to unit holder by theBusiness Trust shall be liable to withholding of tax at the rateof:

5% - where the interest is distributed to a non-resident; or 10% - where the interest is distributed to a resident.

The Business Trust shall be liable to file income tax return.

The transfer of units of Business Trust by the unit holder shallbe liable to capital gain tax in the same manner as are listedsecurities.


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Indirect Tax

Service Tax

Rate of Service Tax has not been changed. The basic threshold limit has not been changed.

Legislative changes

Amendments in Exemption Notification No. 25/2012dated 20.06.2012(w.e.f. 11.07.2014):

Services provided by operators of the common Bio MedicalWaste Treatment Facility to a clinical establishment arenow exempted.

Services provided by Indian tour operator to a foreign

tourist in relation to tour conducted wholly outside Indiaare included in the exemption notification.

Services provided by way of technical testing or analysis ofnewly developed drugs by a clinical research instituteapproved by Drug Controller General of India is madetaxable.

Services provided to RBI from outside India in relation tomanagement of foreign exchange services.

Exemption is extended to services of accommodation for

residential purpose by any non-commercial dharamshalasetc. which have declared tariff less than Rs. One thousandper day.

Changes in Negative List (w.e.f. notification afterassent of president):

Service provided by radio taxis is included in the servicetax net. Service tax will be charged on abated value of40%.

Selling of space for advertisement in any form other thanprint media is brought under the service tax net. (Print

media does not include business directories, yellow pages

and trade catalogues meant for commercial purpose)

Service Tax Rule (w.e.f. 01.10.2014)

Every Service Tax assessee has to pay service tax through

internet banking.

Reverse Charge (w.e.f. 11.07.2014)

Services by a non-executive director to any company wereunder reverse charge. Now the scope has been widened toinclude non-executive directors of Body Corporate.

Services provided by recovery agents to banks and NBFCare covered under reversed charge to the extent of 100%.

In respect of non-abated renting of motor vehicle for

transporting passenger, the ratio of payment of service taxhas been made 50% by service provider and 50 % byservice receiver.

Rate of Interest on Delayed Payment of Service Tax(w.e.f. 01.10.2014)

The rate of interest on delayed payment of Service Tax hasbeen revised as under:

Sr. No. Period Of delay Rate of simple interest

1. Upto 6 months 18 %

2. More than 6 monthsand upto 1 year

18 % for the first sixmonths and 24 % for thedelay beyond 6 months.

3. More than one year 18 % for the first sixmonths and 24 % for thedelay beyond 6 months and30% for any delay beyond1 year.


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All pending dues (whether in litigation or not) will be

applied new interest rates after 01.10.2014. Thus, anydues which are pending payment since one year as on01.10.2014 will attract 30% interest rate.

3% concession to small scale service providers is retained.

Point of Taxation (w.e.f. 01.10.2014)

The point of taxation in respect of reverse charge will bepayment date or the first day after a period of threemonths from the date of invoice, whichever is earlier.(Applicable to invoices issued after 01.10.2014 only)

For the invoices issued prior to 01.10.2014, if payment ismade in 6 months, the point of taxation shall be date ofpayment. Otherwise, the date of invoice shall be the pointof taxation.

Place of Provision of Service Rules (w.e.f. 01.10.2014)

Under Rule 4, a machine temporarily imported for repair inIndia continues to enjoy exemption and the procedure isfurther simplified.

In Rule 9(c), changes have been made to includeintermediary of goods. Thereby, commission agent orconsignment agent will now be covered under Rule 9(c)and the place of provision of service shall be location of

such commission or consignment agent.

Services consisting of hiring of vessels & aircrafts(excluding yachts) will be covered under general rule 3 andplace of provision shall be location of service receiver.

Determination of Value Rules, 2006 (w.e.f. 01.10.2014)

In Rule 2A, value of service portion in works contract ofrepair maintenance of movable and immovable propertyOR any other works contract (other than original workscontract) has been reconciled and the same shall be 70%

of the total amount.

Amendments in Act (w.e.f. notification after assent of

president):-

Under Section 80 of the Finance Act, 1994 benefit ofwaiver of penalty under Section 78 has been withdrawn.

The definition of Private Limited Company has beenadopted for Service tax from Companies Act, 2013.Similarly definition of resident has been adopted fromIncome Tax Act, 1961.

Input Service Distribution

Rule 7 of the CENVAT Credit Rules has been clarified tostate that the accumulated credit can be distributed to allthe units of the assessee irrespective of fact that theservice was not used in any particular unit, subject tocompliance of other conditions.

Central Excise

Rate of Duty

Peak rate of Excise Duty has been not been changed.

Legislative changes

Section 15A has been inserted in the Act so as to empowerthe Central Government to create a Nodal Agency to seek

information regarding an assessee from any other specifiedGovernment agency/office like Income Tax Authority, VATAuthorities, Electricity Board, Registrar of Companies etc.in a specified time limit. It is also proposed to insertSection 15B, which provides for imposition of penalty tothe extent of Rs. 100 for each day of default, if desiredinformation is not submitted.

Section 23A of the Act has been amended so as to includethe resident private limited company to apply for advanceruling before the Advance Ruling Authority. Earlier the saidfacility was available to the non-residents.


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Similar amendments have been carried out in the

corresponding provisions of Customs Act.

Section 32E has been amended to allow filing ofapplications before Settlement Commission subject to itssatisfaction in cases where applicant has not filed the

return. Earlier it was prohibited under the Act.

Section 35B has been amended so as to increase thediscretionary powers of the tribunal to refuse to hear theappeal involving duty amount less than Rs. 2 Lakhs.Earlier, the prescribed amount was Rs. 50,000.

Similar amendments have been carried out in thecorresponding provisions of Customs Act.

New Section 35F has been inserted whereby, arequirement of mandatory pre-deposit of 7.5% of the duty

demanded or penalty imposed or both have been made forthe purpose of filing of appeal before the first appellateauthority and a deposit of 10% of the aforesaid amount forfiling before the 2nd appellate authority has been made. Acap of Rs.10 crores has been placed on such pre-deposit.

As a result of this amendment, mechanism of filing stayapplications before Commissioner (Appeals) and Tribunalhas been done away with.

Similar amendments have been carried out in thecorresponding provisions of Customs Act.

An amendment has been made in Section 35L whichrelates to filing of appeal before the Supreme Court ofIndia. Now it has been clarified that determination ofdisputes related to taxability or excisablity of goods iscovered under the term determination of any-questionhaving a relation to rate of duty. The said amendmentwould help in avoiding uncalled for litigation before theHigh Courts on the issue related to excisability.

Other Amendments

Amendment has been made in Rule 8(1B) of Central ExciseRules, 2002, so as to make it mandatory for every assesse

to pay duty electronically through internet banking w.e.f

October 1, 2014. The Assistant Commissioner uponsatisfaction may allow payment through any other mode.

Further amendment has been made in Rule 8(3A) to makeprovisions for imposition of penalty at the rate of 1% on

duty not paid for each month or part thereof during thedefault period, which has been declared as payable in thereturns.

Amendment is made in Rule 6 of Central Excise ValuationRules. It has been provided that in cases where theexcisable goods are sold at a price less than themanufacturing cost and profit and no additionalconsideration is flowing, the value of such goods will betreated as the transaction value for the purpose of

payment of excise duty. Primarily, this amendment hasbeen made effective to get over the ruling of Supreme

Court of India in the case of Fiat India.

Rule 2 (qa) has been inserted in the CENVAT Credit Rule,2004, in order to define place of removal.

Rule 4 of the said rules has been amended w.e.f.September 1, 2014, so as to provide that the manufactureror the output service provider shall not take the CENVATCredit after 6 Months of the date of issue of invoice/document. Henceforth, there will be a limitation of 6months to avail the credit, which was not present prior to

the amendment.

Rule 4 has been further amended so as to provide that incase of services where service recipient is liable to payservice tax, credit shall be allowed after the service tax ispaid. Further, in cases where service tax liability is partiallyon the provider and partially on the recipient, credit inrespect of such services shall be allowed on or after theday on which payment is made of the value of inputservice and the service tax paid or payable.


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Impact on Industry

Automobiles

Excise duty is being exempted on parts of tractorsremoved from factories of a tractor manufacturer to

another factory of the same manufacturer.

Tobacco Products

Excise duty increased from 12 percent to 16 percent onpan masala, from 50 percent to 55 percent onunmanufactured tobacco and from 60 percent to 70percent on gutkha and chewing tobacco.

Agriculture/ Agro- Processing

Basic excise duty is being reduced from 10% to 6% on

machinery for the preparation of meat, poultry, fruits, nutsand vegetables and on similar machinery used in themanufacture of wine, cider, fruit juices and similarbeverages, etc.

Textile

Excise duty on polyester staple fibre and polyester filamentyarn manufactured from plastic waste and scrap is beingexempted retrospectively w.e.f. June 29, 2010 to May, 5,2012 and intermediate product Toe w.e.f. June 29, 2010

to July 10, 2014. Further, excise duty at the rate of 2%(without CENVAT) or 6% (with CENVAT) has been imposedon PSF and PFY manufactured from plastic waste andscrap w.e.f. July 11, 2014.

Electronics

Excise duty on recorded smart cards has been increased to12%.

Excise duty on Metal Core PCB and LED Driver used in themanufacture of LED Lights has been reduced from 12% to

6%.

Renewable Energy

Full exemption from excise duty has been granted inrespect of machinery/ equipment, etc. required for settingup solar energy production projects.

Exemption from excise duty has also been provided onmachinery, equipment etc., required for setting up ofcompressed biogas plant (Bio-CNG).

Miscellaneous

Optional excise duty of 2% (without CENVAT) on writingand printing paper for printing of educational textbookshas been withdrawn and instead a uniform excise duty of6% has been levied.

The scope of excise duty exemption, all goods supplied

against International Competitive Bidding has beenclarified, so as to state that the said exemption is alsoavailable to the sub-contractors for manufacture andsupply of goods to the main contractor for the execution ofsaid product.

Full exemption from education cess and secondary &higher education cess/ customs component is beingexempted on goods cleared by an EOU into the DTA

Customs

Rate of Duty

Peak rate of Basic Customs Duty has been not been

changed.

Legislative Changes

Section 8B of the Customs Tariff Act, 1975 has beenamended so as to provide for levy of safeguard duty oninputs/ raw materials imported by an EOU and cleared intoDTA as such or are used in the manufacture of final

products, which are cleared into DTA.


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Baggage rules have been amended to raise the free

baggage allowance to Rs. 35000 to Rs. 45000. Further,duty free allowance has been reduced on cigarettes from200 to 100, of cigars from 50-25 and of tobacco from 250gms. to 125 gms.

Impact on Industry

Textile Industry

The BCD on raw materials for manufacture of spandexyarn has been done away with.

The list of specified goods required by handicraftmanufacturer-exporter has been expanded to include wirerolls.

Steel Industry

BCD on stainless steel flat products has been increasedfrom 5%-7.5%.

BCD on ships imported for breaking up has been reducedfrom 10% to 5%.

Electronics

BCD on LCD and LED TV panels of below 19 inches hasbeen done away with. Further, BCD on specified parts of

LCD and LED Panels of TVs has also been exempted.

BCD on specified telecommunication products not coveredunder the Information Technology Agreement has beenincreased to 10%.

Special Additional Duty on all inputs/ components used inthe manufacture of personal computer (laptops/ desktops)and tablet computers has been exempted subject to actualuser components.

Renewable Energy

Full exemption from Special Additional Duty has beenprovided on parts and components required for themanufacture of wind operated electricity generators.

BCD on machinery, equipment, etc., required for setting upof solar energy production project has been reduced to5%.

Concessional Custom Duty of 5% has been provided onmachinery, equipment, etc., required for setting up ofcompressed biogas plant (Bio-CNG).

Infrastructure

State governments concerned are being notified assponsoring authority for Metro Rail Projects covered under

the Project Import Regulations, 1986.

The requirement of certification Ministry of Road Transportor National Highway Authority of India for availing customduty exemption on specified goods required forconstruction of roads has been done away with.


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DSK Budget Highlights 2014-15