INDIA BUDGET 2015 - Manupatradocs.manupatra.in/newsline/articles/Upload/6F75FD7D-6184-4E85-BF2… · Income Slabs (Rs.) Income Slabs (Rs.) Proposed Tax Rates Tax Rates FY 2015-16

INDIA

BUDGET 2015- HIGHLIGHTS

RSM Astute Consulting Group

Indian member of RSM International

Personnel strength of over 1,200

Consistently ranked amongst India's top 6 Accounting and Consulting groups(Source: International Accounting Bulletin)

Nationwide presence

RSM International

Annual combined fee income of US$ 4.4 billion

732 offices across 112 countries

Personnel strength of over 37,000

International delivery capabilities

astuteconsulting.com

iINDIA BUDGET 2015 - Highlights

February 2015

INDIA


Includes

ØG-20 Countries - Comparative Corporate and Personal Tax Rates

ØTax Incentives for Businesses

ØDTAA Rates

ØDirect Tax and Service Tax Compliance Calendar

RSM Astute Consulting

CONTENTS

CHAPTER 1 : INTRODUCTION

CHAPTER 2 : INDIAN ECONOMY - AN OVERVIEW

CHAPTER 3 : TAX RATES

CHAPTER 5 : TAX INCENTIVES FOR BUSINESSES

CHAPTER 6 : DIRECT TAXES - SIGNIFICANT CHANGES

6.1 Business Entities6.2 Personal6.3 Non Residents

CHAPTER 7 : INDIRECT TAXES - SIGNIFICANT CHANGES

7.1 Service Tax7.2 Customs Duty7.3 Central Excise

7.4 Goods and Services Tax

CHAPTER 8 :

6.4 Transfer Pricing

OTHER SIGNIFICANT PROPOSALS

INDIA


9

12

15

24

41

64

75

41485156

64697174

EXECUTIVE SUMMARY

CHAPTER 9 : 79

CHAPTER 10 : 88

CHAPTER 11 : TDS RATES

DTAA RATES

96

ABBREVIATIONS 102

1

IMPACT ON SELECT INDUSTRIES

6.5 General 57

ii

CHAPTER 12 : DIRECT TAX AND COMPLIANCE CALENDAR

SERVICE TAX 99

CHAPTER 4 : G-20 COUNTRIES - COMPARATIVECORPORATE AND PERSONAL TAX RATES

23

INDIA BUDGET 2015 - HighlightsRSM Astute Consulting

EXECUTIVE SUMMARY

1. DIRECT TAXES

1.1 Effective Tax Rates

1.1.1 Personal taxation

The Bill proposes certain modifications to the tax structure for individuals

# In case of a resident individual of the age of 60 years or more (senior citizen) at any time during the previous year, the basic exemption income slab of Rs. 3,00,000 continues to remain the same. For a resident individual of the

Ø

1

Income Slabs(Rs.)

Income Slabs(Rs.)

ProposedTax Rates

Tax Rates

FY 2015-16 FY 2014-15

Nil

10.30% [tax rate10% plus education cess3% thereon] ofincome exceedingRs. 2,50,000

Rs. 25,750plus 20.60%[tax rate 20% plus education cess 3%thereon] of incomeexceedingRs. 5,00,000

Rs. 1,28,750 plus30.90% [tax rate 30%plus education cess 3%thereon] of incomeexceedingRs. 10,00,000

0 - 2,50,000#

2,50,001# - 5,00,000*

5,00,001 - 10,00,000

10,00,001 - 1,00,00,000

Nil

10.30% [tax rate10% pluseducation cess 3%thereon] of incomeexceedingRs. 2,50,000

Rs. 25,750 plus20.60% [tax rate20% plus education cess 3%thereon] of incomeexceedingRs. 5,00,000

Rs. 1,28,750 plus30.90% [taxrate 30% pluseducation cess 3%thereon] of incomeexceedingRs. 10,00,000

0 - 2,50,000#

2,50,001# - 5,00,000*

5,00,001 - 10,00,000

10,00,001 - 1,00,00,000

Rs.32,00,725 plus 33.99% [(tax rate 30%plus surcharge 10%thereon) pluseducation cess 3%thereon] of incomeexceedingRs.1,00,00,000

1,00,00,001^ and aboveRs. 32,58,920 plus34.608% [(tax rate 30%plus surcharge 12%thereon) pluseducation cess 3%thereon] of incomeexceedingRs.1,00,00,000

1,00,00,001^ and above


2INDIA BUDGET 2015 - HighlightsRSM Astute Consulting

age of 80 years or more (very senior citizen) at any time during the previous year the basic exemption income slab of Rs. 5,00,000 continues to remain the same.

* A resident individual having income upto Rs. 5,00,000 continues to be entitled to a rebate of tax payable [excluding education cess] or Rs. 2,000, whichever is less.

^ Marginal relief is available to ensure that the additional income tax payable, including surcharge of 12% on the excess of income over Rs. 1,00,00,000, is limited to the amount by which the income is more than Rs. 1,00,00,000. However, no marginal relief shall be available in respect of the education cess.

It is proposed to abolish the levy of wealth-tax and the information relating to assets which is currently required to be furnished in the ROW shall be captured in the ROI.

Limit of deduction of health insurance premium increased from Rs. 15,000 to Rs. 25,000. For senior citizens, limit of such deduction increased from Rs. 20,000 to Rs. 30,000. Senior citizens above the age of 80 years, who are not covered by health insurance, to be allowed deduction of Rs. 30,000 towards medical expenditure. Overall deduction limit under section 80D shall not exceed Rs. 30,000.

Deduction limit of Rs. 60,000 with respect to specified disease of serious nature enhanced to Rs. 80,000 in case of senior citizen and additional deduction of Rs. 25,000 allowed for differently abled persons.

Limit on deduction on account of contribution to a pension fund and the new pension scheme increased from Rs. 1,00,000 to Rs. 1,50,000. Further, additional deduction of Rs. 50,000 for contribution to the new pension scheme under section 80CCD(1B) of the Act.

Sukanya Samriddhi Account Scheme is notified for deduction under section 80C of the IT Act and interest earned and withdrawal from the Sukanya Samriddhi Account Scheme is proposed to be exempt.

1.1.2 Corporate taxation

Domestic Corporate base tax rate is proposed to be reduced from 30% to 25% over the next 4 years from the next financial year. However, for FY 2015-16, surcharge on the corporate tax / MAT has been increased from 5% to 7% where income exceeds Rs. 1,00,00,000 not exceeding

Ø

Ø

Ø

Ø

Ø

Ø

Rs. 10,00,00,000 and from 10% to 12% where income exceeds Rs. 10,00,00,000, resulting into higher effective corporate tax / MAT rates. As a result, companies having income exceeding Rs. 10,00,00,000 now be liable to tax at effective rate of 34.608% as against 33.99%. Similarly, the rate of MAT stands increased from 20.9605% to 21.3416%.

For computing DDT / tax on distributed income (buy-back of shares), surcharge to be considered at 12% as against the existing surcharge of 10%. As a result, the rate for DDT / tax on distributed income stands increased to 20.9248% {(15%+12% surcharge) plus 3% cess with grossing up}.

For determination of residential status in case of the companies, 'Control and Management' test under section 6 of the IT Act to be replaced with POEM Test.

1.1.3 Partnership firms / LLP

For total income exceeding Rs. 1,00,00,000 tax is chargeable @34.608% [(tax rate 30% plus surcharge 12% thereon) plus education cess 3% thereon]. In other cases, the effective tax rate to remain unchanged @ 30.90%.

AMT to be increased to 21.346% [(tax rate 18.50% plus surcharge 12% thereon) plus education cess 3% thereon] in case the adjusted total income exceeds Rs. 1,00,00,000. In other cases, the effective tax rate to remain unchanged @ 19.055%.

1.2 Proposals for Businesses

Additional investment allowance @15% and additional depreciation @35% to new manufacturing units set up during the period 1 April 2015 to 31 March 2020 in notified backward areas of Andhra Pradesh and Telangana.

In case of new plant and machinery installed and used for less than 6 months by a manufacturing unit or a unit engaged in generation and distribution of power, then the remaining 50% of the additional depreciation is to be allowed immediately in the next year.

Acceptance or re-payment of an advance of Rs. 20,000 or more in cash for purchase of immovable property to be prohibited.

Sponsors shall be entitled to concessional tax rate of 15% (plus applicable surcharge and cess) on short term capital gains and exemption of long term capital gains on off-loading of units under an IPO of listing of units of REITs,

Ø

Ø

Ø

Ø

Ø

Ø

Ø

Ø


subject to payment of STT.

Further, the rental income of REITs from their own assets to have a pass through facility, whereby distributed income or any part thereof received by a unit holder from the REIT which is in the nature of income by way of renting or leasing or letting out any real estate asset owned directly by such REIT, shall be deemed to be income of such unit holder and shall be charged to tax.

REIT to deduct tax on rental income distributed to resident unit holders @ 10% and in case non-resident unit holders at the rates in force as applicable.

Benefit of accelerated deduction under section 80JJAA of the Act for employment of new regular workmen to be applied to all types of manufacturing entities. Further, the benefit under the section 80JJAA is extended to units employing 50 workmen instead of 100 regular workmen.

100% deduction for contributions, other than by way of CSR contribution, to Swachh Bharat Kosh and Clean Ganga Fund.

It is proposed to amend section 2(15) of the Act to modify the ceiling on receipts from activities in the nature of trade, commerce or business to 20% of the total receipts from the existing ceiling of Rs. 25,00,000. Further, Yoga to be included within the ambit of charitable purpose.

Tax 'pass through' to be allowed to all the sub-categories of category I and category II AIFs.

PAN being made mandatory for any purchase or sale exceeding Rs. 1,00,000

As most of the provisions of DTC have already been included in the IT Act, DTC will no longer be introduced.

Tax free infrastructure bonds are proposed to be introduced for the projects in the rail, road and irrigation sectors.

1.3 Proposal for Transfer Pricing

The threshold limit for applicability of domestic transfer pricing provisions proposed to be increased from Rs. 5,00,00,000 to Rs. 20,00,00,000.

1.4 Proposals for Non-residents

Provision relating to indirect transfers under section 9 of the IT Act proposed

Ø

Ø

Ø

Ø

Ø

Ø

Ø

Ø

Ø

Ø

Ø


to be amended to bring clarity by providing the definition and manner of determination of “substantial interest”. It has been proposed that, the indirect transfer of shares or interest will be taxed in India only if the underlying fair value of Indian assets is more than 50% of the total assets of the entity and subject to the fact that the value of Indian assets exceeds Rs. 10,00,00,000.

Tax rate for non-resident taxpayers in respect of Royalty and FTS reduced from 25% to 10%.

Income from capital gains arising to FII to be excluded from chargeability of MAT. Also, the share of the member of AOP, in the income of AOP, to be excluded from chargeability of MAT.

Fund managers in India not to constitute business connection of offshore funds, subject to fulfillment of prescribed conditions by the fund and the fund manager.

Deeming fiction in section 9 of the IT Act introduced to provide that case of foreign banking company, interest payable by branch office in India to the head office shall be deemed to accrue or arise in India and shall be chargeable to tax.

1.5 Other Proposals

Gold monetization scheme to be introduced to allow the depositors of gold to earn interest in their metal accounts and the jewellers to obtain loans in their metal account. It is also proposed to develop a Sovereign Gold Bond Scheme.

Section 6 of FEMA to be amended through Finance Bill to provide control on capital flows as equity will be exercised by Government in consultation with RBI.

Foreign investments in AIFs to be allowed and distinction between different types of foreign investments, especially between foreign portfolio investments and FDI to be done away with subject to certain conditions.

Comprehensive bankruptcy code of global standards to be brought in FY 2015-16 towards ease of doing business.

An expert committee to examine the possibility and prepare a draft legislation where the need for multiple prior permission can be replaced by a pre-existing regulatory mechanism. This will facilitate India becoming an

Ø

Ø

Ø

Ø

Ø

Ø

Ø

Ø

Ø


investment destination.

Implementation of GAAR to be deferred by 2 years i.e. the same will be effective from 1 April 2017 and will apply prospectively.

Benami Transactions (Prohibition) Bill to curb domestic black money proposed to be introduced in the current session of the Parliament.

Leverage of technology by CBDT and CBEC to access information from each other's data bases.

TARC recommendations to be appropriately implemented during the course of the year.

To effectively and forcefully deal with generation of black money and its concealment, a Bill for a comprehensive new law to deal with black money parked abroad to be introduced in the current session of the Parliament.

Public Debt Management Agency (PDMA) bringing both external and domestic borrowings under one roof to be set up this year. Further, Forward Markets commission to be merged with SEBI.

Proposal to introduce public contracts (resolution of disputes) bill to streamline the institutional arrangements for resolution of such disputes

2.0 INDIRECT TAXES

2.1 Service Tax

Effective Service Tax rate to remain unchanged at 12.36%. However, it is proposed to increase effective rate to 14% from the date to be notified after approval of the Finance Bill by the Parliament and the President. It is further proposed to levy additional 2% Swachh Bharat Cess on all or any of the taxable services. Once effective, service tax rate will be 14% or 16%, as the case may be.

Uniform abatement rate notified for transportation by rail, road and vessel. Service tax shall be payable on 30% of the taxable value.

Manpower supply services or security services which were covered under partial reverse charge mechanism to be covered under full reverse charge mechanism. Hence, in such cases, the service provider need not charge service tax and all service tax will be payable under reverse charge by the service receiver.

Ø

Ø

Ø

Ø

Ø

Ø

Ø

Ø

Ø

Ø


Ø

Ø

Ø

Ø

Ø

Ø

Ø

Ø

Ø

Ø

Ø

Ø

Ø

CENVAT credit in respect of service tax paid under the partial reverse charge mechanism to be available even if no payment is made to the service provider.

Services provided to Government for infrastructure projects like schools, hospitals and residential staff quarters to be liable to service tax.

Construction, erection, commissioning or installation of airports or ports to be liable to service tax.

Services by way of access to amusement facility providing fun by means of games, rides, bowling alleys, water parks, theme parks and such other places are proposed to be liable to service tax.

Services by way of admission to entertainment events or concerts, pageants, award functions, musical performances and non-recognized sporting events are proposed to be liable to service tax if the consideration for right to admission is more than Rs. 500.

Services provided by a performing artist in folk or classical art forms of music, dance or theatre to be liable to service tax if consideration charged by such artist for the said performance is more than Rs. 1,00,000.

Most services provided by Government or Local Authority are proposed to be made liable to service tax other than those services specifically exempted by way of notification or entry in the Negative list.

Services by way of transportation by rail, vessel or road of tea, sugar, jaggery, coffee and edible oil to be liable to service tax.

Services by way of transportation by rail, vessel or road of rice and pulses to be exempted from service tax.

Services by way of pre-conditioning, pre-cooling, ripening, waxing, retail packing, labelling of fruits or vegetables to be exempted from service tax.

Services provided by a mutual fund agent or a distributor of mutual fund to a Mutual Fund or Assets Management Company to be liable to service tax and to be covered under reverse charge mechanism.

Services provided by way of exhibition of movie by an exhibitor to the distributor or an association of persons consisting of the exhibitor as one of its members to be exempted from service tax.

Alternative optional rate of service tax in relation to money changing


services, air travel agents services, insurance agent services and lottery ticket agent services to be revised appropriately to counterpart with the proposed change in rate of service tax.

2.2 Excise Duty

The general effective rate of basic excise duty has been increased from 12.36% to 12.50%.

Time limit for availing CENVAT credit on inputs and input services has been increased from 6 months to 1 year.

Time limit for return of capital goods from a job worker has been increased from 6 months to 2 years.

Provision relating to reversal for CENVAT credit presently applicable to exempted goods and services, would be applicable to non-excisable goods also.

Online registration under central excise and service tax to be done in 2 working days.

Central excise/Service tax assessees allowed to use digitally signed invoices and maintain records electronically.

The scheme of advance ruling being extended to resident firms, LLP, proprietorship firm and One Person Company.

2.3 Customs

No change in peak rate of BCD.

Effective rate of BCD on import of commercial vehicles other than in case of completely knocked down condition is increased from 10% to 20%.

BCD on organic LED TV panels is reduced from 10% to NIL.

SAD has been reduced on import of certain inputs and raw materials.

All goods used in manufacture of information technology agreement bound items except for populated printed circuit boards are exempted from SAD.

Ø

Ø

Ø

Ø

Ø

Ø

Ø

Ø

Ø

Ø

Ø

Ø


1.1 Background

In FY 2015-16, the Union Budget expects the Indian economy to grow in the range of 8% to 8.5% making it the fastest growing large economy in the world. Standard & Poor's has sharply raised India's growth forecasts recently and said the Indian economy should be a "bright spot" in Asia. S&P raised its India GDP growth forecast to 7.9 % for FY 2015-16 and 8.2 % for FY 2016-17.

The Union Budget 2015 is primarily driven with the objective of accelerating investment and growth as well as channelizing savings in to financial instruments. It has announced permitting tax free bonds for railways, roads and irrigation sector. A Gold monetization scheme is proposed to be introduced to allow the depositors of gold to earn interest in their metal accounts and the jewellers to obtain loans in their metal accounts. It is also proposed to develop Sovereign Gold Bond Scheme for monetisation of unutilized Gold (Indian gold holding estimated at US$ 1 trillion). The fiscal deficit for FY 2015-16 is expected to be contained at 3.9% of GDP and would be gradually reduced to 3% over the next 3 years, thereby laying a roadmap for fiscal consolidation.

The Budget has outlined its intent to lower the corporate tax rates over the next 4 years from 30% to 25%, However, the tax rate for financial year 2015-16 has actually increased marginally from 33.99% to 34.608% due to increase in surcharge from 10% to 12%. In turn, it has proposed phased elimination of deductions and exemptions from next financial year.

Indirect transfer of shares or interest will be taxed in India only if the underlying fair value of Indian assets is more than 50% of the total assets of the entity and the value of Indian assets exceeds Rs. 10 crores. The controversy on MAT applicability to foreign institutional investors has been put to rest. GAAR implementation is deferred by 2 years and will be prospective from 1 April 2017. It has been clarified that Fund Managers in India shall not constitute permanent establishment of offshore funds in India. Tax 'pass through' is proposed to be allowed to both, Category I and Category II Alternative Investment Funds. It is proposed to do away with the

CHAPTER 1: INTRODUCTION


distinction for different types of foreign investments, especially between foreign portfolio investments and foreign direct investments, and replace them with composite caps.

Reduction of TDS (or withholding tax) rate on royalty and fees for technical services payments from 25% to 10% from FY 2015-16, is a very welcome move for technological up-gradation in India. The increase in threshold limit of specified domestic transactions to Rs. 20 crores from Rs. 5 crores is a very welcome move for small and medium scale industry.

A deeming fiction in section 9 of the IT Act is introduced to provide that in case of a foreign banking company, interest payable by branch office in India to its head office, shall be deemed to accrue or arise in India and shall be chargeable to tax. This will induce foreign banks to set up a subsidiary company instead of a Branch model.

There has been no change in the personal tax rates. The basic exemption limit continues at Rs.2.50 lacs. With a view to replace wealth tax, an additional surcharge of 2% is proposed in case where income exceeds Rs. 1 Crore. This will result in maximum marginal rate of 34.608% for financial year 2015-16 as against 33.99% at present. The limit for deduction under section 80C of Rs. 1,50,000 remains unchanged. Section 80C provides for tax deduction in respect of investment in eligible savings such as Provident Fund, ELSS, life insurance premiums, housing loan repayments, 5 year bank deposits, NSC, ULIP to promote growth. Limit of deduction of health insurance premium increased from Rs. 15,000 to Rs. 25,000. The wealth tax currently levied at 1% per annum on certain select assets (such as jewellery and immovable property) is proposed to be abolished.

GST is proposed to be implemented with effect from 1 April 2016. The excise duty is increased to 12.5% and service tax increased from 12.36% to 14% and 16% in certain cases. The proposal to introduce a new Direct Tax Code (DTC) in place of the Income-tax Act has been abandoned. Deduction for contributions towards Swachh Bharat Kosh, Clean Ganga Fund and National Fund for Control of Drug Abuse is proposed to be allowed upto 100%.

A comprehensive new law on black money is proposed to be enacted which will specifically deal with such money stashed away abroad. A new and more comprehensive Benami Transactions (Prohibition) Bill will be introduced to curb domestic black money and benami property.

A Comprehensive Bankruptcy Code of global standards is proposed to be


introduced in FY 2015-16 and PPP mode of infrastructure development to be revisited and revitalised. An expert committee would examine the possibility and prepare a draft legislation where the need for multiple prior permissions can be replaced by a pre-existing regulatory mechanism. This will facilitate India becoming an investment destination.

The Budget is a serious Policy Statement for putting India back on the path of long term sustained economic growth.

In this booklet compiled by us, we intend to offer a broad outline of the highlights of the Union Budget 2015 presented on 28 February 2015. We have discussed the significant proposals of general interest in respect of direct taxes. In respect of indirect taxes and other policy initiatives, only the highlights have been briefly enumerated. Preceding the budget proposals are the macro indicators of Indian economy which provide a backdrop to the legal and financial proposals.

This booklet is not an offer, invitation or solicitation of any kind and it does not purport to be comprehensive, or to render legal, economic or financial advice. This booklet should not be relied upon for taking actions or decisions without appropriate professional advice as the facts of each case have to be studied and the legal position analysed properly before taking any action or decision in the matter. Further, this booklet contains only the proposals and amendments as given in the Finance Bill, 2015, which may be modified before it receives the approval and assent of the Parliament and the President. The proposals regarding direct taxes would become effective from AY 2016-17 (FY 1 April 2015 to 31 March 2016), unless otherwise specified. In this booklet, the terms 'IT Act', 'the Rules' and 'the Bill' are used for the "Income-tax Act, 1961", ''Income-tax Rules, 1962'' and "Finance Bill, 2015" respectively.

While all reasonable care has been taken in preparation of this booklet, we accept no responsibility for any errors it may contain or for any omissions or otherwise or for any loss, howsoever caused or sustained, by the person who relies on it.

1.2 Scope and Limitations


2.2 General Review

The macro-economic situation in India has improved significantly during the current year. In FY 2015-16, the Union Budget expects the Indian economy to grow in the range of 8% to 8.5% making it the fastest growing large economy in the world. Standard & Poor's has raised its India GDP growth forecast to 7.9% for 2015-16 and 8.2% for 2016-17. The new visionary political leadership, lower crude oil prices and better realization from the divestment/allocation of public resources, have resulted in India

becoming a “global economic hotspot”.

The performance of the Indian equity markets also witnessed a dream run wherein the BSE Sensex reached 29,362 on 28 February 2015 from the level of 21,120 as on 28 February 2014.

CHAPTER 2 : INDIAN ECONOMY - AN OVERVIEW

2.1 India At A Glance - The Macro-Economic Perspective


GDP - 2014

GDP Growth Rate

lUS$ 7.227 trillion measured in terms of Purchasing Power Parity (PPP) - 3rd largest in the world

lUS$ 2.047 trillion in terms of Market Exchange Rates

l7.4% p.a. for FY 2014-15l8.1% to 8.5% for FY 2015-16

Forex ReserveslForex Reserves of US$ 340 billion

Market CapitalizationlUS$ 1.66 trillion

Rapid AdvancementlSecond largest telecommunications market in

the world.l3rd largest internet user base and TV market

in the world.

Young DemographylSecond most populous -1.27 billion peoplelOver 50% of the population below 25 years

Exchange Ratel1 US$ = INR 61.79 (as on 28 February 2015)

Political SystemlFederal Republic with Parliamentary

democracylStable political regime over last 6 decades

27/02 2009/

26/02 2010/

5/ 2 20 1

2 0 / 129/02 2012

/

BSE Sensex

8/ 2 02 0 /2 13

28/02 2014/

28/02 2015/

8,892

16,43017,701 17,753

18,86121,120

29,362

GDP Growth

5.1

6.97.4

8.3

2014-15(Advance Estimated)

2015-16(Advance Estimated)

2013-142012-13

The CAD was at US$ 18 billion in 2014-15 (April-September) as against US$ 27 billion in the same period for 2013-14, primarily due to lower crude oil import cost. As a proportion of GDP, the CAD declined from 3.1% in the first half of 2013-14 to 1.9% in the first half of 2014-15.

Headline inflation measured in terms of the Wholesale Price Index (WPI) (base year 2004-05), which remained persistently high at around 6-9% during 2011-13, moderated to an average of 3.4% in 2014-15 (April-December) on the back of lower food and fuel prices.

Net foreign investment surged from US$ 8 billion in 2013-14 (April-September) to US$ 38 billion in 2014-15 (April-September). Foreign investment inflows in 2014-15 are likely to be in excess of US$ 55 billion, leading to a sizeable accretion to the foreign reserves and which resultantly now stands at about US$ 340 billion.

Based on the increased foreign inflows and the positive macro-economic factors, the Indian Rupee has been moderately consistent and stood at Rs. 61.79 per US$ as on 28 February 2015.

Factors like the steep decline in oil prices, plentiful inflow of foreign funds, a benign external environment and potential impact of the new government at the centre, bode well for the growth prospects and the overall macroeconomic situation, therebye creating an excellent opportunity to propel India onto a double-digit growth trajectory.

The aforesaid factors coupled with the challenges in other major economies have thrust India amongst the most attractive investment destinations, well above other countries.


65

60

55

50

45

40

51.00

46.07 45.07

49.37

53.82

62.07 61.79

Ru

pe

es

Rupees/US $ rate

2 F brua y 200

8 er

9 2

28 February 010

ba

1

28 Fe ru ry 20 1

2b ua y 2 1

8 Fe r r 0 2

28 February 2013

u2

28 Febr ary 014

27 February 2015

Foreign exchange reserves

294305279 292 304

329

2009-10 2010-11 2011-12 2012-13 2013-14 2014-15(Est.)

400

350

300

250

200

150

100

50

US

$ B

illio

n

2.3 India - Key Economic Indicators

1

NS

AE

Calculated based on available figures.

New Series Estimates

Advance Estimate

a 2nd Advance Estimates

b Base (2004-05=100)

c Indicative rates announced by Foreign Exchange Dealers Association of India (FEDAI) and from May 2012 onwards are RBI’s reference rates.

9,281NS 9,921NS

167.7 177.7

172.2 172.0

5.1

7.4

1.1

7.4

f3.4

2.1f

6.9NS8,599 9,170NS 4.9 7.56.6

257.1 265.6 -0.8 -3.23.3

964.5 1014.8 4.0 9.9f6.0

6.0

1,706 1,640 -7.5 6.9-3.9

-0.1

d Fiscal indicates for 2013-14 are based on the provisional actual

e Budget Estimates

f April-December 2014

g Figures for 2011-12 to 2013-14 relate to end of financial year and the figure for 2014-15 is at end January 2015

h As on January 9, 2015.

490 450 0.3 f3.6-8.3

300 314 -1.8 f4.04.7

292.0 304.2 -0.8 8.14.2

54.41 60.5

4.5d

13.5 0.511.2

4.8

(Rs. thousand crore)

-At constant market prices

GVA At basic prices(2011-12 prices)

Index of industrialproductionb

Electricity generated(Utilities only) (billion KWH)

Wholesale Price Index(Average)

d

exchange rate)(US$ billion - Annual Average

1At constant market prices

Food grains production(million tones)

Imports(US$ million)

Exports

Foreign exchange reservesg

(US$ million)

(in US$ billion)

Average exchange ratec

(Rs. / US$)

Gross fiscal deficit(% of GDP)

(Base: 2004-05 = 100)


10,657AE

183.8

175.6

9,858AE

a257.1

1115.3

1,753

466

327

328.7

60.78

4.1e

Absolute values % change over previous periodItems

2014-152012-13 2013-142012-132013-14

Gross Domestic Product

2014-15


CHAPTER 3 : TAX RATES

3.1 Individuals, HUFs, AOPs and BOIs

3.1.1 Tax Rates

T h e B i l l p r o p o s e s c e r t a i n

modifications to the tax structure for

individuals, HUFs, AOPs, and BOIs.

Consequent ly, the e f fec t i ve

proposed and present tax rates for

the FYs 2015-16 and 2014-15, in

case of individuals, HUFs, AOPs and

BOIs are as follows:

Income Slabs(Rs.)

Income Slabs(Rs.)

ProposedTax Rates

Tax Rates

FY 2015-16 FY 2014-15

Nil

10.30% [tax rate10% plus education cess3% thereon] ofincome exceedingRs. 2,50,000

Rs. 25,750 plus20.60% [tax rate20% plus education cess3% thereon]of incomeexceeding Rs. 5,00,000

Rs. 1,28,750plus 30.90% [taxrate 30% pluseducation cess3% thereon] ofincome exceedingRs. 10,00,000

0 - 2,50,000#

2,50,001# - 5,00,000*

5,00,001 - 10,00,000

10,00,001 -1,00,00,000

Nil

10.30% [tax rate10% pluseducation cess 3%thereon] of incomeexceedingRs. 2,50,000

Rs. 25,750 plus20.60% [tax rate20% plus education cess 3%thereon] of incomeexceedingRs. 5,00,000

Rs. 1,28,750 plus30.90% [taxrate 30% pluseducation cess 3%thereon] of incomeexceedingRs. 10,00,000

0 - 2,50,000#

2,50,001# - 5,00,000*

5,00,001 - 10,00,000

10,00,001- 1,00,00,000

Rs. 32,00,725 plus33.99% [(tax rate30% plus surcharge10% thereon) pluseducation cess3% thereon] ofincome exceedingRs. 1,00,00,000

1,00,00,001^ and aboveRs 32,58,920 plus34.608% [(tax rate30% plus surcharge12% thereon) pluseducation cess3% thereon] ofincome exceedingRs.1,00,00,000

1,00,00,001^ and above


# In case of a resident individual of the age of 60 years or more (senior citizen) at any time during the previous year, the basic exemption income slab of Rs.3,00,000 continues to remain the same. For a resident individual of the age of 80 years or more (very senior citizens) at any time during the previous year the basic exemption income slab of Rs. 5,00,000 continues to remain the same. The tax for other slabs will change accordingly.

* A resident individual having income upto Rs. 5,00,000 continues to be

entitled to a rebate of tax payable [excluding education cess] or Rs. 2,000, whichever is less.

^ Marginal relief is available to ensure that the additional income tax payable, including surcharge of 12% on the excess of income over Rs. 1,00,00,000, is limited to the amount by which the income is more than Rs. 1,00,00,000. However, no marginal relief shall be available in respect of the education cess.

The proposed incidence of income-tax for FY 2015-16 on individuals, senior citizens and very senior citizens having different income levels can be exemplified as follows:

* The tax incidence for HUFs, AOPs and BOIs will be same as that of individuals.

3.1.2 Proposed tax incidence

Annual

Income (Rs.) Individuals(including women)*

Tax Liability (Rs.)

Very Senior CitizensSenior Citizens

2,50,000

3,00,000

4,00,000

5,00,000

8,00,000

10,00,000

25,00,000

50,00,000

1,00,00,000

1,50,00,000

-

5,150

15,450

25,750

87,550

1,28,750

5,92,250

13,64,750

29,09,750

49,89,320

-

-

-

-

61,800

1,03,000

5,66,500

13,39,000

28,84,000

49,60,480

-

-

10,300

20,600

82,400

1,23,600

587,100

13,59,600

29,04,600

48,83,552


3.2 Companies

3.2.1 Domestic companies

No changes are proposed in the corporate tax rate for FY 2015-16. The Bill proposes to reduce the corporate tax rate from 30% to 25% over a period of 4 years starting from the next financial year. However, the rate of surcharge is proposed to be increased by 2% for FY 2015-16 in case the income of the domestic companies exceeds Rs. 1,00,00,000. As such, the effective tax rates and MAT rates for domestic companies for FYs 2015-16 and 2014-15 are as follows:

Marginal relief is available to ensure that the additional income tax payable,

including surcharge of 7% on the excess of income over Rs. 1,00,00,000, is

limited to the amount by which the income is more than Rs. 1,00,00,000.

Similarly, marginal relief is available to ensure that the additional income tax

payable, including surcharge of 12% on the excess of income over Rs.

10,00,00,000, is limited to the amount by which the income is more than Rs.

10,00,00,000. However, no marginal relief shall be available in respect of the

education cess.

Domestic

CompanyFY 2015-16

Effective Tax Rates

Having total income exceeding Rs. 10,00,00,000

33.99% [(tax rate 30% plus

surcharge 10% thereon) plus

education cess 3% thereon]

20.9605 %[(tax rate 18.5%

plus surcharge 10% thereon) plus education

cess 3% thereon]

32.445% [(tax rate 30% plus surcharge 5% thereon) plus


FY 2014-15 FY 2015-16 FY 2014-15

Effective MAT Rates

19.055% (tax rate 18.5%

plus education cess 3% thereon)

20.008 %[(tax rate 18.5% plus surcharge 5% thereon) plus


Having total income

exceeding Rs.1,00,00,000

but not exceeding Rs.10,00,00,000

Having totalincome upto

Rs. 1,00,00,000

30.90% (tax rate 30% plus education cess

3% thereon)

34.608% [(tax rate 30% plus

surcharge 12% thereon) plus


33.063% [(tax rate 30% plus surcharge

7% thereon) plus education cess 3%

thereon]

21.3416 % [(tax rate 18.5% plus surcharge 12% thereon) plus


20.38885 % [(tax rate 18.5% plus surcharge 7%) plus education

cess 3% thereon]

30.90% (tax rate 30% plus education cess 3% thereon)

19.055% (tax rate 18.5% plus education cess

3% thereon)


3.2.2 Foreign companies

3.2.3 Tax on dividend / income distributed by domestic companies

No changes are proposed in the tax rate and surcharge. As such, the

effective tax rates for foreign companies for FYs 2015-16 and 2014-15 are

as follows:

Marginal relief is available to ensure that the additional income tax payable, including surcharge of 2% on the excess of income over Rs. 1,00,00,000, is limited to the amount by which the income is more than Rs. 1,00,00,000. Similarly, marginal relief is available to ensure that the additional income tax payable, including surcharge of 5% on the excess of income over Rs.10,00,00,000, is limited to the amount by which the income is more than Rs.10,00,00,000. However, no marginal relief shall be available in respect of the education cess.

No changes are proposed in the DDT rate. However, the rate of surcharge is proposed to be increased from 10% to 12%. As such, the effective DDT rate for dividend to be distributed by domestic companies for FY 2015 -16 and FY 2014-15 are as follows:

Foreign CompanyFY 2015-16

Effective Tax Rates

Having total income exceeding

Rs.10,00,00,000

43.26% [(tax rate 40% plus surcharge 5% thereon) plus education cess 3% thereon]

FY 2014-15



Rs.1,00,00,000 but not exceeding

Rs.10,00,00,000

Having total income upto Rs. 1,00,00,000


Dividend Distribution

Tax Rate FY 2015-16

Effective DDT Rates

Rate of DDT on the amount of dividend

received by the shareholders

20.475% [(tax rate 15% plus surcharge 10% thereon) plus education cess 3% thereon considering the grossing up

provisions]

FY 2014-15

20.925% [(tax rate 15% plus surcharge 12% thereon) plus education cess 3% thereon considering the grossing up

provisions]


3.3 Partnership Firms/LLPs

No changes are proposed in the tax rates. However, the rate of

surcharge is proposed to be increased from 10% to 12% in case of the

partnership firm/LLP having total income exceeding Rs. 1,00,00,000.

As such, the effective tax rates for partnership firms/LLPs for FYs 2015-16

and 2014-15 are as follows:

Marginal relief is available to ensure that the additional income-tax payable, including surcharge of 12% on the excess of income over Rs.1,00,00,000, is limited to the amount by which the income is more than Rs.1,00,00,000. However, no marginal relief shall be available in respect of the education cess.

AMT continues on non-corporate assessees such as partnership firms, sole proprietorships, AOPs, HUFs, BOIs, etc. AMT is to be calculated on adjusted total income (if the adjusted total income of such person exceeds Rs. 20,00,000) if the regular income tax payable by such person is less than AMT. No change has been proposed in the AMT rate. However, the surcharge rate is proposed to be increased from 10% to 12% in case the total income exceeds Rs. 1,00,00,000. As such, the effective AMT rates for FYs 2015-16 and 2014-15 are as follows:

3.4 AMT on all Business Organizations other than Companies

Partnership

Firms/LLPs FY 2015-16

Effective Tax Rates


Rs.1,00,00,000


FY 2014-15

Having total income upto Rs.1,00,00,000

30.90% [(tax rate 30% plus education cess 3% thereon]



Non-Corporateassessees FY 2015-16

Effective AMT Rates


Rs.1,00,00,000

21.3416% [(tax rate 18.50% plus surcharge 12% thereon)

plus education cess 3% thereon]

FY 2014-15

Having total income upto Rs.1,00,00,000

20.9605% [(tax rate 18.50% plus surcharge 10% thereon

plus education cess 3%

19.055% [(tax rate 18.50% plus education cess 3% thereon]

19.055% [(tax rate 18.50% plus education cess 3%

thereon]


Marginal relief is available to ensure that the additional income-tax payable, including surcharge of 12% on the excess of income over Rs. 1,00,00,000, is limited to the amount by which the income is more than Rs. 1,00,00,000. However, no marginal relief shall be available in respect of the education cess.

No changes are proposed in the tax rate. However, the rate of surcharge is proposed to be increased from 10% to 12%. As such, the effective tax rate on income distributed by mutual fund for FY2015-16 and FY 2014-15 are as follows:

3.5 Tax on Income Distributed by Mutual Funds

Type of Income

39.52%*(considering the

grossing up provisions)51.49% *

(considering thegrossing upprovisions)

Income distributed by a money market mutual fund or a liquid mutual fund to

- an Individual or an HUF

- others

Income distributed by a mutual fund (including debt fund) other than a money market mutual fund or a liquid mutual fund to

- an Individual or an HUF

- others

Income distributed by a mutual fund to non-residents (not being company) under infrastructure debt scheme

Effective Tax Rate

FY 2015-16 FY 2014-15

40.52%* (consideringthe grossing up

provisions)

52.92%*(considering the

grossing up provisions)

39.52%*(considering the grossing up

provisions)51.49%*

(considering the grossing up provisions)


provisions)52.92%*(considering

the grossing up provisions)


provisions)


provisions)

* The tax rates are inclusive of surcharge of 12% for FY 2015-16 and 10% for FY 2014-15

and education cess of 3% thereon.

3.6 Tax on Distributed Income of Domestic Company for Buy-back of

Shares

No changes are proposed in the tax rate. However, the rate of surcharge is

proposed to be increased from 10% to 12%. As such, the effective tax rate

for distributed income of domestic companies for buy-back of shares for FY

2015-16 and FY 2014-15 are as follows:

ParticularsFY 2015-16

Effective Tax Rates

Rate of tax on the amount of distributed income of domestic

company


FY 2014-15


Type of IncomeFY 2015-16

Effective Tax Rates

Income distributed bya Securitization - an Individual or a HUF - others

28.325%33.99%

FY 2014-15

28.84 %34.608 %

3.7 Tax on Distributed Income by Securitization Trust

No changes are proposed in the tax rate.

proposed to be increased from 10% to 12%. As such, the effective tax rate

for distributed income of domestic companies for buy-back of shares for FY

2015-16 and FY 2014-15 are as follows:

However, the rate of surcharge is

3.8 Other Entities

3.8.1 Co-operative societies

No change is proposed in the tax rate. However, the rate of surcharge is

proposed to be increased from 10% to 12%. As such, the tax rates for co-

operative societies for FYs 2015-16 and 2014-15 are as follows:


Income slab

(Rs.)FY 2015-16

Tax Rates

0 - 10,00010,001 - 20,000

20,001 - 1,00,00,000

Above - 1,00,00,000

FY 2014-15

10.30%Rs.1,030 plus 20.60% of income exceedingRs. 10,000Rs. 3,090 plus 30.90% of income exceeding Rs.20,000

Rs. 34,57,339 plus 34.608% of income exceeding Rs. 1,00,00,000

10.30%Rs. 1,030 plus 20.60% of income exceeding Rs. 10,000Rs. 3,090 plus 30.90% of income exceeding Rs.20,000Rs. 33,95,601 plus 33.99% of income exceeding Rs. 1,00,00,000

Marginal relief is available to ensure that the additional income-tax payable,

including surcharge of 12% on the excess of income over Rs. 1,00,00,000,

is limited to the amount by which the income is more than Rs. 1,00,00,000.

However, no marginal relief shall be available in respect of the education

cess.

No change is proposed in the tax rate. However, the rate of surcharge is

proposed to be increased from 10% to 12%. As such, the tax rates for local

authorities for FYs 2015-16 and 2014-15 are as follows:

3.8.2 Local authorities

Marginal relief is available to ensure that the additional income-tax payable,

including surcharge of 12% on the excess of income over Rs. 1,00,00,000 is

limited to the amount by which the income is more than Rs. 1,00,00,000.

However, no marginal relief shall be available in respect of the education

cess.

Local authoritiesFY 2015-16

Effective Tax Rates

Having total income exceeding Rs. 1,00,00,000

Having total income up to Rs.1,00,00,000

33.99% [(tax rate 30% plus surcharge 10%

thereon) plus education cess 3% thereon]

30.90% (tax rate 30% plus education cess 3%

thereon)

FY 2014-15

34.608% [(tax rate 30% plus surcharge 12%

thereon) plus education cess 3% thereon]

30.90% (tax rate 30% plus education cess 3%

thereon)


CHAPTER 4 : G-20 COUNTRIES - COMPARATIVECORPORATE AND PERSONAL TAX RATES

Notes:1. The above rates are MMR and inclusive of provincial or local taxes as may be applicable to domestic

companies / resident individuals in respective countries.2. The taxation regime for personal taxes is progressive for all the G-20 economies except Russia and

Saudi Arabia.3. Corporate tax @ 35.64% is indicative effective rate of tax. In addition, size based business tax is also

levied on companies.4. Corporate tax @ 20% is payable on the pro-rata income to the extent of non-resident shareholding.

Saudi and the Gulf Cooperation Council (GCC) nationals or companies owned by them have to pay Zakat (i.e. a religious tax) @ 2.5%.

5. Corporate tax comprises of federal tax (35%) as well as state and local government taxes which vary from state to state. Personal tax comprises of federal tax (39.6%) and further each state and local government can also levy tax on income.

6. The above rates are general rates to provide a comparative matrix. The detailed regulations in the relevant countries need to be referred for determining exact rates.

Sr. No. Country Corporate Tax Rate Personal Tax Rate [Note 1] [Notes 1 and 2]

2. Australia 30% 45%3. Brazil 34% 27.50%4. Canada 31% 50%5. China 25% 45% 6. France 38.11% 45%7. Germany 34.82% 47.50%

8. India 34.608% 34.608%9. Indonesia 25% 30%

10. Italy 31.40% 45.93%11. Japan [Note 3] 35.64 % 50.84%12. Mexico 30% 30%13. Russia 20% 13%14. Saudi Arabia [Note 4] 0% 0%15. South Africa 28% 40%16. South Korea 24.20% 41.80%17. Turkey 20% 35%18. United Kingdom 20% 45%19. United States of America

1. Argentina 35% 35%

[Note 5] 35% 39.60%

The G-20 economies comprising of 19 countries and the EU, account for almost 90% of the global GDP, 80% of world trade (including EU intra-trade) and two-third of the world population. Considering the significance of these economies and in order to provide an indicative overview of the prevailing tax rates in these key economies, a brief comparative matrix is tabulated below.


CHAPTER 5 : TAX INCENTIVES FOR BUSINESSES(As updated up to the Finance Bill, 2015)

The IT Act provides for far reaching tax holidays and other tax incentives for businesses. We have briefly enumerated below, the significant tax holidays and incentives available to businesses along with the nature of deductions, eligibi l i ty criteria, quantum of deduction and period for which the deductions are available. The tax holidays and incentives are subject to fulfillment of specified conditions. The changes proposed by the Finance Bill, 2015 are highlighted in bold font. The Budget 2015 has announced the plan to reduce corporate tax rate from 30% to 25% over the next 4 years. However, this process of reduction will be accompanied by rationalisation and removal of various kinds of tax exemptions and incentives for corporate taxpayers and hence the incentive listed below may undergo a substantial change over the next 4 years.


PeriodDetails of Exemption / DeductionSection Quantumof Deduction

10AA First 5 yearsNext 5 years

+Next 5 years

100%50%50%

New eligible unit set up in SEZ on or after 1 April 2005

Exemption is available to the entrepreneur as referred to in Section (2j) of SEZ Act, 2005 for profits derived from export of articles or things or services, manufactured, or produced or provided by an eligible unit. The profits and gains derived from on-site development of computer software (including services for development of software) outside India shall be deemed to be the profits and gains derived from the export of computer software outside India.The benefit is also available to units engaged in cutting and polishing of precious and semi-precious stones.The deduction under this section is to be computed in the same proportion, which the export turnover of the eligible unit bears with the total turnover of the said unit. The eligible units (which are domestic companies) availing these deductions will be subject to MAT @ 21.3416% [(tax rate 18.50% plus surcharge 12%) plus education cess 3% thereon] (having book profit exceeding Rs. 10,00,00,000) or 20.38885% [(tax rate 18.50%

Ø

Ø

Ø

Ø

Ø

Details of Exemption / DeductionSection

plus surcharge 7%) plus education cess 3% thereon] (having book profit exceeding Rs. 1,00,00,000 but not exceeding Rs. 10,00,00,000 ) or 19.055% (tax rate 18.50% plus education cess 3% thereon) (in other cases). From FY 2013-14, a person other than Company shall be required to pay AMT @ 21.3416% [(tax rate 18.50% plus surcharge 12%) plus education cess 3% thereon] (having adjusted total income exceeding Rs. 1,00,00,000) or 19.055% (tax rate 18.50% plus education cess 3% thereon) (in other cases).

In case any deduction has been claimed under section 10AA for the specified business mentioned in section 35AD(8)(c), no deduction under section 35AD shall be available in the same or any other assessment year in respect of such specified business.

+ The deduction is allowed only on creation of a specified reserve, which is required to be utilized for specified purposes.

Ø

ØCredit of MAT and AMT paid shall be available for set-off against the tax as per normal provisions in subsequent years.

Ø

25INDIA BUDGET 2015 - Highlights

Period Quantumof Deduction


Tea / Coffee / Rubber / development allowanceDeduction is available to assessee engaged in the business of growing and manufacturing tea, coffee or rubber in India.For claiming the deduction, the amount has to be deposited in a special account with NABARD or any Deposit Account opened by the assessee and approved by the Tea Board or Coffee Board or Rubber Board within 6 months from the end of the financial year or before the due date of furnishing the return of income, whichever is earlier.The amount has to be utilized by the assessee for specified purposes.

Ø

Ø

Ø

33AB Available for every AY

Upto 40% of profits or amount

deposited, whichever is

less.

Site Restoration Fund – Petroleum or Natural GasDeduction is available to assessee engaged in the business of prospecting for, or extraction or production of petroleum or natural gas or both in India and in relation to which the Central Government has entered into an agreement with such assessee.For claiming the deduction, the amount has to be deposited in a special account with SBI opened by the assessee and approved by the Ministry of Petroleum and Natural Gas before the end of the .The amount has to be utilized by the assessee for specified purposes.

Ø

Ø

Øfinancial year

33ABA Available for every AY

Upto 20% of profits or amount

deposited, whichever is

less.

Details of Exemption / DeductionSection

Amortization of expenditure on prospecting, etc. of certain minerals

The amortization of expenditure is available subject to fulfillment of certain conditions to the resident assessee engaged in the operation of prospecting, extraction or production of specified minerals.The expenditure incurred wholly and exclusively on any operation relating to prospecting for the minerals or development of a mine or other natural deposit qualifies for amortization.

Ø

Ø


Period Quantumof Deduction


Additional Depreciation

General rate of depreciation for plant and machinery is 15% (other than certain specified types of plant and machinery).

An assessee engaged in the business of manufacture or production of any article or thing or in the business of generation or generation and distribution of power can claim the additional depreciation of 20% on the cost of new plant and machinery (other than ships and aircraft) which are acquired and installed after 31 March 2005. Additional depreciation shall be allowed only to the extent of 50% (i.e. 10%) if the machinery is put to use for a period less than 180 days in the year of its acquisition and installation.

It is proposed to allow higher additional depreciation @ 35% (instead of above 20%) in respect of the actual cost of eligible new machinery or plant 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 1 April 2015 and ending before the 1 April 2020. The eligible machinery or plant is mentioned in existing proviso to section 32(1)(iia) of the IT Act.

It is proposed to provide that, in case of eligible new plant and machinery installed and used for less than 180 days by a manufacturing unit or a unit engaged in generation and distribution of power, then, the remaining 50% (i.e. 10% or 17.5% as the case may be) of the additional depreciation is to be allowed in immediate next year.

Ø

Ø

Ø

Ø

32(1) (iia)

Eligibility Criteria, Quantum and Period of DeductionSection

Investment in new plant or machinery

Where a company is engaged in the business of manufacture or production of an article or thing, acquires and installs new assets exceeding Rs. 25,00,00,000, then there shall be allowed a deduction of 15% of the actual cost of such new assets over and above the normal depreciation under section 32 of the IT Act .

The said deduction is available for investment made in new plant and machinery upto 31 March 2017.

In case any new asset is sold or otherwise transferred within a period of 5 years, the deduction allowed above shall be deemed to be the income chargeable under the head ‘Profits and Gains of business or profession’ of the financial year in which such new asset is sold or otherwise transferred (in addition to taxability of gains on transfer of such new asset).

Ø

Ø

Ø

32AC

(1A)

(1B)

(2)

35E Equal installments

over 10 years

‘1/10th of the expenditure’ or

‘income’, whichever is

less.

A company can also directly incur expenditure in respect of eligible project and scheme

Not permitted

Assessee To whom payment should be made Direct Expenditure

Company

Others

Public Sector Company, or a local authority or to an association or institution approved by the National Committee for carrying out any eligible project or scheme

Same as above


Investment in new assets in notified backward areas of the State of Andhra Pradesh or the State of Telangana

It is proposed to provide an additional investment allowance of an amount equal to 15% of the cost of new asset acquired and installed by an assessee, if:

i. It sets up an undertaking or enterprise for manufacture or production of anyarticle or thing on or after 1 April 2015 in any notified backward areas inthe State of Andhra Pradesh and the State of Telangana; and

ii. The new assets are acquired and installed for the purposes of the saidundertaking or enterprise during the period 1 April 2015 to 31 March 2020.

New assets have been defined as plant or machinery subject to fulfillment of prescribed conditions.

The above deduction will be allowed over and above the existing deduction under section 32AC of the IT Act.

In case any new asset is sold or otherwise transferred within a period of 5 years, the deduction allowed above shall be deemed to be the income chargeable under the head ‘Profits and Gains of business or profession’ of the financial year in which such new asset is sold or otherwise transferred. (in addition to taxability of gains on transfer of such new asset)

This restriction shall not apply in a case of amalgamation or demerger. However, the above 5 years condition shall continue to apply to the amalgamated company or resulting company, as the case may be.

Ø

Ø

Ø

Ø

Ø

32AD


Expenditure on eligible projects or scheme

Øwelfare.

ØAny assessee can claim deduction as under:

Deduction is available for expenditure incurred for promoting social and economic

35AC

Deduction in respect of expenditure on specified businesses

Any expenditure of capital nature (other than expenditure incurred on the acquisition of any land or goodwill or financial instrument) incurred, wholly and exclusively, during the year for specified business shall be allowed as deduction subject to the specified provisions.

Specified business and the year (in which the operations to be commenced) for availing deduction under this section are tabulated as under:

Ø

Ø

35AD



From 1 April 2009 onwards*

From 1 April 2007 onwards

From 1 April 2010 onwards**










From 1 April 2009 onwards*1 Setting up and operating a cold chain facility

2 Setting up and operating a warehousing facility for storing agricultural produce

3 Laying and operating a cross-country natural gas or crude or petroleum oil pipeline network for distribution, including storage facilities being an integral part of such network

4 Building and operating a hotel of 2 star or above category as classified by the Central Government anywhere in India

5 Building and operating a hospital with atleast 100 beds for patients anywhere in India

6 Developing and building a housing project under a scheme for slum redevelopment or rehabilitation framed by the Central or State Government, as the case may be, and which is notified by the Board in this behalf in accordance with the guidelines as may be prescribed

7 The business of developing and building a housing project under a scheme for affordable housing framed by the Central Government or a State Government, as the case may be, and notified by the Board in this behalf in accordance with the guidelines as may be prescribed

8 Production of fertilizers in India through a new plant or a newly installed capacity in an existing plant

9 Setting up and operating an inland container depot or a container freight station notified or approved under the Customs Act, 1962

10 Bee-keeping and production of honey and beeswax

11 Setting up and operating a warehousing facility for storage of sugar

12 Laying and operating a slurry pipeline for transportation of iron ore

13 Setting up and operating a semiconductor wafer fabrication manufacturing unit, if such unit is notified by the Board in accordance with the prescribed guidelines

Sr.No.

Specified Business Specified Year ofCommencement

* Specified business referred at Sr. No. 1, 2, 5, 7 and 8 in the above table commencing operations on or after 1 April 2012 shall be eligible for deduction of 150% of capital expenditure incurred.

** Where the assessee builds a hotel of 2 star or above category as classified by the Central Government and subsequently, while continuing to own the hotel, transfers the operation thereof to another person, the said assessee shall be deemed to be carrying on the ‘specified business’ of building and operating hotel as referred at Sr. No. 4 in the above table, with retrospective effect from AY 2011-12.



Ø

Øfinancial year

Ø

Ø

Any asset, in respect of which a deduction is claimed and allowed under this section, shall be used only for the specified business for a period of 8 years beginning with the financial year in which such asset is acquired or constructed.

Where such asset is used for any purpose other than the specified business, then, the total amount of deduction so claimed and allowed in any in respect of such asset (after reducing the depreciation allowable under section 32 of the IT Act on deduction allowed under section 35AD of the IT Act), shall be deemed to be income of the assessee chargeable under the head ‘Profits and gains of business or profession’.

While computing AMT, adjusted total income shall be increased by the deduction claimed under section 35AD of the IT Act as reduced by the amount of depreciation allowable under section 32 of the IT Act on such deduction.

In case deduction has been availed under section 35AD of the IT Act on account of capital expenditure incurred for the purpose of specified business in any assessment year, no deduction under section 10AA of the IT Act or under the provisions of Chapter VI-A or under any other provisions of the IT Act shall be available in the same or any other assessment year in respect of such specified business.

Deduction for payment towards rural development programmesDeduction is allowed subject to fulfillment of certain conditions for any sums paid to:i. An association or institution for carrying out any programme of rural developmentii. An association or institution for training of persons for implementation of rural

development programmeiii. National Fund for Rural Developmentiv. National Urban Poverty Eradication Fund

Ø35CCA

Weighted deduction of expenditure incurred on agriculture extension project

This section provides for weighted deduction of 150% of the expenditure incurred on agricultural extension project. The conditions for eligibility of agricultural extension project have been provided under Rule 6AAD and Rule 6AAE of the IT Rules.

Further, where a deduction under this section is claimed and allowed for any , in respect of any expenditure on agricultural extension project, no deduction shall be

allowed in respect of such expenditure under any other provisions of the IT Act for the same or any other .

assessment year

assessment year

35CCC

Weighted deduction of expenditure incurred on skill development project

Any expenditure (not being expenditure in the nature of cost of any land or building) incurred on skill development project shall be eligible for weighted deduction of 150% in the hands of a company. The conditions of eligibility of skill development project have been provided under Rule 6AAF to Rule 6AAH of the IT Rules.

Further, where a deduction under this section is claimed and allowed for any in respect of any expenditure on skill development project, no deduction shall be

allowed in respect of such expenditure under any other provisions of the IT Act for the same or any other .

assessment year

assessment year

35CCD

Amortization of preliminary expenses

Certain preliminary expenses incurred by the resident assessee before thecommencement of business or after commencement of business in case of extensionof an industrial undertaking or setting up a new industrial unit.

The deduction is allowed in 5 equal annual installments for amount of preliminaryexpenditure incurred or 5% of cost of project, whichever is less.

Ø

Ø

35D


Details of DeductionSection Quantum ofdeduction of

sum paid/expenditure

incurred

Weighted deduction on various expenditure incurred on Scientific Research

35(1)(i) Any expenditure (not being in nature of capital expenditure) laid or expended on scientific research related to business carried on by the assessee.

35(1)(ii) Any sum paid to an approved research association, (which has its object of undertaking scientific research) or to a university, college or other institution to be used for scientific research.

35(1)(iia) Any sum paid to an approved company to be used by it for scientific research. Such approved company will not be entitled to claim weighted deduction under section 35(2AB) of the IT Act. However, deduction to the extent of 100% of the sum spent as revenue expenditure on scientific research, which is available under section 35(1)(i) of the IT Act will continue to be allowed.

35(1)(iii) Any sum paid to approved research association (which has its object of undertaking research) or university, college or other institution to be used for research in social science or statistical research.

35(1)(iv) Any capital expenditure (other than expenditure on land and building) incurred on scientific research related to the business carried on by the assessee.

35(2AA) Any sum paid to a National Laboratory or a University or an Indian Institute of Technology or a specified person with a specific direction that the said sum shall be used for scientific research undertaken under a programme approved by the prescribed authority.

35(2AB) Any expenditure incurred up to 31 March 2017(other than expenditure on cost of land and building), on in-house research and development facility, as approved by the prescribed authority, incurred by the company, engaged in the business of bio-technology or manufacture or production of article or thing (except those specified in the Eleventh Schedule).

100%

175%

125%

125%

100%

200%

200%


Amortization of amalgamation or demerger expenses

Any expenditure incurred by the Indian company for the purposes of amalgamation or demerger of an undertaking shall be eligible for amortization over 5 years beginning from the financial year in which the amalgamation or demerger takes place.

35DD

Amortization of expenditure incurred by way of voluntary retirement scheme

Any expenditure incurred by way of payment of any sum to an employee in connection with his voluntary retirement is eligible for amortization over 5 years, subject to specified conditions.

In case of conversion of private company or unlisted public company into a LLP, unabsorbed expenditure incurred under voluntary retirement scheme by the private company or unlisted public company will be amortized for the remaining period by the LLP.

35DDA



Details of DeductionSection Quantum ofdeduction of

sum paid/expenditure

incurred

It is proposed to provide that, deduction under the said section shall be allowed only if the company enters into an agreement with the prescribed authority for co-operation in such research and development facility and fulfills prescribed conditions with regard to maintenance and audit of accounts and also furnishes prescribed reports.


Capital gains arising on transfer of plant, machinery, land, building or any rights in land / building effected in course of or in consequence of the shifting of an industrial undertaking situated in an urban area to any area (other than an urban area) shall be eligible for exemption. This exemption shall be least of the following:lAmount of capital gains;lAmount of capital gains utilized within a period of 1 year before or 3 years after the date

of transfer of the above assets, for purchase of new plant and machinery, land andbuilding and for shifting expenses, subject to specified conditions.

54G

Capital gains arising on transfer of plant, machinery, land, building or any rights in land / building effected in course of or in consequence of the shifting of an industrial undertaking situated in an urban area to any SEZ shall be eligible for exemption. This exemption shall be least of the following:lAmount of capital gains;lAmount of capital gains utilized within a period of 1 year before or 3 years after the date

of transfer of the above assets, for purchase of new plant and machinery, land andbuilding and for shifting expenses, subject to specified conditions.

54GA

Exemptions from Capital Gains in certain cases

Ø

Ø

Long term capital gains shall be exempt in the hands of an individual or an HUF on sale of a residential property (house or plot of land) in case of re-investment of the net consideration in the equity of a newly started-up SME company in the manufacturing sector and the SME company utilizes the said funds for purchase of new plant and machinery, subject to the certain conditions.The said relief would be available in case of any transfer of residential property made on or before 31 March 2017.

54GB

Ø

Ø

Capital gain on transfer of a long term capital asset shall be exempt from tax, if anassessee invests, within a period of 6 months from the date of transfer of a long-termcapital asset, the capital gains in the specified assets. The specified asset must beheld for a period of 3 years from the date of its acquisition. This exemption shall beleast of the following:lInvestment in specified assets viz. bonds issued by NHAI and the RECL. The

investment is restricted up to Rs. 50,00,000 per assessee per financial year. lAmount of capital gains.

Further, the exemption in respect of capital gains upon aforesaid investments madeduring the financial year in which the original asset or assets are transferred and in thesubsequent financial year shall not exceed Rs. 50,00,000.

54EC


Eligibility Criteria, Quantum and Period of Deduction / ExemptionsSection

Any income arising to an assessee, being a shareholder on account of buy back of shares as referred in section 115QA (not being listed on a recognized stock exchange) by the company shall not be included in the total income of assessee.

10(34A)

Capital gain arising from transfer of long term capital asset being an equity share in a company or a unit of an equity oriented fund or unit of a business trust, on which securities transaction tax is charged, is exempt from tax. However, this exemption is not available for computation of MAT.

10(38)


Any dividend declared, distributed or paid by the specified foreign company to Indian company shall be taxable at a concessional tax rate of 15%.

115BBD

In computing DDT liability, dividend declared by the domestic holding company to its shareholders shall be reduced to the extent of:

i. Dividend received from the domestic subsidiary company during the year on whichDDT has already been paid by subsidiary under this section.

ii. Dividend received from the specified foreign subsidiary during the year on which taxis payable by the holding company under section 115BBD of the IT Act.

115-O

Company / Any other

body established

or constituted under any Central or State Act

100% For 10 consecutive

years out of first 15 years

(20 years for road, bridge, rail system, highway

project, water supply project, water treatment

system, irrigation project, sanitation

and sewerage system or solid

waste management

system).

Deductions of Profits derived by Newly Established Industrial Undertakings / Infrastructure Projects / Facilities / Developers of SEZs / Banking units, etc.

80-IA / 80- IB / 80- IC / 80- IAB / 80- ID / 80- IE / 80JJAA/80LA

Nature of Activity and Location Type ofOrganization

Quantum ofDeduction

Number ofYears

Sr.No.

1. Specified Infrastructure Projects [Section 80-IA(4)(i)]Enterprise being company or consortium of companies registered in India or any authority or board or a corporation or any other body established or constituted under any Central or State Act, for carrying on business of (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining of any infrastructure facility (such as road including toll road, bridge, rail system, highway project, water supply project, water treatment system, irrigation project, sanitation and sewage system or solid waste management system, airport, port, inland waterways and inland ports or navigational channel in the sea) commencing its operations on or after 1 April 1995. Widening of an existing road by constructing additional lanes as a part of highway project is also regarded as a new infrastructure facility eligible for deduction as per Circular No. 4/2010 dated 18 May 2010.

10(34)/10(35)

Dividend referred to in section 115-O and income received in respect of units of mutual fund or shares shall not be included in the total income of assessee.



Deduction shall not be available to a person executing above referred activities as a works contract.

Telecommunication Service Providers

[Section 80-IA(4)(ii)]

Any undertaking which starts providing telecommunication services, whether basic or cellular, including radio paging, domestic satellite service or network of trunking, broadband network and internet services on or after 1 April 1995 but before 31 March 2005.

Deduction shall not be available to a person executing the above referred services as a works contract.

2. All 100% 30%

First 5 yearsNext 5 years

The above 10 years shall be

consecutive AYs out of first 15

years

Nature of Activity and LocationType of

OrganizationQuantum ofDeduction

Number ofYears

Sr.No.

Development of Industrial Park

[Section 80-IA(4)(iii)]

Any undertaking which begins to develop or develops and operates or maintains and operates an industrial park which has commenced operations during 1 April 1997 to 31 March 2011.

Deduction shall not be available to person executing the above referred services as a works contract.

3. All 100%

10 years out of first 15 years


4.(a) All 100%

Any 10 consecutive


Power Undertakings [Section 80-IA(4)(iv)]

Undertaking set up in any part of India for the generation or generation and distribution, of power, which has commenced operations during 1 April 1993 to 31 March 2017.Undertaking which starts transmission or distribution by laying a network of new transmission or distribution lines between 1 April 1999 and 31 March 2017.Undertaking which undertakes s u b s t a n t i a l r e n o v a t i o n a n d modernization of the existing network of transmission or distribution lines between 1 April 2004 and 31 March 2017.Deduction shall not be available to aperson executing the above referredactivities as a works contract.

Ø

Ø

Ø

Ø



Number ofYears

Sr.No.


Undertakings for revival of Power Generating Units

[Section 80-IA(4)(v)]

Undertaking owned by Indian Company (formed before 30 November 2005 and notified before 31 December 2005) set up for reconstruction or revival of a power generating unit, which has commenced operations in power before 31 March 2011.

Deduction shall not be available to person executing the above referred activities as a works contract.

4.(b) Indian Company

100% Any 10 consecutive


Developer of SEZ

[Section 80-IAB]

Any assessee being developer of a SEZ notified by the Central Government after 1 April 2005 can claim deduction under section 80-IAB.

5. All 100%

10 years out of first 15 years.

Scientific and Industrial Research Company[Section 80-IB(8A)]Any company registered in India with its main object being scientific and industrial research and development which is for the time being approved by the DSIR at any time after 31 March 2000 but before 1 April 2007.

6. Company 100%

For first 10 years

Production of mineral oil and natural gas

[Section 80-IB(9)]

Any undertaking which is engaged in refining of mineral oil and begins such refining on or after 1 October 1998 but not later than 31 March 2012 subject to specified conditions.

The tax holiday is also available in respect of profits arising from commercial production of natural gas from blocks which are licensed under the VIII Round of bidding for award of exploration contracts under the New Exp lo ra t ion L icens ing Po l i cy announced by the Government of India and IV Round for the Coal Bed Methane and begins commercial production of natural gas on or after 1 April 2009.

Ø

Ø

7. All 100%

First 7 years


Sr.No.



Number ofYears

INDIA BUDGET 2015 - Highlights

Undertaking engaged in processing /preservation / transportation of specified food items

[Section 80-IB(11A)]

An undertaking deriving profit from the integrated business of handling, storage and transportation of food grains subject to such business beginning its operations on or after 1 April 2001

T h e b e n e f i t i s e x t e n d e d t o undertakings engaged in the business of processing, preservation and packaging of fruits and vegetables.

Further, the benefit is extended to the undertakings engaged in the business of meat and meat products or poultry or marine or dairy products which begin to operate such business on or after 1 April 2009.

Ø

Ø

Ø

8. Company 100% 30%


Others 100% 25%


RSM Astute Consulting 35

Operating and Maintaining Hospital

[Section 80-IB(11C)]

Any undertaking engaged in the business of operating and maintaining a hospital in India other than specified excluded areas.

The undertaking shall be eligible for the deduction if such hospital is constructed in accordance with the local regulations in force; and has at least 100 beds for patients.

The said tax benefit is available to a hospital which is constructed and has started or starts functioning at any time during the period beginning 1 April 2008 and ending on 31 March 2013.

Ø

Ø

Ø

9. All 100%

First 5 years

Undertakings in special category states[Section 80-IC]

Undertakings and enterprises, which begins to manufacture or produce any article or thing which is not specified in Thirteenth Schedule or undertakings and enterprises, which manufactures or produces any article or thing which is not specified in thirteenth Schedule and undertake substantial expansion of existing undertakings.

Ø

10.

Sr.No.


OrganizationQuantum of Number of

Years


Others 100%25%


All 100%

First 10 years

Company 100%30%


}

Convention Centre and Hotels in notified areas

[Section 80-ID]

ØAny undertaking engaged in business of convention centers or hotels in specified area of the National Capital Territory subject to fulfillment of certain conditions:

a. Engaged in the business of hotellocated in specified area; or

b. Engaged in the business ofbuilding, owning and operating aconvention centre located inspecified area, which has startedits operations from 1 April 2007 to31 July 2010.

ØThe aforesaid deduction has been extended to any undertaking engaged in the business of hotel located in specified districts having 'World Heritage Sites' if such hotel is const ruc ted and has s tar ted funct ioning during the period

11. All 100% First 5 years

ØUndertakings and enterprises, which begin to manufacture or produce any article or thing which is specified in fourteenth Schedule or commences any operation specified in that Schedule or undertakings and enterprises, which manufactures or produces any article or thing which is specified in fourteenth Schedule or commences any operation specified in that Schedule and undertake substantial expansion.

i. If located in Sikkim, from 23 December 2002 to 31 March 2007.

ii. If located in North Eastern States*, from 24 December 1997 to 31 March 2007.

iii. If located in Himachal Pradesh and Uttaranchal, from 7 January 2003 to 31 March 2012.

* States of Assam, Tripura, Meghalaya, Mizoram, Nagaland, Manipur and Arunachal Pradesh

Deduction

Sr.No.



Years


Undertakings in North Eastern States

[Section 80-IE]

ØNew undertakings and enterprises, which begin to manufacture or produce any eligible article or thing or provide any services or undertake substantial expansion or carry on any eligible business in any of the North Eastern states beginning from 1 April 2007 to 31 March 2017.

ØThe eligible businesses for this purpose are hotel (not below 2 star category), adventure and leisure sports including ropeways, providing medical and health services in the nature of nursing home with a minimum capacity of 25 beds; running an old-age home; operating vocational t r a i n i n g i n s t i t u t e f o r h o t e l management, catering and food craft, entrepreneurship development, nursing and para-medical, civil aviation related training, fashion designing and industrial training; running information technology related training centre; manufacturing of information technology hardware and bio-technology.

beginning 1 April 2008 and ending on 31 March 2013.

ØThe benefit is available to 2 star, 3 star or 4 star hotels.

12. All 100% First 10 years


Deduction of Additional Wages

[Section 80JJAA]

ØDeduction of an amount equal to 30% of additional wages paid to the new regular workmen shall be available t o a l l a s s e s s e e s h a v i n g manufacturing units deriving profits from manufacture of goods in its factory.

ØIt is proposed to amend the definition of additional wages to mean wages paid to new regular workmen in excess of 50 workmen (instead of earlier limit of 100 workmen) employed during the financial year.

13. All 30% of additional

wages paid to the new

regular workmen

3 AYs including the AY relevant

to the FY in which such

employment is provided

Deduction

Offshore banking unit in SEZ and International Financial Services Centre[Section 80LA]Income from:ØOffshore banking unit in SEZ or ØThe business referred to in section

6(1) of the Banking Regulation Act, 1949 or

ØAny unit of the International Financial Services Center from its approved business.

14 . Scheduled Bank or any

bank incorporated by or under the law of a

country outside India or a unit of an International

Financial Services Center.

100% First 5 years (beginning with

the year in which prescribed

permissions are obtained).

50% Next 5 years

ØIt is also provided that the deduction under this section shall not be available if the factory is acquired by the assessee by way of transfer from any other person or as a result of any business re-organization.

Sr.No.



Years


Deduction


Significant conditions for eligibility for deduction under various sections mentioned above

ØFor the purpose of sections 80-IA, 80-IB and 80-IC, an eligible industrial undertaking is one, which fulfills all of the following conditions:

lIt manufactures or produces any article or thing (other than any non-priority article or thing as specified in the Eleventh Schedule) or operates one or more cold storage plant or plants in any part of India. However, restriction regarding manufacture of non-priority article specified in Eleventh schedule is not applicable to small-scale industrial undertakings and industrial undertakings located in backward states (applicable in case of section 80-IB);

lIt employs (a) 10 or more workers in a manufacturing process carried on with the aid of power or (b) 20 or more workers in a manufacturing process carried on without the aid of power (applicable in case of section 80-IB);

lIt is not formed by splitting up, or reconstruction, of a business already in existence or by transfer to a new business of machinery previously used for any purpose (except under certain circumstances);

lThe benefit of section 80-IA shall not be available to an amalgamated or demerged entity after 1 April 2007.

ØThe profits and gains of an eligible business for the purpose of determining the quantum of deduction is to be computed as if such eligible business were the only source of income of the assessee during the financial year relevant to the assessment year for which the deduction is to be made.

ØAn eligible enterprise engaged in development, operation and maintenance of any infrastructure facility should have entered into an agreement with the Central Government / State Government / local authority / other statutory body for developing or operating and maintaining or developing, operating and maintaining a new infrastructure facility.

ØFor the enterprise where, housing or other activities are an integral part of the highway project, then the exemption is available to profits and gains derived from such project subject to condition that the profit has been transferred to a special reserve account and the same is actually utilized for the highway project excluding housing and other activities before the expiry of 3 years following the year in which such amount was transferred to the reserve account and the amount remaining unutilized shall be chargeable to tax as income of the year in which transfer to reserve account took place.

ØWhere any amount of profits and gains of an industrial undertaking or of a hotel in the case of an assessee is claimed and allowed under this section for any assessment year, deduction to the extent of such profits and gains shall not be allowed under any other provision of the IT Act and shall in no case exceed the profits and gains of the undertaking or hotel, as the case may be.


ØAny undertaking claiming deduction under this section must furnish a report of audit in the prescribed form duly signed and verified by an accountant.

ØNo deduction under 80-IA, 80-IB, 80-IAB, 80-IC, 80-ID, 80-IE will be allowed unless the assessee files return of income within the due date specified under section 139(1) of the IT Act.

ØWith retrospective effect from FY 2002-03:

lIf deduction in respect of profits and gains is claimed and allowed under the various provisions of section 10AA of the IT Act or under any provisions of Chapter VI-A under the heading 'C-Deductions in respect of certain incomes' in any assessment year, no deduction in respect of same shall be allowed under any other provisions of the IT Act for such assessment year;

lThe aggregate of the deductions under the various provisions referred above, shall not exceed the profits and gains of the undertaking or unit or enterprise or eligible business, as the case may be;

lNo deductions under the various provisions referred above, shall be allowed if the deduction has not been claimed in the return of income.

ØIn case of a person other than company who has claimed deduction under any section (other than section 80P of the IT Act) included in Chapter VI-A under the heading 'C-Deductions in respect of certain incomes' or under section 10AA of the IT Act, shall be required to pay AMT @ 21.3416% [(tax rate 18.50% plus surcharge 12%) plus education cess 3% thereon] (having adjusted total income exceeding Rs. 1,00,00,000) or 19.055% (in other cases). However, the provisions of AMT shall not apply to an Individual or an HUF or an AOP or a BOI (whether incorporated or not) or an artificial juridical person referred to in section 2(31)(vii), if the adjusted total income of such person does not exceed Rs. 20,00,000.

ØWhere a deduction under section 10AA or any provisions of Chapter VI-A under the heading 'C-Deductions in respect of certain incomes' is claimed and allowed in respect of profits and gains of any of the specified business referred in section 35AD(8)(c), no deduction of capital expenditure shall be allowed under section 35AD of the IT Act in relation to such specified business for the same or any other assessment year.



6.1 Business Entities

6.1.1 Liberalisation of accelerated deduction for employment of new

workmen

6.1.2 Deferment of provisions relating to GAAR

The existing provisions contained in section 80JJAA of the IT Act, provide for deduction to an Indian company, deriving profits from manufacture of goods in a factory. The quantum of deduction allowed is equal to 30% of additional wages paid to new regular workmen employed by the assessee in such factory, in the previous year, for 3 assessment years, including the assessment year relevant to the previous year in which such employment is provided. Further, clause (i) to Explanation to section 80JJAA of the IT Act defines ‘Additional wages’ to mean wages paid to new regular workmen in excess of 100 workmen employed during the previous year.

It is proposed to amend the section so as to extend the benefit to all assessees having manufacturing units rather than restricting it to corporate assessees only. Further, in order to enable the smaller units to claim this incentive, it is proposed to extend the benefit under the section to units employing 50 instead of 100 regular workmen.

Further, under the existing provisions, the benefit of section 80JJAA of the IT Act is not available if the factory is hived off or transferred from another existing entity or acquired by the assessee company as a result of amalgamation with another company. It is proposed to substitute this clause for denial of deduction under section 80JJAA of the IT Act for factory acquired by the assessee by way of transfer from any other person or as a result of business re-organisation.

As per existing provisions of IT Act, GAAR provisions shall be applicable to the income of FY 2015-16 (AY 2016-17) and subsequent years.

It is proposed that implementation of GAAR be deferred by 2 years and GAAR provisions be made applicable to the income of FY 2017-18 (AY 2018-19) and subsequent years.

CHAPTER 6 : DIRECT TAXES - SIGNIFICANT CHANGES


Investments made up to 31 March 2017 are proposed to be protected from applicability of GAAR by amendment in the relevant Rules in this regard.

As per existing provision of section 115JB of the IT Act, a company which is member of an AOP is liable to MAT on the share of income of AOP, since such income is not excluded from the book profit while computing the MAT liability in the hands of a company as member of AOP.

It is proposed that the share of member of AOP in the income of the AOP, on which no tax is payable in accordance with the provisions of section 86 of the IT Act, should be excluded while computing the MAT liability. The expenditure, if any, debited to the profit and loss account, corresponding to such income are also proposed to be added back to the book profit.

It is further proposed that income from transactions in securities (other than short term capital gains arising on transactions on which STT is not chargeable) arising to a FII, shall be excluded from chargeability of MAT and the profit corresponding to such income shall be reduced from the book profit. The expenditure, if any, debited to the profit and loss account, corresponding to such income is also proposed to be added back to the book profit.

As per existing provisions, capital gains arising to the sponsor at the time of exchange of shares in SPVs, being the unlisted company through which income generating assets are held indirectly by the business trusts, with units of the business trust, the taxation of gains is deferred. The tax on such gains is levied at the time of disposal of units by the sponsor. The deferral of capital gains provided to the sponsor of business trust places such a sponsor at a disadvantageous tax position vis-à-vis direct listing of shares of the SPV.

In case the sponsor holding shares of the SPV decides to exit through the IPO route, then the benefit of concessional tax regime relating to capital gains arising on transfer of shares subject to levy of STT is available to him. The tax on short term capital gains in such case is levied @15% (plus applicable surcharge and cess) and the long term capital gains is exempt under section 10(38) of the IT Act. However, the benefit of concessional regime is not available to the sponsor at the time it offloads units of business trust acquired in exchange of its shareholding in the SPV through Initial Offer at the time of listing of business trust on stock exchange.

6.1.3 Rationalization of provision of MAT in case of FII/AOP

6.1.4 Taxation regime for REITs


In order to provide parity, it is proposed that:

(i) the sponsor would get the same tax treatment on offloading of units under an Initial Offer on listing of units as it would have been available had he offloaded the underlying shareholding through an IPO;

(ii) the Finance (No.2) Act, 2014 be amended to provide that STT shall be levied on sale of such units of business trust which are acquired in lieu of shares of SPV, under an Initial Offer at the time of listing of units of business trust on similar lines as in the case of sale of unlisted equity shares under an IPO;

(iii) the benefit of concessional tax regime @15% (plus applicable surcharge and cess) on short term capital gains and exemption on long term capital gains under section 10(38) of the IT Act shall be available to the sponsor on sale of units received in lieu of shares of SPV subject to levy of STT.

Further, in case of a business trust, being REITs, the income is predominantly in the nature of rental income. This rental income arises from the assets held directly by REIT or held by it through SPV. The rental income received at the level of SPV gets passed through by way of interest or dividend to the REIT, the rental income directly received by the REIT is taxable at REIT level and does not get pass through status. In order to provide pass through status to the rental income arising to REIT from real estate property directly held by it, it is proposed to provide that

(i) any income of a business trust, being a REIT, by way of renting or leasing or letting out any real estate asset owned directly by such business trust shall be exempt;

(ii) the distributed income or any part thereof, received by a unit holder from the REIT, which is in the nature of income by way of renting or leasing or letting out any real estate asset owned directly by such REIT, shall be deemed to be income of such unit holder and shall be charged to tax;

(iii) REIT shall deduct TDS @10% on rental income distributed to resident unit holder; and in case of distribution to non-resident unit holder; the tax shall be deducted at rate in force as applicable.

No deduction shall be made under section 194-I of the IT Act where the income by way of rent is credited or paid to a business trust, being a REIT, in respect of any real estate asset held directly by such REIT.

6.1.5 Conditions for determining residential status in respect of foreign

companies


Under the existing provisions of section 6(3) of the IT Act, a company is said to be resident in India in any previous year, if it is an Indian company; or during that year, the control and management of its affairs is situated wholly in India.

It is proposed to amend the provisions of section 6 of IT Act to provide that a person being a company shall be said to be resident in India in any previous year, if it is an Indian company; or its place of effective management, at any time in that year, is 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 business of an entity as a whole are, in substance made. It is further proposed that in due course, a set of guiding principles to be followed in determination of POEM would be issued for the benefit of the taxpayers as well as tax administration.

Under existing provisions of section 32(1)(iia) of the IT Act, additional depreciation of 20% of the cost of new plant or machinery acquired and installed is allowed over and above the general depreciation allowance. Non-availability of 100% of additional depreciation for acquisition and installation of new plant or machinery in the second half of the year may motivate the assessee to defer such investment to the next year for availing full 100% of additional depreciation in the next year.

It is proposed to provide 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, in the immediately succeeding year.

To promote industrialization and economic growth in the states of Andhra Pradesh and Telangana, it is proposed to provide following tax incentives:

Additional Investment Allowance

It is proposed to insert a new section 32AD in the IT Act 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

• he sets up an undertaking or enterprise for manufacture or production of any article or thing on or after 1 April 2015 in any notified backward areas in the State of Andhra Pradesh and the State of Telangana; and

6.1.6 Allowance of balance 50% additional depreciation

6.1.7 Tax incentives in the form of additional investment and depreciation

allowance for the State of Andhra Pradesh and the State of Telangana


• the new assets are acquired and installed for the purposes of the said undertaking or enterprise during the period beginning from 1 April 2015 to 31 March 2020.

It is proposed that the deduction shall be available over and above the deduction available under section 32AC of the IT Act.

It is also proposed to provide suitable safeguards for restricting transfer of the plant or machinery for a period of 5 years to ensure that the manufacturing units which are set up by availing this proposed incentive actually contribute to economic growth of these backward areas. However, this restriction shall not apply to the amalgamating or demerged company or the predecessor in a case of amalgamation or demerger or business reorganisation but shall continue to apply to the amalgamated company or resulting company or successor, as the case may be.

Additional Depreciation

Under the existing provision of section 32(1)(iia) of the IT Act, additional depreciation of 20% is allowed in respect of the cost of new plant or machinery acquired and installed by certain assessees over and above the deduction allowed for general depreciation under section 32(1)(ii) of the IT Act.

In order to incentivise acquisition and installation of plant and machinery for setting up of manufacturing units, it is proposed to allow higher additional depreciation @ 35% (instead of 20%) in respect of actual cost of 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.

It is proposed that this higher additional depreciation shall be available in respect of acquisition and installation of any new machinery or plant for the purposes of the said undertaking or enterprise during the period beginning on 1 April 2015 and ending before 1 April 2020. The eligible machinery or plant for this purpose shall not include the machinery or plant which are currently not eligible for additional depreciation as per the existing provision of section 32(1)(iia) of the IT Act.

It is also proposed to make consequential amendments in the second proviso to section 32(1) of the IT Act for applying the existing restriction of the allowance to the extent of 50% for assets used for the purpose of business for less than 180 days in the year of acquisition and installation. However, the balance 50% of the allowance is also proposed to be allowed in the


immediately succeeding financial year.

As per section 47(vib) of the IT Act, any capital asset transferred by the demerged company to the resulting company in the scheme of demerger is not regarded as transfer if the resulting company is an Indian company.

In such cases, the cost of such asset in the hands of resulting company should be cost of such asset in the hands of demerged company as increased by the cost of improvement, if any, incurred by the demerged company. Further, the period of holding of such asset in the hands of resulting company should include the period for which the asset was held by the demerged company. Under the existing provisions of the IT Act, there is no express provision to this effect.

It is proposed to amend section 49(1)(iii)(e) of the IT Act to include transfer pursuant to demerger and 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. Consequentially, the period of holding of such asset in the hands of resulting company shall include the period for which the asset was held by the demerged company.

Section 194A(3) of the IT Act provides a general exemption from making tax deduction from payment of interest by all co-operative societies including co-operative banks, to its members. It is proposed to amend the provisions of section 194A of the IT Act to expressly provide that the exemption from making tax deduction from payment of interest by all co-operative societies to its members under section 194A(3)(v) of the IT Act shall not apply to the payment of interest on time deposits by the co-operative banks to its members.

The existing provision of TDS on payment of interest by banking company or co-operative bank applies only to the interest payment on time deposits excluding recurring deposit. It is proposed to amend the definition of ‘time deposits’ so as to include recurring deposits within its scope for the purpose of deduction of tax under section 194A of the IT Act

As per the existing provisions of section 194A(3) of the IT Act, interest income for the purpose of deduction of tax by the banking company or the co-

6.1.8 Cost of acquisition of the capital assets in case of demerger

6.1.9 Rationalisation of provisions relating to TDS on interest (other than

interest on securities)


operative bank or the public company shall be computed with reference to each branch of these entities.

It is, therefore, proposed to amend the provisions of section 194A of the IT Act to provide that the computation of interest income for the purposes of deduction of tax should be made with reference to the income credited or paid by the banking company or the co-operative bank or the public company which has adopted core banking solutions.

These amendments will take effect from 1 June 2015

The existing provisions of section 195(6) of the IT Act provide that any person responsible for paying any interest or any sum chargeable to tax to a non-resident not being a company, or to a foreign company shall deduct tax at the rates in force and furnish prescribed information. One of the main principles of obtaining information for foreign remittances is to identify the taxable remittances on which tax was deductible but was not deducted.

In view of this, it is proposed to amend the provisions of section 195 of the IT Act to provide that the person responsible for paying any sum, whether chargeable to tax or not, to a non-resident, not being a company, or to a foreign company, shall be required to furnish the information of the prescribed sum in such form and manner as may be prescribed.

For ensuring submission of accurate information in respect of remittance to non-resident, it is further proposed to insert Section 271-I in the IT Act for levy of penalty of Rs. 1,00,000 in case of non-furnishing of information or furnishing of incorrect information as per section 195(6) of the IT Act. Such penalty may be not levied in case if it is proved that there was reasonable cause for non-furnishing or incorrect furnishing of information.

These amendments will take effect from 1 June 2015.

In order to curb generation of black money by way of dealings in cash in immovable property transactions, it is proposed to amend section 269SS of the IT Act 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

6.1.10 Information of remittance to Non-residents

6.1.11 Mode of accepting and repayment of certain loans, deposits and

specified sums/advances


specified sum is Rs. 20,000 or more.

It is also proposed to amend section 269T of the IT Act so as to provide that no person shall repay any loan or deposit made with it or any specified advance received by it, 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 Rs. 20,000 or more. The specified advance shall mean any sum of money in the nature of an advance, by whatever name called, in relation to transfer of an immovable property whether or not the transfer takes place.

It is further proposed to make consequential amendments in section 271D and section 271E of the IT Act to provide for penalty for failure to comply with the amended provisions of section 269SS and 269T of the IT Act, respectively.


It is proposed to abolish the levy of wealth tax under the Wealth-tax Act, 1957. It is further proposed to suitably modify the ROI to capture the information relating to assets which is currently required to be furnished in the wealth-tax return.

Section 192 of the IT Act does not contain any guidance regarding nature of evidence/documents to be obtained by the person responsible for paying income chargeable under the head “salaries” before allowing certain deductions, exemptions or allowances or set-off of certain loss as per provisions of the IT Act for the purposes of estimating income of the assessee or computing the amount of the tax deductible under the said section.

It is proposed to amend the provisions of section 192 of the IT Act to provide that the person responsible for paying income chargeable as salary and for the purposes of estimating income of the assessee or computing tax deductible under section 192(1) of the IT Act, shall obtain evidence or proof or particulars of the prescribed claim (including claim for set-off of loss) under the provisions of the IT Act in the form and manner as may be prescribed.

6.1.12 Abolition of Wealth-tax Act, 1957

6.2 Personal

6.2.1 Declaration by employee in prescribed form and manner for TDS on

salary


6.2.2 Additional deduction under section 80CCD in respect of contributions

to National Pension System

6.2.3 Increase in deduction for deposits towards pension funds under

section 80CCC

6.2.4 Increase in deduction in respect of health insurance premia under

section 80D

6.2.5 Tax benefits for income from and investments under Sukanya

Samriddhi Account Scheme

The existing provisions of section 80CCD of the IT Act provides that in case of an individual who has paid or deposited any amount in his account under a pension scheme notified or as may be notified by the Central Government, a deduction of such amount not exceeding 10% of his salary or gross total income is allowed, subject to the maximum deduction of Rs. 1,00,000.

It is proposed to remove such restriction of Rs. 1,00,000. It is further proposed to provide an additional deduction to the individual employee of the whole amount paid or deposited in the previous year in his account under a pension scheme notified or as may be notified by the Central Government not exceeding Rs. 50,000. However, no deduction shall be allowed in respect of the amount on which deduction has already been claimed as a part of calculation of 10% of salary or gross total income.

It is proposed to raise the limit of deduction under section 80CCC of the IT Act to Rs. 1,50,000 from the existing limit of Rs. 1,00,000 to the individual assessee for amount paid or deposited by him to effect or keep in force a contract for any annuity plan of Life Insurance Corporation of India or any other insurer for receiving pension from a fund set up under a pension scheme.

It is proposed to amend section 80D of the IT Act so as to raise the limit of deduction from Rs. 15,000 to Rs. 25,000 for individual and HUF and to raise the limit of deduction for senior citizens from Rs. 20,000 to Rs. 30,000.

It is further proposed to provide that any payment made on account of medical expenditure in respect of a very senior citizen not exceeding Rs. 30,000 shall be allowed as deduction under section 80D, if no payment has been made to keep in force any insurance on the health of such person. Further, the aggregate deduction for health insurance premia and medical expenditure incurred in respect of the parents would be limited to Rs. 30,000.

Pursuant to the Budget announcement in July 2014, a special small savings


instrument for welfare of the girl child has been introduced under the Sukanya Samriddhi Account Rules, 2014 envisaging various tax benefits on investments made in and income derived from the accounts maintained under the aforesaid scheme.

Accordingly, it is proposed to insert a section 10(11A) of the IT Act so as to provide that any payment from an account opened in accordance with the Sukanya Samriddhi Account Rules, 2014 shall not be included in the total income of the assessee. Thus, the interest accruing on deposits in and withdrawals from any account under the scheme would be tax exempt.

The scheme has already been notified under clause (viii) of section 80C of the IT Act. It is further proposed to amend provisions of section 80C of the IT Act to provide for the deduction to the parent or legal guardian of the girl child of a sum paid or deposited during the year in the aforesaid scheme in the name of any girl child of such individual or for whom such individual is the legal guardian.

This amendment will take effect retrospectively from AY 2015-16 and subsequent years.

It is proposed to amend section 80DDB of the IT Act to provide for a higher limit of deduction of up to Rs. 80,000 for the expenditure incurred in respect of the medical treatment of a ‘very senior citizen’ (individual resident in India who is of the age of 80 years or more).

Under the existing provisions of section 80DDB, a certificate in the prescribed form is required from a neurologist, an oncologist, a urologist, a haematologist, an immunologist or such other specialist working in a Government hospital to claim the benefit.

It is proposed to amend section 80DDB so as to provide that the assessee will be required to obtain a prescription from a specialist doctor for the purpose of availing such deduction.

It is proposed to amend section 80DD and section 80U of the IT Act so as to raise the limit of deduction in respect of a person with disability from Rs. 50,000 to Rs. 75,000 and in respect of a person with severe disability from Rs. 1,00,000 to Rs. 1,25,000.

6.2.6 Increase in deduction under section 80DDB in respect of medical

treatment

6.2.7 Increase in deduction under sections 80DD and 80U for persons with

disability and severe disability


6.2.8 TDS mechanism for pre-mature withdrawals from EPFS

6.2.9 Increase in transport allowance for the employees

6.2.10 Abolition of WT Act

6.3 Non-Residents

6.3.1 Tax rates for Royalty and FTS in the hands of non-resident reduced to

10%

6.3.2 Pass through status to category–I and category–II AIFs

It is proposed to introduce a new section 192A in the IT Act for deduction of tax at the rate of 10% on pre-mature taxable withdrawal from EPFS over the threshold limit of Rs. 30,000. However, to reduce the compliance burden of the employees having taxable income below the taxable limit, the employee can furnish declaration in Form 15G / Form 15H (as applicable for senior citizen employees).

In order to ensure the collection of proper taxes by these employees, it is also proposed that non-furnishing of PAN to the EPFS for receiving these payments would attract deduction of tax at the maximum marginal rate.


As per the Budget speech, it is proposed to increase transport allowance exemption from Rs. 800 to Rs. 1,600 per month.

It is proposed to abolish the levy of wealth tax under the WT Act It is further proposed to suitably modify the ROI to capture the information relating to assets which is currently required to be furnished in ROW.

The existing provisions of section 115A of the IT Act provide that in case of non-resident taxpayer, where the total income includes any income by way of Royalty and FTS received by such non-resident from Government or an Indian concern after 31 March 1976 and which is not effectively connected with PE, if any, of the non-resident in India, tax shall be levied @ 25% (plus applicable surcharge and cess) on the gross amount of such income.

It is proposed to amend the IT Act to reduce the tax rate provided under section 115A on royalty and FTS payments made to non-resident to 10% (plus applicable surcharge and cess).

With a view to streamline the taxation of all sub-categories of category I and category II AIFs (herein referred to as investment fund), it is proposed to provide a special tax regime. The salient features of the special tax regime are as under:


?Income of a unit holder out of investments made in the investment fund shall be chargeable to income-tax in his hands.

?Income in the hands of investment fund, other than income under the head profits and gains from business or profession shall be exempt from tax.

?Income in the hands of investor which is of the same nature as income by way of profits and gain of business at investment fund level shall be exempt.

?Where any income is paid to a unit holder by an investment fund other than income which is taxable at investment fund level, the fund shall deduct income-tax @ 10%

?The income paid or credited by the investment fund shall be deemed to be of the same nature and in the same proportion in the hands of the unit holder as if it had been received by, or had accrued or arisen to, the investment fund.

?The loss arising to the fund shall not be allowed to be passed through to the investors and would be carried over at fund level to be set off against income of the next year in accordance with the provisions of Chapter VI of the Act.

?The provisions of Chapter XII-D (DDT) or Chapter XII-E (Tax on distributed income) shall not apply to the income paid by an investment fund to its unit holders.

?The income received by the investment fund would be exempt from TDS requirement. This would be provided by issue of appropriate notification under section 197A(1F) of the IT Act subsequently.

?Investment fund has to mandatorily file its ROI. The investment fund shall also provide to the prescribed income-tax authority and the investors, the details of various components of income, etc. for the purpose of the scheme.

Further, the existing pass through regime is proposed to be continued to apply to VCF/VCC which had been registered under SEBI (VCF) Regulations, 1996. Remaining VCFs, being part of category-I AIFs, shall be subject to the new pass through regime.

Under the existing provisions of IT Act, the offshore funds could get liable to tax in India on the basis of presence of its fund manager in India creating sufficient nexus of the offshore fund with India, thereby constituting its business connection in India, even though the fund manager may be an independent person. Similarly, if the fund manager located in India

6.3.3 Fund managers in India not to constitute business connection of

offshore funds


undertakes fund management activity in respect of investments outside India for an offshore fund, the profits made by the fund from such investments may be liable to tax in India due to the location of fund manager in India and attribution of such profits to the activity of the fund manager undertaken on behalf of the offshore fund. Further, presence of the fund manager under certain circumstances may lead to the offshore fund being held to be resident in India on the basis of its control and management being in India.

In order to facilitate location of fund managers of offshore funds in India a specific regime has been proposed in the IT Act in line with international best practices with the objective that, subject to fulfillment of prescribed conditions by the fund and the fund manager:

?the tax liability in respect of income arising to the fund from investment in India would be neutral to the fact as to whether the investment is made directly by the fund or through engagement of fund manager located in India; and

?that income of the fund from the investments outside India would not be taxable in India solely on the basis that the fund management activity in respect of such investments have been undertaken through a fund manager located in India.

It is further proposed that every eligible investment fund shall, in respect of its activities in a financial year, furnish within 90 days from the end of the financial year, a statement to the prescribed income-tax authority in the prescribed form containing information relating to the fulfillment of specified conditions or any information or document which may be prescribed. In case of non-furnishing of the prescribed information or document or statement, a penalty of Rs. 5,00,000 shall be leviable on the fund.

The existing provisions of section 194LD of the IT Act provide for lower withholding tax @ 5% in case of interest payable at any time on or after 1 June 2013 but before 1 June 2015 to FIIs and QFIs on their investments in Government securities and rupee denominated corporate bonds provided that the rate of interest does not exceed the rate notified by the Central Government in this regard. The limitation date of the eligibility period for benefit of reduced rate of tax available under section 194LC in respect of ECB has been extended from 30 June 2015 to 30 June 2017 by Finance (No.2) Act, 2014.

Accordingly, it is proposed to amend section 194LD to provide that the

6.3.4 Extension of concessional tax rate of 5% under section 194LD


concessional rate of 5% withholding tax on interest payment under the section will now be available on interest payable up to 30 June 2017.

This amendment will take effect from 1 June 2015.

The existing provisions of section 9(1)(v) of the IT Act provides that income by way of interest, if payable by person specified in the said section, shall be deemed to accrue or arise in India.

It is proposed to amend the section to provide that in case of a non-resident, being a person engaged in the business of banking, any interest payable by the PE in India of such non-resident to the head office or any PE or any other part of such non-resident outside India shall be deemed to accrue or arise in India and shall be chargeable to tax in addition to any income attributable to the PE in India.

It is further proposed that the PE in India shall be deemed to be a person separate and independent of the non-resident of which it is a PE and the provisions of the Act relating to computation of total income, determination of tax, collection and recovery shall apply.

The existing provision of section 9 of the IT Act deals with cases of income which are deemed to accrue or arise in India. Sub-section (1) of the said section creates a legal fiction that certain incomes shall be deemed to accrue or arise in India. Clause (i) of the said sub section (1) provides a set of circumstances in which income accruing or arising, directly or indirectly, is taxable in India. The said clause provides that all income accruing or arising, whether directly or indirectly, through or from any business connection in India, or through or from any property in India, or through or from any asset or source of income in India, or through the transfer of a capital asset situate in India shall be deemed to accrue or arise in India.

The Finance Act, 2012 inserted certain clarificatory amendments in the provision of section 9 of the IT Act. The amendments, inter alia, included insertion of Explanation 5 in section 9(1)(i) with retrospective effect from 1 April 1962. The Explanation 5 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.

6.3.5 Taxation of interest received from PE or branch of non-resident

engaged in banking

6.3.6 Clarity relating to indirect transfer of assets


Following amendments are proposed by insertion of Explanation 6 and 7 in the provisions of section 9 relating to indirect transfer:

• 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 Rs. 10,00,00,000 and

b) represents at least 50% 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.

• If, however, the book value of the assets of the company of the date of transfer exceeds by atleast 15% of the book value of the assets as on the last balance sheet date preceding the date of transfer, then the date of transfer shall be the specified date of valuation.

• The manner of determination of fair market value of the Indian assets vis-à-vis global assets of the foreign company and the method for determination of proportionate taxation of gains arising on transfer of a share or interest deriving, directly or indirectly, its value substantially from assets located in India shall be prescribed in the rules.

• In case transfer is of share or interest in a foreign entity which holds the Indian assets directly then no income shall be deemed to accrue or arise to a non-resident transferor if he along with its associated enterprises,-

a) neither holds the right of control or management,

b) nor holds voting power or share capital or interest exceeding 5% of the total voting power or total share capital, in the foreign company or entity directly holding the Indian assets (direct holding company).

• In case transfer is of share or interest in a foreign entity which does not hold the Indian assets directly then no income shall be deemed to accrue or arise to a non-resident transferor if he along with its


associated enterprises,

a) neither holds the right of management or control in relation to such company or the entity,

b) nor holds any rights in such company which would entitle it to either exercise control or management of the direct holding company or entity or entitle it to voting power exceeding 5% in the direct holding company or entity.

In section 47 of the IT Act, clause (viab) has been inserted for providing exemption in respect of any transfer, subject to certain conditions, in a scheme of amalgamation, of a capital asset, being a share of a foreign company which derives, directly or indirectly, its value substantially from the share or shares of an Indian company, held by the amalgamating foreign company to the amalgamated foreign company.

Further, in section 47 of the IT Act, clause (vicc) has been inserted for providing exemption in respect of any transfer, subject to certain conditions, in a demerger, of a capital asset, being a share of a foreign company which derives, directly or indirectly, its value substantially from the share or shares of an Indian company, held by the demerged foreign company to the resulting foreign company.

It is proposed to amend section 49(1)(iii)(e) of the IT Act so as to provide for cost of acquisition and period of holding of the previous owner in respect of transfer of shares or interest in a foreign entity pursuant to amalgamation and demerger as covered under section 47(viab) and 47(vicc) of the IT Act.

The existing provisions of section 92BA of the IT Act defines ‘specified domestic transaction’ and it also specifies the threshold limit of Rs. 5,00,00,000 for reporting purpose. The said threshold limit is proposed to be enhanced to Rs. 20,00,00,000.

6.3.7 Capital gain exemption on transfer of shares or interest in a foreign

entity pursuant to amalgamation or demerger

6.3.8 Period of holding and cost of previous owner in case of transfer of

shares or interest in a foreign entity pursuant to amalgamation or

demerger

6.4 Transfer Pricing

6.4.1 Raising the threshold limit for qualifying as Specified Domestic

Transaction


6.5 General

6.5.1 CBDT to notify rules for giving foreign tax credit

6.5.2 Reporting obligation on Indian concern in which the Indian assets are

held by foreign company

6.5.3 Rationalization of definition of charitable purpose

The IT Act does not provide the manner for granting credit of taxes paid in any country outside India. It is proposed to amend sub-section (2) of section 295 so as to provide that CBDT may make rules to provide the procedure for granting relief or deduction, as the case may be, of any income-tax paid in any country or specified territory outside India against the income-tax payable under the IT Act.


It is proposed to insert section 285A to the IT Act to provide for reporting obligation on Indian concern through or in which the Indian assets are held by the foreign company or the entity. The Indian entity shall be obligated to furnish information relating to the offshore transaction having the effect of directly or indirectly modifying the ownership structure or control of the Indian company or entity. In case of any failure on the part of Indian concern penalty is proposed to be levied:

a) a sum equal to 2% of the value of the transaction in respect of which such failure has taken place in case where such transaction had the effect of directly or indirectly transferring the right of management or control in relation to the Indian concern, and

b) a sum of Rs. 5,00,000, in any other case.

It is proposed to amend section 2(15) of the IT Act to include ‘yoga’ as a specific category in the definition of charitable purpose on the lines of education.

Further, it is proposed to amend the definition of charitable purpose 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:

• such activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility; and


• 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.

The existing provisions of section 11 of the IT Act, provide the primary conditions for grant of exemption to a trust or institution in respect of income earned during the year provided 85% of such income applied for, charitable purpose in India during the same year. Accordingly, only 15% of the income can be accumulated indefinitely by such a trust or institution.

Further, section 11(2) of the IT Act provides that, 85% of income can only be accumulated for a period not exceeding 5 years subject to the conditions that, trust or institution shall submit the prescribed Form 10 to the AO in this regard and money so accumulated or set apart shall be invested or deposited in the specified form or modes as mentioned in section 11(5) of the IT Act. If the accumulated income is not applied in accordance with the aforesaid conditions, then such income is deemed to be taxable income of the trust or institution.

It is proposed to amend the section so as to provide that Form 10 shall be filed before the due date of filing return of income as specified under section 139 of the IT Act. In case, the Form is not submitted before the due date, then the benefit of accumulation would not be available and such income would be taxable at the applicable rates. It is also proposed that the benefit of accumulation would be available only if the ROI is furnished before the due date specified under section 139 of the IT Act.

Under the existing provision contained in section 271(1)(c) of the IT Act, penalty for concealment of income or furnishing inaccurate particulars of income is levied on the “amount of tax sought to be evaded”, which has been defined as difference between the tax due on the income assessed and the tax which would have been chargeable had such total income been reduced by the amount of concealed income.

Certain courts have held that penalty under section 271(1)(c) cannot be levied in cases where the concealment of income occurs under the income computed under general provisions and the tax is paid under the provisions of section 115JB or 115JC of the IT Act.

6.5.4 Rationalization of provisions relating to accumulation of income by

charitable trusts and institutions

6.5.5 Penalty under section 271(1)(c) in case of applicability of MAT


It is proposed to amend section 271(1)(c) of the IT Act so as to provide that the amount of tax sought to be evaded shall be the summation of tax sought to be evaded under the general provisions and the tax sought to be evaded under provisions of MAT / AMT. However, if an amount of concealment of income on any issue is considered both under the general provisions and provisions of MAT/AMT then such amount shall not be considered in computing tax sought to be evaded under provisions of section M AT / AMT. Further, in case where the provisions of MAT/AMT are not applicable, the computation of tax sought to be evaded under the provisions of M AT/AMT shall be ignored.

It is proposed to amend the provisions of section 206C of the IT Act so as to allow the collector to furnish TCS correction statements and consequentially also proposed to provide for processing of TCS statements. The proposed provision shall also incorporate the mechanism for computation of fee payable under section 234E of the IT Act.

It is also proposed to provide that intimation generated after processing of TCS statement shall also be subject to rectification under section 154 of the IT Act; appealable under section 246A of the IT Act; and deemed as notice of demand under section 156 of the IT Act.

It is proposed to provide that where interest is charged for any period under section 206C (7) of the IT Act on the tax amount specified in the intimation issued after processing of TCS statement, then, no interest shall be charged under section 220(2) of the IT Act on the same amount for the same period.

The existing provisions of section 200A of the IT Act does not provide for determination of fee payable under section 234E of the IT Act at the time of processing of TDS statements.

It is, therefore, proposed to amend the provisions of section 200A of the IT Act so as to enable computation of fee payable under section 234E at the time of processing of TDS statement under section 200A of the IT Act.

Section 80G of the IT Act is proposed to be amended to incentivize donations to 2 funds i.e. Swachh Bharat Kosh and Clean Ganga Fund. It is proposed to

6.5.6 Rationalisation of provisions relating to TCS

6.5.7 Determination of fees payable under section 234E for late filing of TDS

Returns

6.5.8 100% deduction for donations to Swachh Bharat Kosh and Clean Ganga

Fund


provide that donations made by any donor to the Swachh Bharat Kosh and donations made by domestic donors to Clean Ganga Fund will be eligible for a deduction of 100% from the total income. However, any sum spent in pursuance of CSR under the Companies Act, 2013 will not be eligible for above deduction.

This amendment will take effect retrospectively from AY 2015-16 and subsequent years.

It is proposed to amend section 80G of the IT Act so as to provide 100% deduction in respect of donations made to the said National Fund for Control of Drug Abuse.

It is proposed to amend section 47 of the IT Act to provide for tax neutrality to unit holders upon consolidation or merger of mutual fund schemes in accordance with the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, provided that the consolidation is of 2 or more schemes of an equity oriented fund or 2 or more schemes of a fund other than equity oriented fund.

It is further proposed to amend section 49 of the IT Act to provide that cost of acquisition of the units of consolidated scheme shall be the cost of units in the consolidating scheme and period of holding of the units of the consolidated scheme shall include the period for which the units in consolidating schemes were held by the assessee.

It is proposed to insert a new section 158AA of the IT Act so as to provide that notwithstanding anything contained in the IT Act, where any question of law arising in the case of an assessee for any assessment year is identical with a question of law arising in his case for another assessment year which is pending before the Supreme Court, in an appeal or in a special leave petition under Article 136 of the Constitution filed by the revenue, against the order of the High Court in favour of the assessee, the Commissioner or Principal Commissioner may, instead of directing the Assessing Officer to appeal to the Appellate Tribunal under sub-section (2) or sub-section (2A) of section 253, direct the Assessing Officer to make an application to the Appellate Tribunal in the prescribed form within 60 days from the date of receipt of order of the

6.5.9 100% deduction for donations to National Fund for Control of Drug

Abuse

6.5.10Tax neutrality on merger of similar schemes of Mutual Funds

6.5.11Procedure for appeal by revenue when an identical question of law is

pending before Supreme Court


Commissioner (Appeals) stating that an appeal on the question of law arising in the relevant case may be filed when decision on the question of law becomes final in the earlier case.


Section 194DA of the IT Act provides for deduction of tax at source at the rate of 2% from payments made under life insurance policy, which are chargeable to tax. It has been further provided that no deduction shall be made if the aggregate amount of payment during a financial year is less than Rs. 1,00,000.

The existing provisions of section 197A of the IT Act provide that tax shall not be deducted, if the recipient of the certain payment on which tax is deductible furnishes to the payer a self-declaration in prescribed Form No.15G/15H declaring that the tax on his estimated total income of the relevant previous year would be nil. It is proposed to amend the provisions of section 197A for making the recipients of payments referred to in section 194DA of the IT Act also eligible for filing self-declaration in Form No.15G/15H for non-deduction of tax at source.


The obtaining of TAN creates a compliance burden for those individuals or Hindu Undivided Family (HUF) who are not liable for audit under section 44AB of the IT Act and especially for the transactions which are likely to be one-time transactions such as single transaction of acquisition of immovable property from non-resident by an individual or HUF on which tax is deductible under section 195 of the IT Act. To reduce the compliance burden of these types of deductors, it is proposed to amend provisions of section 203A of the IT Act so as to provide that the requirement of obtaining and quoting of TAN under section 203A of the IT Act shall not apply to the notified deductors or collectors.


It is proposed to amend clause (i) of the Explanation to clause (b) of section 245A of the IT Act to provide that where a notice under section 148 of the IT Act is issued for any AY, the assessee can approach Settlement Commission

6.5.12Enabling of filing of Form 15G/15H for payment made under life

insurance policy

6.5.13 Relaxing the requirement of obtaining TAN for certain deductors

6.5.14 Settlement Commission


for other AYs as well even if notice under section 148 of the IT Act for such other AYs has not been issued. However, ROI for such other AYs should have been furnished under section 139 of the IT Act or in response to notice under section 142 of the IT Act.

It is further proposed to amend clause (iv) of the Explanation to provide that a proceeding for any AY, other than the proceedings of assessment or reassessment referred to in clause (i) or clause (iii) or clause (iiia), shall be deemed to have commenced from the date on which a ROI is furnished under section 139 or in response to notice under section 142 of the IT Act and concluded on the date on which the assessment is made or on the expiry of 2 years from the end of relevant AY, in a case where no assessment is made.

It is proposed to amend sub-section (6B) of section 245D of the IT Act to provide that the Settlement Commission may, with a view to rectify any mistake apparent from the record, amend any order passed by it under sub-section (4) at any time within a period of 6 months from the end of month in which the order was passed; on an application made by the Principal Commissioner or Commissioner before the end of period of 6 months from the end of the month in which the order was passed, at any time within a period of 6 months from the end of month in which such application was made.

It is proposed to amend sub-section (1) of section 245H of the IT Act so as to provide that the Settlement Commission while granting immunity to any person shall record the reasons in writing in the order passed by it.

It is proposed to amend sub-section (1) of section 245HA of the IT Act in respect of abatement of proceedings in different situations so as to provide that where in respect of any application made under section 245C, an order under sub-section (4) of section 245D of the IT Act has been passed without providing the terms of settlement, the proceedings before the Settlement Commission shall abate on the day on which such order under sub-section (4) of section 245D was passed.

It is proposed to amend section 245K of the IT Act to provide that any person, related to the person who has already approached the Settlement Commission once, also cannot approach the Settlement Commission subsequently. The related person with respect to a person has been broadly defined to include a company or a firm, in which such individual holds more than 50% shares or voting powers, or an HUF where such individual is a Karta and in case of a company/firm, an individual holding more than 50% shares of


such company before the date of application before the Settlement Commission.

It is proposed to amend section 132B of the IT Act to provide for adjustment against the amount of liability arising on an application made before the Settlement Commission under sub-section (1) of section 245C in addition to the existing liability under the IT Act, the WT Act and the amount of liability determined on completion of assessment.


It is proposed to insert an Explanation in sub-section (1) of section 263 of the IT Act to provide that an order passed by the AO shall be deemed to be erroneous so far as it is prejudicial to the interests of the revenue, if in the opinion of the Principal Commissioner or Commissioner, the order is passed without making inquiries or verification, which should have been made; the order is passed allowing any relief without inquiring into the claim; the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or the order has not been passed in accordance with any decision, prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person.


6.5.15 Revision of order prejudicial to the interest of revenue


The provisions applicable to Service Tax, Customs and Excise are given as under:

?Registration for single premises Service Tax registration and Central Excise registration to be granted on provisional basis within 2 days from the date of filing of online application. Permanent number to be granted post submission of prescribed physical documents within 15 days from the date of application.

?W.e.f. 1 March 2015, the scheme of Advance Ruling under Service Tax, Excise and Customs has been extended to resident Partnership Firms, LLPs which has no Company as its partner, Proprietorship Firms and One Person Company.

?It has been proposed that when any proceeding is referred back, whether in appeal or revision or otherwise, by any Court, Appellate Tribunal Authority or any other authority to the adjudication authority for a fresh adjudication or decision, then such case shall not be entitled for settlement.

?Effective service tax rate to remain unchanged at 12.36%. However, it is proposed to increase the effective rate to 14% from the date to be notified after enactment of the Bill. It is further proposed to levy additional 2% as ‘Swachh Bharat Cess’ on all or any of the taxable services. Once effective, service tax rate will be either 14% or 16%, as the case may be.

?All services provided by the Government or Local Authority to business entities other than those services specifically exempted by way of notification or covered by any entry in the Negative List are proposed to be liable to

7.1 Service Tax

7.1.1 General

7.1.2 Amendment in scope of negative list of services and exempted services

The change in rates effected in the Customs and Central Excise regulations shall be effective from 1 March 2015 and legislative changes shall be effective from the enactment of Finance Bill, unless otherwise specified.The changes in Service Tax regulations shall be effective from the date of enactment of the Bill, unless otherwise specified.

CHAPTER 7 : INDIRECT TAXES - SIGNIFICANT CHANGES


service tax. Thus, not only those services which can be undertaken by entities in the ordinary course of business but also services which can be specifically provided by Government or Local Authority to business entities, are proposed to be liable to service tax.

?Services by way of access to amusement facility providing fun or recreation by means of gaming devices, rides, bowling alleys, amusement arcades, water parks, theme parks and such other places are proposed to be liable to service tax.

?Services by way of right to admission to :

a) Exhibition of cinematographic film, circus, dance, or theatrical performance including drama or ballet;

b) Recognised sporting event;

c) Award functions, concert, pageants, musical performances or any non-recognized sporting events, where consideration for right to admission to such events is not more than Rs. 500

to be exempted from service tax. Presently, admission to entertainment events or access to amusement facilities is not liable to service tax.

?Services by way of carrying out any processes amounting to manufacturing or production of alcoholic liquor for human consumption are proposed to be liable to service tax.

The above proposed changes will be in force with effect from the date to be notified.

?Services by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration provided to Government, local authority or governmental authority shall henceforth not be an exempted services in respect of following infrastructure projects:

• Civil structure;

• Structure used as educational, clinical and art establishment

• Residential complex used by government employees.

?Services provided by way of construction, erection, commissioning or installation of original works pertaining to airports or ports henceforth not to be exempted services.

?Services by a performing artist in folk or classical art form of music, dance or theatre shall henceforth not be an exempted service if the consideration


charged for such performance by an artist is more than Rs. 1,00,000.

?Services by way of transportation of tea, sugar, jaggery or coffee and edible oil by rails or vessel or by goods transport agent shall henceforth not be exempted. Further, exemption from service tax has been provided in respect of transportation services of rice and pulses.

?Services provided by a mutual fund agent or distributor to a mutual fund or asset management company shall henceforth not be exempted. However, the service tax liability on such services is to be discharged by service recipient under Reverse Charge Mechanism.

?Services provided by selling or marketing agent of lottery ticket to a distributor shall henceforth not be exempted services. However, the service tax liability on said services is to be discharged by the service recipient under Reverse Charge Mechanism.

?Exemption has been provided in respect of services provided by way of transportation of a patient in an ambulance. Hitherto, ambulance services provided to and from a clinical establishment by clinical establishment, an authorized medical practitioner or para-medics are not liable to service tax.

?Exemption has been provided in respect of services by way of pre-conditioning, pre-cooling, ripening, waxing, retail packing, labeling of fruits and vegetables which do not change or alter the essential characteristics of the said fruits or vegetables.

?Exemption has been provided in respect of services by way of admission to a museum, national park, wildlife sanctuary, tiger reserve or zoo.

?Exemption has been provided in respect of services by way of exhibition of a movie by an exhibitor to the distributor or an association of persons consisting of the exhibitor as one of its member.

?Goods Transport Agency services provided for transport of export goods by road from place of removal to a Land Customs Station has also been exempted now from service tax. Presently, only Goods Transport Agency services provided for transport of export goods by road from place of removal to an inland container depot, a container freight station, a port or airport are exempted from service tax.

This amendment will take effect from 1 April 2015.


7.1.3 Amendment in abatement rates

7.1.4 Amendment in Reverse Charge Mechanism

7.1.5 Other Significant Amendments

?At present, service tax is payable on 30% of the value of rail transport for goods and passengers, 25% of the value of goods transport by road by a Goods Transport Agency and 40% for goods transport by vessels. The conditions also vary. A uniform abatement is now being prescribed for transport by rail, road and vessel. Service tax shall be payable on 30% of the value of such services, provided CENVAT credit on inputs, capital goods and input services used for providing the taxable service, has not been taken.

?At present, service tax is payable on 40% of the value of air transport of passenger for economy as well as higher classes, e.g. business class. The abatement for classes other than economy is being reduced and service tax would be payable on 60% of the value of such higher classes.

These amendments will take effect from 1 April 2015.

?In respect of any service provided under aggregator model, the aggregator, or any of his representative office located in India, is being made liable to service tax if the service is so provided using the brand name of the aggregator in any manner. If an aggregator does not have any presence, including that by way of representative, in such a case any agent appointed by the aggregator shall pay tax on behalf of the aggregator.

The amendment will take effect from 1 March 2015.

?Manpower supply and security services when provided by an individual, HUF, or partnership firm to a body corporate are being brought to full reverse charge. Presently these are taxed under partial Reverse Charge Mechanism.

The amendment will take effect from 1 April 2015.

?Digitally signed invoices are being added along with the option of maintaining of records in electronic form and their authentication by means of digital signatures.

The amendment will take effect from 1 March 2015.

?It is proposed to amend the term ‘consideration’ under section 67 for the purpose of valuation of taxable service for charging service tax. The proposed definition includes any reimbursement or cost incurred by the service provider and charged, in the course of providing or agreeing to provide a taxable service subject to such conditions, as may be prescribed. The proposed


amendment is to overcome the Judgment of Hon’ble Delhi High Court in the case of Intercontinental Consultants and Technocrats Pvt. Ltd. Vs. CCE 2012-TIOL-966-HC.

?It is proposed that recovery of the service tax amount self-assessed and declared in the return but not paid, shall be recovered as per the mode specified in section 87 without serving of any show cause notice under section 73(1).

?The penal provisions under service tax law has been proposed to be rationalized as follows:

• It is proposed that the amended provision of sections 76 and 78 shall apply to cases where either no Show Cause Notice is served or in cases where Show Cause Notice is served but no order has been passed before enactment of the Finance Bill, 2015.

• The provision of non-imposition of penalty in case assessee proves reasonable cause for failure in non payment of service tax is proposed to be withdrawn.

?It proposed that the remedy against order passed by Commissioner (Appeals), in a matter involving rebate of service tax, shall lie before the Central Government for revision under Section 35EE of the Central Excise Act, 1944. All the appeals filed in CESTAT after the date of the Finance Act, 2012 and pending as on date of enactment of the Finance Bill, 2015 shall also be transferred.

Quantum of penalty

Tax, interest or penalty, as applicable paid within 30 days from the date of issuance of Show Cause Notice.

Tax, interest or penalty, as applicable paid within 30 days from the date of receipt of Order In Original.

Service Tax amount gets reduced in any appellate proceedings and the Tax, interest or penalty, as applicable paid within 30 days from the date of receipt such appellate order.

Not exceeding 10% of Service Tax

No Penalty

25% of the penalty imposed in order

25% of the penalty imposed in appellate

order

Not exceeding 100% of Service Tax

Penalty equal to 15% of Service Tax

25% of the Service Tax so determined

25% of the Service Tax determined in appellate order

ParticularsNO - Proposed

section 76 to be applicable

Cases involving fraud or collusion or wilful

misstatement or suppression of facts or contravention

of any provision of the Act or rules

YES - Proposedsection 78 to be applicable


7.2 Customs Duty

7.2.1 General

7.2.2 Infrastructure

7.2.3 Ores and Metals

7.2.4 Electronics/ Hardware

?Peak rate of Basic Custom Duty (BCD) remains unchanged @ 10.30% (Tax @ 10%, Education Cess @ 2% and Secondary and Higher Education Cess @ 1%).

?BCD on certain inputs, raw materials, intermediates and components in 22 items, reduced to minimize the impact of duty inversion.

?Scheduled rates of Additional Duty of Customs levied (CVD) on imported Motor Spirit i.e. Petrol and High Speed Diesel Oil i.e. Road Cess are increased from Rs. 2 per litre to Rs. 8 per litre and the effective rates of CVD are increased from Rs. 2 per litre to Rs. 6 per litre only.

?BCD on iron and steel (including articles of iron or steel) is increased from 10% to 15% although there will be no change in the existing effective rates on these goods. Export duty on upgraded ilmenite is reduced from 5% to 2.5%.

?BCD on metallurgical coke is increased from 2.5% to 5%. SAD on melting scrap of iron and steel including stainless steel scrap for melting, copper scrap, brass scrap and aluminum scrap is reduced from 4% to 2%.

?All goods for use in manufacture of Information Technology Agreement bound items except for populated printed circuit boards are fully exempted from SAD, subject to actual user condition.

?BCD, CVD and SAD are exempted on parts, components and accessories alongwith their sub-parts, used in manufacture of tablet computer, subject to actual user condition.

?CVD and SAD are exempted on specified raw materials for use in the manufacture of pacemakers, subject to actual user condition.

?SAD on inputs for use in the manufacture of LED drivers and metal core printed circuit board for LED lights, fixtures and lamps are exempted, subject to actual user condition.

?BCD on the following items subject to actual user condition, has been reduced:


1. Metal parts for use in the manufacture of electrical insulators

2. Ethylene-Propylene-non-conjugated-Diene Rubber, Water blocking tape and Mica glass tape, for use in the manufacture of insulated wires and cables

3. Magnetron of upto 1 KW use in the manufacture of domestic microwave ovens

4. Zeolite, ceria zirconia compounds and cerium compounds for use in the manufacture of washcoats, which are used in manufacture of catalytic converters

5. Specified components for use in the manufacture of specified CNC lathe machines and machining centres

6. C-Block for Compressor, Over Load Protector and Positive thermal co-efficient and Crank Shaft for compressor for use in the manufacture of Refrigerator compressors

7. Specified inputs for use in the manufacture of flexible medical video endoscope

8. High Density Polyethylene for use in the manufacture of telecommunication grade optical fibre cables

9. Black Light Unit Module for use in the manufacture of Liquid-Crystal Display (LCD)/ Light-Emitting Diode (LED) TV panels

10. Organic LED TV panels

10%

10%

5%

7.5%

7.5%

7.5%

5%

7.5%

10%

10%

7.5%

7.5%

Nil

5%

2.5%

5%

2.5%

Nil

Nil

Nil

S r.No.

Items PreviousBCD

RevisedBCD

?BCD on digital still image video camera with certain specification and parts and components for use in the manufacture of such cameras is reduced to Nil.

?BCD is exempted on evacuated tubes with 3 layers of solar selective coating for use in the manufacture of solar water heater and system, subject to actual user condition.

?BCD on active energy controller for use in the manufacture of renewable power system inverters is reduced to 5%, subject to certification by Ministry of New and Renewable Energy.

?The effective BCD on commercial vehicles is being increased from 10% to 20% except for such vehicles and electrically operated vehicles in Completely Knocked Down (CKD) condition will continue to be @ 10%.

7.2.5 Renewable Energy

7.2.6 Automobiles


?Concessional customs duties of Nil BCD, 6% excise/ CVD and Nil SAD on specified goods for use in the manufacture of electrically operated vehicles and hybrid motor vehicles, presently available up to 31 March 2015, are being extended up to 31 March 2016.

?BCD on bituminous coal is reduced from 55% to 10%.

?CVD and SAD exemption on specified goods imported for use by Security Printing and Minting Corporation of India Limited are withdrawn.

?The general effective rate of Basic Excise Duty has been increased from 12.36% to 12.5%.

?Excise duty on chassis for ambulances is being reduced from 24% to 12.5%, subject to actual user condition.

?Concessional excise duty of 6% on specified goods used in the manufacture of electrically operated vehicles and hybrid vehicles, presently available up to 31 March 2015, is being extended up to 31 March 2016.

?Excise duty on cigarettes is being increased by 25% for cigarettes of length not exceeding 65 mm and by 15% for cigarettes of other lengths. Excise duty on cigars, cheroots and cigarillos and cigarettes & cigarillos of tobacco substitutes is also being increased.

?Excise duty on wafers for manufacture of integrated circuit modules for smart cards is being reduced from 12% to 6%.

?Excise duty for mobile handset including cellular phones being increased from 6% with CENVAT credit to 12.5%. However, the duty without CENVAT Credit on these items remains at 1% unchanged. National Calamity Contingent Duty of 1% on mobile handsets including cellular phones remains unchanged.

?Excise duty of 2% without CENVAT credit or 12.5% with CENVAT Credit is now being provided to tablet computers. Further, parts, components and

7.2.7 Others

7.3 Central Excise

7.3.1 General

7.3.2 Automobile Sector

7.3.3 Health

7.3.4 Electronic Hardware


accessories for use in manufacture of tablet computers are being exempted from Excise duty.

?Sub-parts for use in manufacture of parts, components and accessories of Tablet computers are also being exempted from Excise duty.

?Specified raw materials such as battery, titanium, palladium wire, eutectic wire, silicone resins and rubbers, solder paste, reed switch, diodes, transistors, capacitors, controllers, coils (steel), tubing (silicone) for use in manufacture of pacemakers are being fully exempted from Excise duty.

?Excise duty on Inputs used in manufacture of Light Emitting Diode (LED) drivers and MCPCB for LED lights, fixtures and lamps is being reduced from 12% to 6%.

?The above exemptions are subject to actual user condition.

?Retail Sale Price based assessment is being prescribed expressly for LED lights or fixtures including LED lamps with an abatement of 35%.

?Excise duty on leather footwear (footwear with uppers made of leather) having Retail Sale Price of more than Rs. 1,000 per pair is being reduced from 12% to 6%.

?The following goods are being notified under section 4A of the Central Excise Act,1944 for the purpose of assessment of Central Excise duty with reference to the Retail Sale Price:

• Goods falling under Chapter sub-heading 2101 20, including iced tea, subject to an abatement of 30%.

• Goods such as lemonade and other beverages, subject to an abatement of 35%.

• Condensed milk subject to an abatement of 30%.

?Excise duty of 2% without CENVAT Credit or 6% with CENVAT Credit is being levied on condensed milk put up in unit containers and on peanut butter.

?Rule 4 has been amended by increasing the time limit for availing CENVAT Credit on Inputs and Input services from 6 months to 1 year. Similarly, time limit for return of Capital Goods from the premises of job worker has been increased from 6 months to 2 years.

7.3.5 Consumer Goods

7.3.6 Food Processing Sector

7.3.7 Amendments in CENVAT Credit Rules, 2004


?Provision relating to reversal for CENVAT Credit in terms of Rule 6, presently applicable to exempted goods and services, has been extended to non-excisable goods also.

?Clause (1A) has been inserted in explanation 1 to Rule 5, wherein the explanation to “export goods” has been provided. Export Goods to mean any goods which are to be taken out of India to a place outside India. The manufacturers who were exporting goods to EOU units and who were not in a position to utilize the CENVAT credit on Inputs and Input services were availing refund under Rule 5 treating it as deemed export. The said manufacturers may now not be able to claim benefit of refund on deemed export.

?Proviso to Rule 11(2) has been inserted wherein if goods are directly sent to the job worker on the direction of the manufacturer or the provider of output service, the invoice shall contain the details of manufacturer or the provider of output service as buyer and job worker as consignee.

?Proviso to Rule 11(2) has been inserted wherein if goods are directly sent to any person on the direction of the registered dealer, the invoice shall contain the details of registered dealer as buyer and such person as consignee.

?Rule 10(4) and Rule 11(8) has been inserted to provide for maintenance of records in electronic form and for issue of digitally signed invoices respectively.

?Rule 12(6) has been inserted wherein any return or Annual Financial Information Statement or Annual Installed Capacity Statement submitted after the due date, the assesse shall be liable to pay late fees @ of Rs.100 per day subject to maximum of Rs.20,000.

?Rule 17(6) has been inserted to provide for late fees @ of Rs.100/- per day subject to maximum of Rs. 20,000 in respect of delay in filing of monthly return i.e. ER-2 by 100% Export Oriented Units for clearance of goods to Domestic Tariff Area .

?The following amendments have been made in Notification No.12/2012-CE dated 17 March 2012 vide Notification No.12/2015-CE dated 1 March 2015:

• Goods manufactured domestically and supplied against International

7.3.8 Amendments to Central Excise Rules, 2004

7.3.9 Certain Other Amendments


Competitive Bidding are eligible for full excise duty exemptionprovided that such goods when imported attract Nil Basic Customs Duty and Nil CVD. The condition is being amended so as to provide that if imported goods are eligible for Nil Basic Customs Duty and Nil CVD subject to certain conditions, then the said conditions shall also apply mutatis mutandis to such goods when manufactured domestically and supplied against International Competitive Bidding for the purposes of availing of the said excise duty exemption. [Sr. No.336 read with condition 41].

• The period of 36 months or more for furnishing bank guarantee or fixed deposits receipt in order to provide Nil excise duty of goods pertaining to setting up of ultra mega power project and mega power project as specified in List No.10 and 11, has been increased to 42 months and 66 months respectively. [Sr. No.337 read with condition 42(b) & Sr. No.338 read with condition 43(b)]

?Finance Minister announced that the Goods and Services Tax (GST) will be implemented wef 1 April 2016 onwards. GST is expected to streamline the tax administration, avoid harassment to business and result in higher revenue collection for Centre and States.

7.4. Goods and Services Tax

8.1 FEMA

8.1.1 Section 6, which governs t h e c a p i t a l a c c o u n t transactions under FEMA, is proposed to be amended to provide that control on capital flows as equity will b e e x e r c i s e d b y Government in consultation with RBI.

Section 6(2) of FEMA is proposed to be amended to provide that RBI may in consultation with Central Government, specify-

(a) any class or classes of capital account transactions, involving debt instruments, which are permissible;

(b) the limit up to which foreign exchange shall be admissible for such transactions;

(c) any conditions which may be placed on such transactions.

Provided, RBI or the Central Government shall not impose any restrictions on the withdrawal of foreign exchange for payment due on account of amortisation of loans or for depreciation of direct investments in the ordinary course of business.

Section 6(3) is proposed to be omitted and a new sub-section (2A) to be inserted in the aforesaid section, which states that the Central Government may, in consultation with RBI, prescribe-

(a) any class or classes of capital account transactions, not involving debt instruments, which are permissible;

(b) the limit up to which foreign exchange shall be admissible for such transactions; and

(c) any conditions which may be placed on such transactions.

The term “debt instruments” means such instruments as may be determined by the Central Government in consultation with RBI.

75

CHAPTER 8: OTHER SIGNIFICANT PROPOSALS


8.1.2 Section 37A is proposed to be inserted in FEMA which states that upon receipt of any information or otherwise, if the Authorised Officer prescribed by the Central Government has reason to believe that any foreign exchange, foreign security or any immovable property situated outside India, is suspected to have been held in contravention of section 4, he may after recording the reasons in writing, by an order, seize value equivalent, situated within India, of such foreign exchange, foreign security or immovable property, provided that no such seizure shall be made in case where the aggregate value of such foreign exchange, foreign security or immovable property, situated outside India, is less than the value as may be prescribed.

The order of seizure along with relevant material to be placed before the Competent Authority by the Authorised Officer within a period of 30 days from the date of seizure. The Competent Authority to dispose of the petition within a period of 180 days from the date of seizure by either confirming or by setting aside such order, after giving an opportunity of being heard.

8.1.3 Section 47(3) of FEMA provides that all regulations made by RBI before the date on which the provisions of this section are notified under section 6 and section 47 of this Act on capital account transactions, the regulation making power in respect of which now vests with the Central Government, shall continue to be valid, until amended or rescinded by the Central Government.

8.1.4 It is proposed to do away with the distinction between different types of foreign investments, especially between foreign portfolio investments and foreign direct investments and replace them with composite caps.

8.2 Anti-Tax Evasion Related Measures

8.2.1 It has been emphasized to effectively and forcefully deal with generation of black money and its concealment. For this purpose, a bill for a comprehensive new law to deal with black money parked abroad to be introduced in the current session of the Parliament. Key features of this new law on black money are as under:

Evasion of tax in relation to foreign assets to have a punishment upto 10 years of rigorous imprisonment, be non-compoundable, have a penalty rate of 300% and the offender will not be permitted to approach the Settlement Commission.

Non-filing of return or filing of return with inadequate disclosures to have a punishment upto 7 years of rigorous imprisonment.

Undisclosed income from any foreign assets to be taxable at the

Ø

Ø

Ø


maximum marginal rate.

Mandatory filing of return in respect of foreign asset.

Entities, banks, financial institutions including individuals are liable for prosecution and penalty.

Concealment of income or evasion of income in relation to a foreign asset, to be made a predicate offence under PML Act, 2002.

PML Act, 2002 and FEMA to be amended to enable administration of new law on black money.

8.2.2 Benami Transactions (Prohibition) Bill to curb domestic black money is proposed to be introduced in the current session of Parliament.

8.2.3 Acceptance or re-payment of an advance of Rs. 20,000 or more in cash for purchase of immovable property to be prohibited.

8.2.4 PAN being made mandatory for any purchase or sale exceeding Rs.1,00,000.

8.3 Certain Other Proposals

8.3.1 Significant reforms on the anvil:

Goods and Service Tax (GST) to be rolled-out from 1 April 2016.

Jan Dhan, Aadhar and Mobile (JAM) - for direct benefit transfer.

8.3.2 Most provisions of Direct Taxes Code (DTC) have already been included in the Income-tax Act, therefore, DTC will no longer be introduced.

8.3.3 Tax free infrastructure bonds are proposed to be introduced for projects in the rail, road and irrigation sectors.

8.3.4 Public Debt Management Agency (PDMA) bringing both external and domestic borrowings under one roof to be set up this year. Further, Forward Markets commission to be merged with SEBI.

8.3.5 Gold monetization scheme to be introduced to allow the depositors of gold to earn interest in their metal accounts and the jewellers to obtain loans in their metal accounts. It is also proposed to develop a Sovereign Gold Bond Scheme.

8.3.6 It is proposed to allow foreign investments in AIFs to give a boost for private equity industry in India. It is further proposed to allow tax pass-through to both Category I and Category II AIFs, thus passing the tax liability burden to the end investor.

8.3.7 Foreign investments in AIFs to be allowed.

Ø

Ø

Ø

Ø

Ø

Ø



8.3.8 Comprehensive Bankruptcy Code of global standards to be brought in fiscal 2015-16 towards ease of doing business.

8.3.9 PPP mode of infrastructure development to be revisited and revitalised.

8.3.10 An expert committee to examine the possibility and prepare a draft legislation where the need for multiple prior permission can be replaced by a pre-existing regulatory mechanism. This will facilitate India becoming an investment destination.

8.3.11 Proposal to introduce a Public Contracts (Resolution of Disputes) Bill to streamline the institutional arrangements for resolution of such disputes.

8.3.12 Leverage of technology by CBDT and CBEC to access information from either's data bases.

8.3.13 Tax Administration Reform Commission recommendations to be appropriately implemented during the course of the year.

8.3.14 To rationalize and remove several tax exemptions and incentives to reduce tax disputes and improve administration.

8.3.15 MUDRA Bank, with a corpus of Rs. 20,000 crores and credit guarantee corpus of Rs. 3,000 crores to be created. MUDRA Bank will be responsible for refinancing all Micro-finance Institutions which are in the business of lending to such small entities of business through a Pradhan Mantri Mudra Yojana.

8.3.16 To create a Task Force to establish sector-neutral financial redressal agency that will address grievance against all financial service providers.

8.3.17 NBFCs registered with RBI and having asset size of Rs. 500 crore and above may be considered for notifications as 'Financial Institution' in terms of the SARFAESI Act 2002.

8.3.18 Government to create a functional social security system for all Indians, especially the poor and the under-privileged.

8.3.19 India Financial Code to be introduced soon in Parliament for consideration to replace the bulk of existing financial laws and bring together laws governing different sectors of the financial system.


9.1 Gems and Jewellery Industry

9.1.1 Key highlights

India has many advantages to emerge as Gems and Jewellery hub of the world.

Gems and Jewellery industry in India is one of the world's largest market with its market size at Rs. 4,61,224 crores (Exports Rs. 2,10,224 crores and domestic Rs. 2,51,000 crores).

The Indian Gems and Jewellery industry is expected to grow at a CAGR of around 16% over the period 2014-2019.

In FY 2013-14, India's Gems and Jewellery industry contributed Rs. 2,17,168 crores (US$ 34,747 million) to the country's foreign exchange earnings.

The Government of India has viewed the sector as a thrust area for export promotion.

9.1.2 Positive proposals / impact

Domestic corporate base tax rate remained unchanged @30% although the same is proposed to be reduced to 25% over the next 4 years starting from the next financial year. In turn, a phased elimination of deductions and exemptions is proposed from next financial year. However, the tax rate for FY 2015-16 has increased marginally from 33.99% to 34.608% due to increase in surcharge from 10% to 12% for companies having income exceeding Rs. 10,00,00,000. There is a marginal increase in the rate for MAT which stands increased from 20.9605% to 21.3416%. The rate for DDT stands increased from 20.4747% to 20.9248%.

Similarly, in case of firms/LLPs, the tax rate for FY 2015-16 has actually increased marginally from 33.99% to 34.608% due to increase in surcharge from 10% to 12% for firms/LLPs having income exceeding Rs. 1,00,00,000.

It is proposed to abolish the levy of wealth-tax and the information relating to assets which is currently required to be furnished in the wealth-tax return shall be captured in the income-tax return.

Tax rate for non-resident taxpayers in respect of Royalty and FTS reduced

Ø

Ø

Ø

Ø

Ø

Ø

Ø

Ø

Ø

CHAPTER 9 – IMPACT ON SELECT INDUSTRIES


from 25% to 10%.

GAAR to be deferred by 2 years i.e. the same will be effective from 1 April 2017 and will apply prospectively.


Benefit of accelerated deduction under section 80JJAA of the IT Act for employment of new regular workmen to be applied to all business entities having a manufacturing unit and also eligibility threshold proposed to be reduced to a minimum of 50 workmen.

Gold monetization scheme to be introduced to allow the depositors of gold to earn interest in their metal accounts and the jewellers to obtain loans in their metal accounts. It is also proposed to develop a Sovereign Gold Bond Scheme. The scheme may increase the supply of gold to the jewellers considerably to resolve the issue that they were facing over last few years.

GST would be implemented from 1 April 2016. This would be a big boost for the domestic Gems and Jewellery industry.


In case of new plant and machinery installed and used for less than 6 months by a manufacturing unit or a unit engaged in generation and distribution of power, then the remaining 50% of the additional depreciation is to be allowed immediately in the next year.

100% deduction for contribution to Swachh Bharat Kosh and Clean Ganga Fund apart from CSR Contribution.

CENVAT credit in respect of service tax paid under the partial Reverse Charge Mechanism to be available even if no payment is made to the service provider.


Time limit for return of capital goods from a job worker has been increased from 6 months to 2 years.

9.1.3 Negative proposals / impact

For determination of residential status in case of the companies, 'Control and Management' test under section 6 of the IT Act to be replaced with

Ø

Ø

Ø

Ø

Ø

Ø

Ø

Ø

Ø

Ø

Ø

Ø


POEM Test.

Surcharge increased from 10% to 12% on individuals, HUFs, AOPs, BOIs,

artificial juridical persons, firms, co-operative societies and local authorities

having income exceeding Rs. 1,00,00,000.

Surcharge @12% as against current rate of 10% on additional income-tax

payable by companies on distribution of dividends and buyback of shares.

PAN being made mandatory for any purchase or sale exceeding Rs.

1,00,000.

The general effective rate of Basic Excise Duty has been increased from

12.36% to 12.50%.

Effective service tax rate of 12.36% is proposed to be increased to 14%

from the date to be notified after the approval of the Finance Bill by the

Parliament and the President. It is further proposed to levy additional 2%

Swachh Bharat Cess on all or any of the taxable services. Once effective,

service tax rate will be either 14% or 16%, as the case may be.

9.2 Entertainment And Media Industry


The Media and Entertainment ('M&E') industry

broadly comprises Television, Films, Print,

Electronic Media, Radio, Music, Animation,

Digital Advertising, Gaming, etc. Each of these

segments has their own impact on the masses.

As per the latest study report, the Indian M&E industry is expected to touch

Rs. 1,78,580 crores by 2018, with a CAGR of 14.2%.

The Indian M&E industry is already a Rs. 91,800 crores industry reporting

an annual growth of 11.8% in 2013. By the end of 2014, the industry is

expected to stand at Rs. 1,03,900 crores.

Digital advertising has shown strong growth in 2013 by growing @38.7%,

followed by gaming which grew by 25.5%.

Additionally, industry estimates reveal that the video games industry grew

at a record 16% in 2013 over 2012.

Indian animation industry is projected to grow @15% to 20% p.a.

Ø

Ø

Ø

Ø

Ø

Ø

Ø

Ø

Ø

Ø

Ø


9.2.2 Positive proposal / impact

Domestic corporate base tax rate remained unchanged @30%, although the same is proposed to be reduced to 25% over the next 4 years starting from the next financial year. In turn, it has proposed phased elimination of deductions and exemptions from next financial year. However, the tax rate for FY 2015-16 has actually increased marginally from 33.99% to 34.608% due to increase in surcharge from 10% to 12% for companies having income exceeding Rs. 10,00,00,000. There is a marginal increase in the rate for MAT which stands increased from 20.9605% to 21.3416%. The rate for DDT stands increased from 20.4747% to 20.9248%.





Benefit of accelerated deduction under section 80JJAA of the IT Act for employment of new regular workmen to be applied to all business entities having a manufacturing unit and also the eligibility threshold proposed to be reduced to a minimum of 50 workmen.


GST would be implemented from 1 April 2016.



9.2.3 Negative proposal / impact

For determination of residential status in case of the companies, 'Control and Management' test under section 6 of the IT Act to be replaced with POEM Test.

Ø

Ø

Ø

Ø

Ø

Ø

Ø

Ø

Ø

Ø

Ø


Ø

Ø

Ø

Ø

Ø

Ø

Ø

Ø

Surcharge increased from 10% to 12% on individuals, HUFs, AOPs, BOIs, artificial juridical persons, firms, co-operative societies and local authorities having income exceeding Rs. 1,00,00,000.

Surcharge @12% as against current rate of 10% on additional income-tax payable by companies on distribution of dividends and buyback of shares.

Effective service tax rate of 12.36% is proposed to be increased to 14% from the date to be notified after approval of the Finance Bill by the Parliament and the President. It is further proposed to levy additional 2% Swachh Bharat Cess on all or any of the taxable services. Once effective, service tax rate will be either 14% or 16%, as the case may be.

9.3 Information Technology and ITeS Industry


India's IT and ITeS services industry with its exponential growth is a unique export-led success story which has put India on the global map.

Indian IT and ITeS industry is divided into 4 major segments – IT services, business process management , sof tware products, engineering services and hardware. CRISIL Research expects the ITeS industry's export revenues to grow by 12% in FY 2014-15 and the domestic ITeS market is expected to grow at 12% to 13% in FY 2014-15.

The revenues of the IT-Business Process Management sector is around US$ 105 billion registering a growth of 10.3% in FY 2013-14.

It is also a provider of skilled employment both in India and abroad, generating direct employment for nearly 3.1 million workers and indirect employment to around 10 million workers in FY 2013-14.

9.3.2 Positive proposals/impact

Domestic corporate base tax rate remained unchanged @30%, although the same is proposed to be reduced to 25% over the next 4 years starting from the next financial year. In turn, it has proposed phased elimination of deductions and exemptions from next financial year. However, the tax rate for FY 2015-16 has actually increased marginally from 33.99% to 34.608% due to increase in surcharge from 10% to 12% for companies having income exceeding Rs. 10,00,00,000. There is a marginal increase in the effective rate for MAT which stands increased from 20.9605% to 21.3416%.


The rate for DDT stands increased from 20.4747% to 20.9248%.






In case of new plant and machinery installed and used for less than 6 months by a manufacturing unit or a unit engaged in generation and distribution of power, the remaining 50% of the additional depreciation is to be allowed immediately in the next year.

Benefit of accelerated deduction under section 80JJAA of the IT Act for employment of new regular workmen to be applied to all business entities having manufacturing unit and also eligibility threshold proposed to be reduced to a minimum of 50 workmen.


It is proposed to abolish the levy of wealth-tax and the information relating to assets which is currently required to be furnished in the wealth-tax return shall be captured in the income-tax return.



9.3.3 Negative proposals/impact

For determination of residential status in case of the companies, 'Control and Management' Test under section 6 of the IT Act to be replaced with POEM Test.

Ø

Ø

Ø

Ø

Ø

Ø

Ø

Ø

Ø

Ø

Ø

Ø


Ø

Ø

Ø

Ø

Ø

Ø

Ø

Ø

Ø


Surcharge @12% as against current rate of 10% on additional income-tax payable by companies on distribution of dividends and buyback of shares.

Effective service tax rate of 12.36% is proposed to be increased to 14% from the date to be notified after the approval of the Finance Bill by the Parliament and the President. It is further proposed to levy additional 2% Swachh Bharat Cess on all or any of the taxable services. Once effective, service tax rate will be either 14% or 16%, as the case may be.

9.4 Real Estate and infrastructure industry


Infrastructural development mirrors the overall health of a nation's economy. The infrastructure sector accounts for 26.7% of India's industrial output.

The Planning Commission has projected that investment in infrastructure would almost double at US$ 1,025 billion in the Twelfth Five Year Plan (2012-17) focusing on increasing infrastructure such as upgraded airports, ports, railway expansion, etc.

The total value of roads and bridges infrastructure in the country is projected to grow at a CAGR of 17.4% over 5 years (2012–17). The total approximate earnings of the Indian railways on originating basis during FY 2013–14 were Rs. 140,485 crore (US$ 23 billion) as against Rs. 121,831 crore (US$ 20 billion) during FY 2012–13.

According to the data released by DIPP, the construction development sector (including townships, housing, built-up infrastructure and construction-development projects) attracted total FDI worth US$ 22,994 million in the period April 2000 – December 2013. Construction (infrastructure) activities during the period received FDI worth US$ 2,353 million.

In the next 10 years, FDI in the sector is expected to increase to US$ 25 billion.

This sector is the second largest employer after agriculture and is slated to grow at 30% over the next decade.


9.4.2 Positive proposals/ impact

Domestic corporate base tax rate remained unchanged @30%, although the same is proposed to be reduced to 25% over the next 4 years starting from the next financial year. In turn, it has proposed phased elimination of deductions and exemptions from next financial year. However, the tax rate for FY 2015-16 has actually increased marginally from 33.99% to 34.608% due to increase in surcharge from 10% to 12% for companies having income exceeding Rs. 10,00,00,000. There is a marginal increase in the rate for MAT which stands increased from 20.9605% to 21.3416%. The rate for DDT stands increased from 20.4747% to 20.9248%.

Similarly, in case of firms/LLPs, the tax rate for FY 2015-16 has increased marginally from 33.99% to 34.608% due to increase in surcharge from 10% to 12% for firms/LLPs having income exceeding Rs. 1,00,00,000.

Concessional tax regime relating to capital gains on exit by the sponsor through the initial public offer route on listing of units of the business trust. However, STT shall be levied on sale of the units.

Pass through status for rental income received from the real estate property directly held by REITs and the REIT to withhold tax @10% on such rental income distributed to resident unit holder and at the rate in force in case of distribution of such income to the non-resident unit holder.

Tax free infrastructure bonds proposed for the projects in rail, road and irrigation sectors.




Investment in infrastructure sector to go up by Rs. 70,000 crore in FY 2015-16 from the Center's funds and resources of CPSEs. It is also proposed to establish a National Investment and Infrastructure Fund and find monies to ensure annual flow of Rs. 20,000 crore to such fund.

Ports in public sector to be encouraged to corporatize and become companies under the Companies Act, 2013 to attract investment and leverage the huge land resources.

Ø

Ø

Ø

Ø

Ø

Ø

Ø

Ø

Ø

Ø


9.4.3 Negative proposals / impact

Various exemptions and deductions available to companies will be rationalized and reduced over a period of time which might result into increase in tax liabilities of the companies.


Acceptance or re-payment of an advance of Rs. 20,000 or more in cash for purchase of immovable property prohibited.

Benami Transactions (Prohibition) Bill to be introduced in the current session of the Parliament to enable confiscation of benami property and provide for prosecution, thus blocking a major avenue for generation and holding of black money in the form of benami property, especially in real estate.

Exemption from service tax on construction of civil structure for Government stands withdrawn w.e.f. 1 April 2015.

Exemption from service tax on construction, erection, commissioning or installation of original works pertaining to an airport or port has been withdrawn w.e.f. 1 April 2015.



Custom duty increased from 10% to 15% in case of iron and steel and articles of iron or steel.

Ø

Ø

Ø

Ø

Ø

Ø

Ø

Ø

Ø


One of the major aspects considered by businesses while operating on an international scale, is the complexity of taxation systems existing in various jurisdictions. India being a major player in the world market, has entered into comprehensive DTAAs with almost 90 countries in order to mitigate the taxation complexities and to facilitate international business transactions. In this chapter, we have compiled the tax rates in respect of Dividend, Interest, Royalty and FTS, based on the DTAAs entered between India and various countries.

Sr.No.

Country Dividend[Note 1]

Interest Royalty FTS Remarks

Tax rate Tax rate Tax rateTax rate

CHAPTER 10 : DTAA RATES(As updated up to the Finance Bill, 2015)

Rate as per the IT Act Nil [Note 1] 20% 10% 10% Rate as per IT Act (to be furtherincreased by applicable surchargeand education cess) or DTAA rate, whichever is more beneficial shall apply.

1. Albania 10% 10% [Note 4] 10% 10%

2. Armenia 10% 10% [Note 4] 10% 10%

3. Australia 15% 15% Note 5 Coveredunder

Article forRoyalty

4. Austria 10% 10% [Note 4] 10% 10%

5. Bangladesh 10% / 15% 10% [Note 4] 10% No 10% tax on dividends if at least 10% ofthe capital is owned by company; inany other case 15%.

6. Belarus 10% / 15% 10% [Note 4] 15% 15% 10% tax on dividends if at least 25% of the shares are owned by company; in any other case 15%.

7. Belgium 15% 15% / 10% 10% 10% 1. Interest taxable at 10% if recipient isbank; in any other case 15%.

2. MFN clause with respect to Royaltyand FTS.

8. Botswana 7.50% / 10% 10% [Note 4] 10% 10% 7.50% tax on dividends if atleast 25% of the capital is owned by company; in any other case 10%.

[Notes 6&7] [Notes 3 [Notes 3 & 7] & 7]

separateprovision


Sr.No.





9. Brazil 15% 15% [Note 4] 15% Coveredunder

Article forRoyalty

10. Bulgaria 15% 15% [Note 4] 15% / 20% 20% 15% tax on royalties if relating to copyrights of literary, artistic or sc ien t i f i c wo rks , o the r t han cinematograph films or films or tapes used fo r rad io or te lev is ion broadcasting; in any other case 20%.

11. Bhutan 10% 10% [Note 4] 10% 10%

12. Canada 15% / 25% 15% [Note 4] Note 5 Note 5 15% tax on dividends if atleast 10% of the voting power is owned by company; in any other case 25%.

13. China 10% 10% [Note 4] 10% 10%

14. Cyprus 10% / 15% 10% [Note 4] 15% 15% / 10% 1. 10% tax on dividends if atleast 10%of the shares are owned bycompany; in any other case 15%.

2. Technical fees are taxable @10%under Article 13 and Fees forIncluded Services is chargeable@15% under Article 12.

15. Czech Republic 10% 10% [Note 4] 10% 10%

16. Colombia 5% 10% [Note 4] 10% 10%

17. Denmark 15% / 25% 15% / 10% 20% 20% 1. 15% tax on dividends if atleast 25%of the shares are owned bycompany; in any other case 25%.

2. Interest taxable at 10% if recipient isbank; in any other case 15%.

18. Estonia 10% 10%[Note 4] 10% 10%

19. Ethiopia 7.50% 10% [Note 4] 10% 10%

20. Finland 10% 10% [Note 4] 10% 10% MFN clause with respect to Dividend, Interest, Royalty and FTS.

21. France 10% 10% [Note 4] 10% 10% MFN clause with respect to Dividend, Interest, Royalty and FTS.

22. Fiji 5% 10% [Note 4] 10% 10%

23. Georgia 10% 10% [Note 4] 10% 10%

24. Germany 10% 10% [Note 4] 10% 10%

25. Greece

15% tax on dividends if paid to a (25% for company; in any other case as per

trademark) domestic tax laws.

[Note 4]

Taxable as per domestic laws in Nosource country separate

provision

89RSM Astute Consulting

Sr.No.





26. Hungary 10% 10% [Note 4] 10% 10% MFN clause with respect to Dividend, Interest, Royalty and FTS.

27. Indonesia 10% / 15% 10% [Note 4] 15% No 1. 10% tax on dividends if atleast 25%of the shares are owned bycompany; in any other case 15%.

2. The tax rates on dividend income,royalties and FTS (In the earlierDTAA, there was no separateprovision for F T S ) h a v e b e e nreduced to 10% but the same is yetto be notified.

28. Iceland 10% 10% [Note 4] 10% 10%

29. Ireland 10% 10% [Note 4] 10% 10%

30. Israel 10% 10% [Note 4] 10% 10% MFN clause with respect to Dividend, Interest, Royalty and FTS.

31. Italy 15% / 25% 15% [Note 4] 20% 20% 15% tax on dividends if atleast 10% of the shares are owned by company; in any other case 25%.

32. Japan 10% 10% [Note 4] 10% 10%

33. Jordan 10% 10% [Note 4] 20% 20%

34. Kazakhstan 10% 10% [Note 4] 10% 10% MFN clause with respect to Dividend, Interest, Royalty and FTS.

35. Kenya 15% 15% [Note 4] 20% No 17.50% tax in case of Management and Professional fees.

36. Korea 15% / 20% 15% / 10% 15% 15% 1. 15% tax on dividends if atleast 20%of the capital is owned by company;in any other case 20%.

2. Interest taxable at 10% if recipient isbank; in any other case 15%.

37. Kuwait 10% 10% [Note 4] 10% 10%

38. Kyrgyz Republic 10% 10% [Note 4] 15% 15%

39. Latvia 10% 10% [Note 4] 10% 10%

40. Libya

41. Lithuania 5%/15% 10% 10% 10% 5% tax on dividends if atleast 10% of the shares are beneficially owned by company (other than a partnership); in any other case 15%.

42. Luxembourg 10% 10% [Note 4] 10% 10%

separateprovision

separateprovision

Taxable as per domestic laws in Nosource country separate

provision

Sr.No.




43. Malaysia 5% 10% [Note 4] 10% 10%

44. Malta 10% 10% [Note 4] 10% 10%

45. Mauritius 5% / 15% Taxable as 15% No 5% tax on dividends if atleast 10% ofper domestic the capital is owned by company; inlaws [Note 4] any other case 15%.

46. Mongolia 15% 15% [Note 4] 15% 15%

47. Montenegro 5% / 15% 10% [Note 4] 10% 10% 5% tax on dividends if atleast 25% of the capital is owned by company (other than a partnership); in any other case 15%.

48. Morocco 10% 10% [Note 4] 10% 10%

49. Mozambique 7.50% 10% [Note 4] 10% Noseparateprovision

50. Myanmar 5% 10% [Note 4] 10%

51. Namibia 10% 10% [Note 4] 10% 10%

52. Nepal [5%/10%] [10%] [Note 4] 15% No 1. 5% tax on dividends if atleast 10%of the shares are owned bycompany; in any other case 10%.

2. MFN clause with respect to Royalty,shall be applicable if Nepal entersinto treaty with any other country fora lower tax on royalties.

53. Netherlands 10% 10% [Note 4] 10% 10% MFN clause with respect to Dividend, Interest, Royalty and FTS.

54. New Zealand 15% 10% [Note 4] 10% 10%

55. Norway 10 % 10 % [Note 4] 10% 10%

56. Oman 10% / 12.50% 10% [Note 4] 15% 15% 10% tax on dividends if atleast 10% of the shares are owned by company; in any other case 12.50%.

57. Philippines 15% / 20% 15% / 10% 15% No 1. 15% tax on dividends if atleast 10%of the shares are owned bycompany; in any other case 20%.

2. Interest taxable @ 10% if recipientis Financial Institution (including aninsurance company) and where theinterest is payable by a companybeing resident of Philippines to aresident of India in respect of publicissues of bonds, debentures orsimilar obligations. In any other case 15%.

separate provision

Noseparateprovision

separate provision


Sr.No.




3. Royalty taxable @ 15% if it ispayable in pursuance of anycollaboration agreement approvedby the Government of India. Norates prescribed in any other case.

58. Poland 10% 10% [Note 4] 15% 15%

59. Portuguese 10% / 15% 10% [Note 4] 10% 10% 10% tax on dividends if atleast 25% of the capital stock is owned by company for an uninterrupted period of 2 years prior to the payment of dividend; in any other case 15%.

60. Qatar 5% / 10%. 10% [Note 4] 10% 10% 5% tax on dividends if atleast 10% of the shares are owned by company; in any other case 10%.

61. Romania 10% 10% [Note 4] 10% 10%

62. Russian Federation 10% 10% [Note 4] 10% 10%

63. Saudi Arabia 5% 10% [Note 4] 10% Noseparateprovision

64. Serbia 5% / 15% 10% [Note 4] 10% 10% 5% tax on dividends if atleast 25% of the capital is owned by company (other than a partnership); in any other case 15%.

65. Singapore 10% / 15% 10% / 15% 10% 10% 1. 10% tax on dividends if atleast 25%of the shares are owned bycompany; in any other case 15%.

2. Interest taxable at 10% if recipient isbank or similar financial institutionincluding an insurance company; inany other case 15%.

66. Slovenia 5% / 15% 10% [Note 4] 10% 10% 5% tax on dividends if atleast 10% of the capital is owned by company; in any other case 15%.

67. South Africa 10% 10% [Note 4] 10% 10%

68. Spain 15% 15% [Note 4] 10% / 20% 10% 1. 10% tax on royalties if paid foruse or right to use any industrial,commercial or scientific equipment;in any other case 20%.

2. MFN clause with respect to Royaltyand FTS.

69. Sri Lanka 7.5% 10% [Note 4] 10% 10%

70. Sudan 10% 10% [Note 4] 10% 10%

71. Sweden 10% 10% [Note 4] 10% 10% MFN clause with respect to Dividend, Interest, Royalty and FTS.

Republic


Sr.No.




72. Swiss 10% 10% [Note 4] 10% 10% MFN clause with respect to Dividend,Interest, Royalty and FTS.

73. Syria 5% / 10% 10% [Note 4] 10% No 5% tax on dividends if atleast 10% ofthe shares are owned by company(other than a partnership); in any other case 10%.

74. Tajikistan 5% / 10%. 10% [Note 4] 10% No 5% tax on dividends if atleast 25% ofthe capital is owned by company (otherthan a partnership); in any other case 10%.

75. Tanzania 5%/10% 10% [Note 4] 10% No 5% tax on dividends if atleast 25% ofshares are beneficially owned by company; in any other case 10%.

76. Thailand 15% / 20% 25% / 10% 15% No

payee company and the payer is anindustrial company, 20% if payercompany is an industrial companyor the payee company owns atleast25% of the voting shares; and in anyother case as per the domestic lawsof the payer company.

2. Interest taxable at 10% if recipient isany financial institution including aninsurance company; in any othercase 25%.

77. Trinidad and 10% 10% [Note 4] 10% 10%

78. Turkey 15% 10%/15% 15% 15% Interest is taxable at 10% if recipient isa bank, insurance company or similar financial institution; in any other case 15%.

79. Turkmenistan 10% 10% [Note 4] 10% 10%

80. Uganda 10% 10% [Note 4] 10% 10%

81. Ukraine 10% / 15% 10% [Note 4] 10% 10% 10% tax on dividends if atleast 25% of the capital is owned by company (other than a partnership); in any other case 15%.

82. United Arab 10% 5% / 12.5% 10% No

any other case 12.50%.

Confederation

separateprovision

separate provision

separate provision

1. 15% tax on dividends if atleast 10%[Note 4] separate of voting shares are owned by

provision

Tobago

[Note 4]

Interest taxable at 5% if recipient isEmirates [Note 4] separate bank or similar financial institution; in

provision

83. United Arab As per As per Taxable in NoRepublic (Egypt) domestic law domestic law source separate

country as provisionper

domestic tax rate


Sr.No.




84. United Kingdom 15% / 10% 15% / 10% Note 5 Note 5 1. Interest taxable at 10% if recipient is a bank; in any other case 15%.

2. Dividend taxable at 15% wheredividend is paid out of incomederived directly or indirectly fromimmovable property. In other case10%.

85. United Mexican 10% 10% [Note 4] 10% 10%

86. United States of 15% / 25% 10% / 15% Note 5 Note 5 1. 15% tax on dividends if atleast 10% of the voting stock is owned by

company; in any other case 25%.2. Interest taxable at 10% if recipient

is bonafide bank or financialinstitution including an insurancecompany; in any other case 15%.

87. Uruguay 5% 10%[Note 4] 10% 10%

88. Uzbekistan 10% 10% [Note 4] 10% 10%

89. Vietnam 10% 10% [Note 4] 10% 10%

90. Zambia 5% / 15% 10% [Note 4] 10% 10% 5% tax on dividends if at least 25% of the shares are owned by company during a period of 6 months immediately preceding the date of payment of dividend; in any other case 15%.

[Note 4]

States

America [Note 4]


Notes:

1. As per section 115-O of the IT Act, subject to certain exceptions, any amount declared,

distributed or paid by a domestic company by way of dividend shall be chargeable to DDT

effectively @ 20.4747%. Further, as per the Finance Bill, 2015, the effective rate of DDT has

gone up to 20.9248%. In such cases, dividend distributed (which is subject to DDT) is not subject

to withholding tax and is tax exempt in hands of the recipient shareholders in India. The rates

mentioned in the above table are applicable to dividend other than the dividend declared,

distributed or paid by Indian companies on which DDT is applicable [such as deemed dividend

under Section 2(22)(e) of the IT Act].

2. Unless otherwise provided in the DTAA, both the countries have right to tax.

3. With effect from FY 2015-16, the rate of tax under the IT Act on Royalty and/or FTS

receivable by a non-resident is proposed to be decreased to 10% (plus applicable

Surcharge and Education Cess) by the Finance Bill, 2015. As per section 90(2) of the IT

Act, tax rate as per the provisions of DTAA or the IT Act, whichever is beneficial to the

assessee, shall apply. For availing the benefit under DTAA, furnishing of TRC and self

declaration in Form 10F by the payee shall be mandatory.

4. Interest derived and beneficially owned by the Government, a political sub-division or a local

authority or certain institutions like the RBI or Central Bank of other State or any other institution

as may be agreed upon, is exempt from taxation in the country of source.

5. Tax rate is 10% in case of Royalties for equipment rental and fees for services ancillary or

subsidiary thereto. For other cases, the tax rate is 15%. However for first 5 years of the

agreement, the rate is 20% in case of payer other than Government or specified institution and

15% for the subsequent years.

6. Lower withholding tax of 5% is applicable in case of interest on borrowing in foreign currency,

interest on long term bond including long term infrastructure bond, interest from infrastructure

debt fund, interest on rupee denominated bonds and government securities.

7. In case, the payee is not able to furnish his/her PAN to the payer, tax shall be deducted at higher

of the following rates : (i) rate specified in the relevant provisions of the IT Act, (ii) at the rate or

rates in force, (iii) at the rate of 20%.


CHAPTER 11 : TDS RATES(As updated upto the Finance Bill, 2015)

In this chapter, we have compiled the

relevant provisions of TDS relating to

r e s i d e n t s a n d n o n - r e s i d e n t s ,

incorporating herein the nature of

payment, threshold limits for tax

deduction and the applicable rates of

TDS for different classes of recipients.

Sr.No.

Nature of Payment Section Proposedthreshold for

deduction w.e.f. 1 April 2015

Rate atwhich Tax is

to bededucted[Note 1]

Existingthreshold for

deduction

ProposedRate at

which taxis to be

deducted[Note 1]


1.

2.

192

192A192A -

As per slab rates prescribed for senior citizens (includes very senior citizens) and other individuals.

Salary

Accumulated balance due to an employeeparticipating in a recognised provident fund [Note 1]

Rs. 30,000 in aggregate of amount

includible in total income of employee

- 10%

3.

4.

5.

6.

193

194A

194B

194BB

Rs. 5,000 for interest on debentures by public company to individuals and HUF

Rs. 10,000 for interest on 8% savings

(Taxable) Bonds, 2003

Rs. 5,000 /Rs. 10,000 p.a.

Rs. 10,000

Rs. 5,000

Interest on Securities including listed debentures [Note 2]

Interest other than interest on securities [Note 3 ]

Winning from lottery or crossword puzzle or card game or other game

Winnings from horse race

Rs. 5,000 for interest on debentures by public company to

individuals and HUF

Rs. 10,000 for interest on 8% savings

(Taxable) Bonds, 2003

Rs. 5,000 /

Rs. 10,000 p.a.

Rs. 10,000

Rs. 5,000

10%

10%

30%

30%

10%

10%

30%

30%

7.

8.

194C

194D

Rs. 30,000 percontract or Rs. 75,000

p.a. in aggregate

Rs. 20,000

Payments to contractors [Notes 5 and 6]

Insurance commission

Rs. 30,000 per contract or

Rs. 75,000 p.a. in aggregate

Rs. 20,000

2% (1% for individual

and HUFs)

10%

2% (1% for individual

and HUFs)

10%


Notes:

1. In case the payee is not able to furnish his / her PAN to the payer, tax shall be deducted at the higher of the following rates (i) rate specified in the relevant provision of the IT Act (ii) at the rates in force or (iii) at the rate of 20%. However, in case of payment of accumulated balance due to an employee participating in a recognised provident fund, it is proposed that tax is to be deducted at the maximum marginal rate of 34.608%

2. Interest on securities issued by Company and listed on the recognized stock exchange, would not be subject to deduction of tax if such securities are held in dematerialized form.

3. Under section 194A, the threshold limit is Rs.10,000 where the payer is a banking company or a co-operative society engaged in banking business, or in case of deposits with post office under a scheme notified by Central Government and Rs. 5,000 in any other cases. Further, tax is not to be deducted, if the payee furnishes to the payer a declaration in writing in duplicate in Form No.15G or 15H, as the case may be.


9.

10.

11.

12.

13.

14.

15.

16.

194DA

194H

194E

194EE

194I

194J

194IA

195 As per the rate in force or rate specified in the relevant DTAAs, whichever is beneficial [Note 8]

2%

10%

20%

20%

2%

10%

1%

Payment in respect of life insurance policy [Note 4]

Commission or brokerage [Note 5]

Payment to non-resident sportsmen / entertainer / sports association

Payment in respect of deposits under National Savings Scheme,1987

Rent of Plant, Machinery or Equipment [Note 5]

Fees for professional and technical services / royalty/remuneration to Director other than salary [Notes 5 and 7]

Payment/credit of consideration to a resident transferor of any immovable property (other than agricultural land)

Payment to non-resident of sum chargeable to tax in India

Less thanRs. 1,00,000

Rs. 5,000 p.a.

No threshold

Less than Rs. 2,500

Rs. 1,80,000 p.a.

Rs. 30,000 p.a.



Rs. 5,000 p.a.

No threshold

Less than Rs. 2,500

Rs. 1,80,000 p.a.

Rs. 30,000 p.a.


2%

10%

20%

20%

2%

10%

1%

Sr.No.

Nature of Payment Section Proposedthreshold for

deduction w.e.f. 1 April 2015

Rate atwhich Tax is

to bededucted[Note 1]

Existingthreshold for

deduction

ProposedRate at

which taxis to be

deducted[Note 1]

4. Tax is to be deducted on sums payable other than the amount not includible in the total income under section 10(10D). Further, tax is not to be deducted, if the payee furnishes to the payer a declaration in writing in duplicate in Form No.15G or 15H, as the case may be.

5. An individual or HUF is not liable to deduct tax. However, an individual or HUF, who is liable to tax audit under section 44AB during the financial year immediately preceding the financial year in which sum is credited or paid, shall be liable to deduct tax under sections 194A, 194C, 194H, 194I and 194J, as the case may be.

6. No tax is required to be deducted at source on credit or payment of transport charges, if the transporter owns 10 or less than 10 goods carriages at any time during the previous year and furnishes a declaration to that effect along with his valid PAN.

7. Tax is required to be deducted on remuneration paid to a director which is not in the nature of salary.

8. For the purpose of claiming DTAA benefit, the non-resident payee should furnish PAN a valid TRC from and a self-declaration in Form 10F.

9. It has been clarified by CBDT that a payer shall not be required to deduct TDS on service tax component wherever in terms of the agreement between the payer and payee, the service tax component comprised in the amount payable to a resident payee is indicated separately.


CHAPTER 12 : DIRECT TAX AND SERVICE TAX COMPLIANCE CALENDAR

(As updated up to the Finance Bill, 2015)

In this chapter, we have provided an overview of the various direct tax and service tax compliances from the perspective of a Company, Partnership Firm (including LLP), Individual and HUF.

99

I. Due dates for filing of ROI, obtaining Tax Audit Report and Transfer Pricing Accountant's Report(Notes 1 & 2)

Person covered under tax audit 30 September(other than those to whom transfer pricing is applicable)

Person covered under transfer pricing 30 November

Other persons 30 September 31 July 31 July (Note 2)

II. Advance Tax Payments for Income Tax (Note 3)

1st Installment - on or before 15 June 15% Not Applicable Not Applicable

2nd Installment - on or before 15 September 45% 30% 30%

3rd Installment - on or before 15 December 75% 60% 60%

4th Installment - on or before 15 March 100% 100% 100%

III. Tax Deducted at Source (‘TDS’)

Tax must be deducted at the time of payment,in case of salary

In case of payments other than salary, at the timeof making payment or credit, whichever is earlier

Tax deducted must be deposited in the bank by 7th dayof following month except tax deducted for paymentor credit made in March must be deposited by 30th April

IV. Tax Collected at Source (‘TCS’)

Tax must be collected at the time of receipt or debit,whichever is earlier

Tax collected must be deposited within one week fromthe last day of the month in which the collection is made.

V. Due dates for filing of TDS / TCS Returns (Notes 4, 5 & 6)

For quarter ended June 15 July

F or quarter ended September 15 October

For quarter ended December 15 January

For quarter ended March 15 May

VI. Due dates for issue of Form 16 (for Salaries) / Form 16A (for other than Salaries) and Form 27D (for TCS)(Notes 7 & 8)

Issue of Form 16 annually 31 May

Issue of Form 16A / 27D for quarter ended June 30 July

Issue of Form 16A / 27D for quarter ended September 30 October

Issue of Form 16A / 27D for quarter ended December 30 January

Issue of Form 16A / 27D for quarter ended March 30 May

Nature of Compliances Company PartnershipFirm / LLP

Individualand HUF

Person

person is covered Applicable under tax audit

in the precedingprevious year

Applicable, only if

person is covered Applicable under tax audit

in the precedingprevious year

Applicable, only if


DIRECT TAX COMPLIANCE CALENDAR



VII. Due date of submission of Statement under section 285 of the IT Act

Non-resident having liaison office in India to Within 60 daysfile statement in Form 49C from the end of financial year

VIII. Due date for filing Annual Information Return under section 285BA of the IT Act

Specified persons to furnish Annual Information Return 31 Augustin Form 61A in respect of specified financial transactions

IX. Due dates for filing of appeals before the Income-tax appellate authorities

Objections before the Dispute Resolution Panel Within 30 days from the receipt

of the draft assessment order

Appeal to the Commissioner of Income-tax (Appeals) Within 30 days from the date of service

of notice of demand or the relevant order sought to be appealed against

Appeal to the Income-tax Appellate Tribunal (Note 9) Within 60 days from the date on which order sought to be appealed against is communicated

Nature of Compliances Company PartnershipFirm / LLP

Individualand HUF

Person

Notes:

1. It is proposed to abolish levy of wealth tax. However, information relating to assets to be now captured in ROI.

2. In case of working partner of a partnership firm, whose accounts are required to be audited under section 44AB of the IT Act, the date of filing of ROI is 30 September.

3. Advance tax payment for income-tax is applicable to every person where the amount of income-tax payable is Rs.10,000 or more.

4. For the convenience of deductor, CPC (TDS) has started accepting a single challan for reporting of tax deposited.

5. TDS return can be rectified online by adding / altering challans and interest payments even without DSC, for all years. Further, rectification / correction of all aspects of deductee details related to FY 2013-14 onwards can be rectified online if DSC of the company / authorized signatory is available.

6. NIL declaration is a declaration for non-filing of TDS statements for those deductors who are not liable to deduct any tax during the relevant quarter or have not deducted tax during any quarter and subsequently did not file a TDS statement under section 200(3) of the IT Act for any quarter.

7. Every person, being a non-resident having Liaison Office in India shall, in respect of its activities in a financial year, file a statement in Form No. 49C within 60 days from the end of the financial year i.e. 30 May to the Assessing Officer.

8. Form 16A can be downloaded from TRACES website for those deductee whose PAN is not available from FY 2013-14 onwards.

9. Memorandum of cross objection is to be filed within 30 days from the receipt of notice intimating that the appeal has been preferred before the Tribunal, against any part of the order under appeal, if required.

10. DDT under section 115O of the IT Act must be paid within 14 days from the date of declaration, distribution, or payment of dividend, whichever is earlier.


Due date for payment of Service Tax (Note 1)

For Individual, partnership firm and LLP By 6th of the following month for every quarter

For Others (Companies, Trusts, HUF, AOP, Societies, etc.) By 6th of the following month for every month

Interest on late payment of Service Tax (Note 2)

Gross Value of taxable services in preceding FY is 18% p.a. - first 6 monthsRs. 60,00,000 or above 24% p.a. - delay beyond 6 months up to 1 year

30% p.a. - delay beyond 1 year

Filing of Service Tax returns

April to September (Note 3) 25 October

October to March (Note 4) 25 April

Late fees for delay in filing of returns (Note 5)

For delay up to 15 days Rs. 500

For delay beyond 15 days up to 30 days Rs. 1,000

For delay beyond 30 days (Note 6) Rs. 1,000 + Rs. 100 per day

Due date for filing of appeal

Appeal to be filed before Commissioner of Central Excise Within 2 months from date of receipt of the order. The(Appeals) against order of adjudication authority subordinate Commissioner of Central Excise (Appeals) has theto Commissioner of Central Excise. There is a mandatory power to condone delay in filing of appeal for a furtherpre-deposit of 7.5% required to be made at the time of period of 1 month provided sufficient cause is shownfiling the appeal. for non-filing the appeal within stipulated period of 2

months.

Appeal to be filed before Customs, Excise and Service Tax Within 3 months from date of receipt of the order.Appellate Tribunal (CESTAT) against order of Commissioner CESTAT has powers to condone the delay in filing ofof Central Excise or Commissioner of Central Excise appeal if it is satisfied that there was sufficient cause for(Appeals). There is a mandatory pre-deposit of differential not presenting the appeal within the stipulated period.2.5% summing to 10%) required to be made at the time offilling the appeal.


ParticularsDue dates/quantum of

interest and late filing fees

Notes:

1. The due date for payment of service tax for the month or quarter ended on 31 March is 31 March itself.

2. For service provider having turnover below Rs. 60,00,000 in the preceding financial year, the specified rate shall be reduced by 3%.

3. The due date for filing of service tax returns for the period April to September for Input Service Distributor is 30 October.

4. The due date for filing of service tax returns for the period October to March for Input Service Distributor is 30 April.

5. In case service tax is NIL, the authority may waive the late filing fees on being satisfied that there is sufficient reason for not filing the return.

6. Maximum late filing fees shall not exceed Rs. 20,000.

7. The following categories of person must mandatorily obtain service tax registration and comply with the provisions:lEvery person liable to pay service tax;lAn Input Service Distributor;lEvery provider of taxable service whose aggregate value of taxable service

in financial year exceeds Rs. 9,00,000.

SERVICE TAX COMPLIANCE CALENDAR



AE Associated EnterpriseAIF Alternative Investment FundAMT Alternate Minimum TaxAO Assessing OfficerAOP Association of PersonsAPA Advance Pricing AgreementAY Assessment YearBCD Basic Customs DutyBED Basic Excise DutyBEPS Base Erosion and Profit shiftingBOI Body of IndividualsBRICS Brazil, Russia, India, China and South AfricaBSE Bombay Stock ExchangeCAGR Compounded Average Growth Rate CBDT Central Board of Direct TaxesCBEC Central Board of Excise and CustomCESTAT Customs Excise & Service Tax Appellate

TribunalCENVAT Central Value Added TaxCCR Cenvat Credit RulesCIT Commissioner of Income TaxCPSE Central Public Sector EnterprisesCRISIL Credit Rating Information Services of India

LimitedCSR Corporate Social ResponsibilityCVD Additional Duty of Customs levied under

section 3(1) of the Customs Tariff Act, 1975DDT Dividend Distribution TaxDIPP Department of Industrial Policy and

PromotionDRP Dispute Resolution PanelDSIR Department of Scientific & Industrial

ResearchDTA Domestic Tariff AreaDTC Direct Taxes Code DTAA Double Taxation Avoidance AgreementECB External Commercial BorrowingELSS Equity Linked Savings SchemeEPFS Employees Provident Fund SchemeEOU Export Oriented UnitEU European UnionFDI Foreign Direct InvestmentFEMA Foreign Exchange Management Act, 1999FII Foreign Institutional InvestorsFIPB Foreign Investment Promotion BoardFTS Fees for Technical ServicesFY Financial YearGAAR General Anti Avoidance RulesGDP Gross Domestic ProductGDR Global Depository ReceiptGJEPC Gems and Jewellery Export Promotion

CouncilGST Goods and Services TaxHUF Hindu Undivided FamilyIDR Indian Depository ReceiptIFC India Financial CodeIIT Indian Institute of TechnologyInvIT Infrastructure Investment TrustIPO Initial Public OfferIT Information TechnologyITeS Information Technology enabled ServicesIT Act Income-tax Act, 1961ITAT Income Tax Appellate TribunalIT Rules Income-Tax Rules, 1962

ABBREVIATIONSLED Light-Emitting DiodeLIC Life Insurance Corporation of IndiaLLP Limited Liability PartnershipMACT Motor Accident Claims TribunalMFN Most Favoured NationMMR Maximum Marginal RateMAT Minimum Alternate TaxMRO Maintenance Repair and OverhaulMUDRA Micro Units Development Refinance Agency

BankNABARD National Bank for Agriculture and Rural

DevelopmentNHAI National Highway Authority of IndiaNRI Non-resident IndianNSC National Savings CertificateOECD Organization for Economic Co-operation and

Development PAN Permanent Account NumberPDMA Public Debt Management AgencyPE Permanent EstablishmentPIO Person of Indian OriginPMLA Prevention of Money-Laundering Act, 2002POEM Place of Effective ManagementPPP Public Private PartnershipQFI Qualified Foreign InvestorR&D Research and DevelopmentRBI Reserve Bank of IndiaRBI Act The Reserve Bank of India Act, 1934RCM Reverse Charge MechanismRECL Rural Electrification Corporation LimitedREIT Real Estate Investment TrustROI Return of IncomeROW Return of WealthSAD Special Additional Duty of Customs levied

under sub-section (5) of section 3 of the Customs Tariff Act, 1975

SARFAESI The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002

SBI State Bank of indiaSCRA Securities Contracts (Regulation) Act, 1956SDT Specified Domestic TransactionSEBI Securities and Exchange Board of IndiaSEZ Special Economic ZoneSME Small And Medium EnterprisesSPV Special Purpose VehicleSSI Small Scale IndustriesSTT Security Transaction TaxTAN Tax Deduction and Collection Account

NumberTARC Tax Administration Reform CommissionTCS Tax Collected at SourceTDS Tax Deducted at SourceTP Transfer PricingTRC Tax Residency CertificateULIP Unit Linked Insurance PolicyVAT Value Added TaxVCC Venture Capital CompanyVCF Venture Capital FundVCU Venture Capital Undertakingw.e.f. with effect fromWPI Wholesale Price IndexWT Act Wealth Tax Act, 1957

India Offices

New Delhi-NCR

Jaipur

Indore

Pune

Kochi

Bengaluru(Bangalore)

RSM International Offices

RSM International's Global Presence

T (91-22) 6108 5555 / 6121 4444 F (91-22) / E [email protected] W astuteconsulting.com

Offices: Mumbai, New Delhi-NCR, Chennai, Kolkata, Bengaluru, Surat, Ahmedabad, Hyderabad, Jaipur, Indore and Pune.

6108 5556 2287 5771

Gandhidham, Kochi,

For further information please contact:

RSM Astute Consulting Group13th Floor, Bakhtawar, 229, Nariman Point, Mumbai - 400 021.

RSM Astute Consulting Group is a member of RSM network. Each member of the RSM network is an independent accounting and advisory firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction. RSM is the brand used by a network of independent accounting and advisory firms each of which practices in its own right. The network is not itself a separate legal entity of any description in any jurisdiction. The network is administered by RSM International Limited, a company registered in England and Wales (company number 4040598) whose registered office is at 11 Old Jewry, London EC2R 8DU. The brand and trademark RSM and other intellectual property rights used by members of the network are owned by RSM International Association, an association governed by article 60 et seq of the Civil Code of Switzerland whose seat is in Zug.

© RSM Astute Consulting, 2015

Documents

INDIA BUDGET 2015 - Manupatradocs.manupatra.in/newsline/articles/Upload/6F75FD7D-6184-4E85-BF2… · Income Slabs (Rs.) Income Slabs (Rs.) Proposed Tax Rates Tax Rates FY 2015-16