© VGGlobal 2015. www.vgglobal.co.in

VGGLOBAL HIGHLIGHTS OF THE FINANCE BILL 2015

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From the Desk of:

CA Ved Parkash Gupta Managing Partner Email: vedgupta@vgglobal.co.in Dear All, Pragmatism…in the right direction This seems to be at the heart of the Union Budget 2015-16, whereby the finance minister has tried to make the investment environment for the market participants as conducive as possible. However, the burden of kick-starting the economy has been passed on to the states and PSUs. Even though, the government has been consistent in its communication and intent about no big-bang reforms/announcements, market participants have been expecting this. To that extent, as also, a postponement of 3% fiscal deficit target by 1 year, the budget could be termed pragmatic rather than disappointing on the margin. Key positives • Pro-investment regulatory environment (Clarity on GAAR, taxation issue on offshore fund management, pass-through for REIT and AIF) • Greater federalism by transferring higher amount to the states • Government borrowing at the low end of estimate in spite of higher than expected fiscal deficit • Potential for surprise on revenue exists • Stress on Social security • Increased allocation towards road and rail infrastructure • Lower corporate tax from 30% to 25% over next 4 years • Re-iterating commitment towards GST implementation by FY16 • New bankruptcy act Key negatives • Lack of a directed public spending – Onus of spending shifted to states and PSU • Lack of details on themes like “Make in India” and “smart cities” which have the potential to accelerate capex Thank you.

CA Ved Parkash Gupta

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TABLE OF CONTENTS

A. DIRECT PROPOSALS ................................................................................................................................................................................4

1. Rate of tax ..............................................................................................................................................................................................4

2. Personal Taxation ...................................................................................................................................................................................5

3. Corporate Taxation .................................................................................................................................................................................5

4. International Taxation ............................................................................................................................................................................6

B. INDIRECT TAX PROPOSALS ......................................................................................................................................................................7

1. Service Tax .............................................................................................................................................................................................7

2. Excise .....................................................................................................................................................................................................7

3. Customs .................................................................................................................................................................................................8

1.

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A. DIRECT TAX PROPOSALS

1. Rates of Taxes

• Basic corporate tax rate shall be reduced to 25% from the exitsing 30% over the next 4 years starting from the next financial year.

• Levy of surcharge @ 12% in case of firm if the total income exeeds 1 crores.

• In case of a company, levy of surcharge @ 7% if the total income is between 2 -10 crores and @ 12% if the total income exceeds 10 crores.

• No change announced in the tax rates or tax slabs for individual tax payers. The tax slabs for FY 2015-16 shall remain to be same as for FY 2014-15.

Individual (Other than Senior Citizen)

Senior Citizens (aged 60 years & above but below 80 years)

Very Senior Citizen (aged 80 years & above)

• Income upto Rs. 250,000 – Nil tax • Income upto Rs. 300,000 – Nil tax • Income upto Rs. 500,000 – Nil tax

• Income from Rs. 250,001 to Rs. 500,000 – 10% tax

• Income from Rs. 300,001 to Rs. 500,000 – 10% tax

• Income from Rs. 500,000 to Rs. 10,00,000 – 20% tax

• Income from Rs. 500,0001 to Rs. 10,00,000 – 20% tax

• Income from Rs. 500,0001 to Rs. 10,00,000 – 20% tax

• Income above Rs. 10,00,000 – 30% tax

• Income above Rs. 10,00,000 – 30% tax

• Income above Rs. 10,00,000 – 30% tax

• An additional surcharge of 2% shall be imposed on super rich i.e. individuals earning Rs 1 Crore or more annually.

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2. Personal Taxation

• Wealth tax stands abolished w.e.f. April 1, 2016

• Section 80C and Section 10: Investments made under the Sukanya Samriddhi Account Scheme (designed for a girl child) will be eligible for deduction under section 80C of the Income-tax Act. The interest accruing on the deposits in such account will be exempt from tax while the withdrawal from the scheme in accordance with the rules of the scheme will also be exempt.

• Section 80CCC and Section 80CCD: Deduction limit for contribution to a pension fund and New Pension Scheme increased from Rs 1 Lacs to Rs 1.5 Lacs.

• Section 80D: Limit of deduction for health insurance premium enhanced from from Rs 15000 to Rs 25000 per annum. For senior citizens, the same has been increased from Rs 20000 to Rs 30000 per annum.

3. Corporate taxation

• Wealth tax stands abolished w.e.f. April 1, 2016

• Section 11 and 13: In case charitable

organization is not able to invest at

least 85% of the income in the current

in the financial year will have file a

deceleration with assessing officer

before the due date of filing its return

of Income and file the return of

Income upto the due date.

• Inclusion of Yoga or publishing of

books under the ambit of the

charitable activities and

consequentially the availability of

exemption of tax thereon.

• Section 32: In case of any assets is

acquired by the assessee engaged in

the manufacturing sector for period

less than 180 days, only 50% of the

additional depreciation (20%) was

allowed. Now, balance 50%

deduction for the additional

depreciation shall be allowed in the

immediate succeeding assessment

year. Additional depreciation rate to

be 30% instead of 20% for the assets

acquired in notified areas of state of

Andhra Pradesh and Telangana.

• Section 32AC: Additional deduction

for investment in new plant and

machinery in notified areas of state of

Andhra Pradesh and Telangana.

• Section 47: In case, stake in the

Indian company is transferred due to

amalgamation/ demerger of the

foreign company, the transaction

would not be deemed as transfer

subject to certain conditions. Further,

wherein the transfer has been made

of units of the mutual funds due to

consolidation of the schemes of

mutual funds, it shall not regarded as

transfer.

• Section 115JB: Rationalizing

Minimum Alternate Tax for FII’s, Profit

corresponding to their income from

capital gains on transactions in

securities, which are liable to tax at a

lower rate, shall not be subject to

MAT.

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• Section 111A: The benefit of the

concessional tax i.e. tax @15% on

Short Term Capital Gains and

exemption on long term capital gains

will now be available to the sponsors

of the REIT on sale of units received

in lieu of shares of the special

purpose vehicle subject to levy of

STT.

• Section 158AA: Extension of time for

filing an appeal with ITAT by the

revenue if any an identical question of

law is pending in SC subject to

certain conditions.

• Wealth tax stands abolished w.e.f. April 1, 2016

• Section 194A: Applicability of TDS@ 10% on the accumulated balance of EPF if the premature withdrawal is made.

• Section 269SS/ 269T: Applicability on section 269SS/269T on purchase of immovable property exceeding Rs 20,000.

• Section 285A and Section 271G: Furnishing of certain Information by a Indian company in case a an entity outside India is holding substantial values of assets as per section 9A and levy of penalty upto 2%/ Rs5 Lacs if the Indian concern fails to furnish such information.

• Section 288: The conditions for appointment of tax auditor/ accountant providing other certificates has been made in line with the requirements of section 141 of the Companies Act, 2013 which prohibits any relative being appointed as auditor.

• Section 255: Raising the limit to Rs 15 lacs from Rs 5 lacs in respect of cases which can be heard by single member ITAT bench.

4. International taxation

• Section 9: Earlier budget has

specifically included income from

transfer of shares/interest in the

overseas company which derives its

value substantially from the assets of

the Indian company to be deemed to

accrue/arise in India. In the current

budget, specific definition of the

situation, wherein a overseas

company shall be deriving its value

substantially from the assets of the

company in India has been provided.

• Section 9A: Income of foreign fund is

not said to taxable in India merely

because fund manager undertaking

fund management activities on its

behalf situated in India subject to

certain conditions.

• Section 91: Amendment of section 91

to empower CBDT to notify the rules

for the giving the forign tax credit in

respect of income which has already

been taxed outside India.

• Secton 92BA: The threshold limit for

applicability of domestic transfer

pricing provisions has been changed

from Rs 5 Crores to Rs 20 crores.

• Section 115A: The tax rate of royalty/

fee for technical services has been

substantially reduced from 25% to

10%.

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B. INDIRECT TAX PROPOSALS

1. Service Tax

• Rate of service tax has been increased to 14% from 12.36%.

• Swach bharat cess@2% levied on the certain taxable services.

• Broadening of tax base by inclusion of following services among others by pruning of the negative list:

(i) Access to amusement facility providing fun or recreation

(ii) Service Tax to be levied on service by way of admission to entertainment event of concerts, non-recognized sporting events, pageants, music concerts, award functions, if the amount charged is more than Rs 500.

• Review of general exemption

provided in circular 25/2012:

(i) Exemption on construction,

erecting and

commissioning services to

government is limited to:

• Historical/astrological/

national importance site

• Canal/ dam/ Irrigation

work

• Pipeline, conduit or

plant for water supply,

water treatment, or

sewerage treatment or

disposal.

• 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.

• Aggregator of transport, has

been made liable to pay

service tax either by

aggregator or its agent.

• Benefit of paying 15%/25% of

the penalty of the additional tax

is being paid within 30 days of

the notice/order of the central

excise officer/ appellate

authority.

2. Excise

• Education Cess and Secondary & Higher Education Cess leviable on excisable goods are being subsumed in Basic Excise Duty and subsequently CENVAT stands increased at 12.5%.from 12%.

• However, the total incidence of various duties of excise on petrol and diesel remains unchanged. Other Basic Excise Duty rates (ad valorem as well as specific) are not being changed. Education Cess and Secondary & Higher Education Cess levied on imported goods as a duty of customs will continue.

• Excise duty on leather footwear with retail price higher than Rs 1000 per pair reduced to 6%

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• Excise duty increased 25% for cigarettes of length less than 65mm and 15% for cigarettes of other lengths.

• Amendments in the CENVAT Credit Rules, 2004

(i) Time limit for taking CENVAT credit on inputs and input services enhanced from the present 6 months to one year

(ii) Time limit for return of capital goods from a job worker enhanced from the present 6 months to two years

(iii) Provision relating to reversal for CENVAT credit, presently applicable to exempted goods and services, made applicable to non-excisable goods also

(iv) CENVAT credit taken, but NOT utilized, also to be recovered

3. Customs

• Rationalization of penalty provisions.

• All goods except populated printed circuit boards, falling under any Chapter of Customs Tariff, for use in the manufacture of ITA Bound Items, are being fully exempted from SAD, subject to actual user condition.

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Thank You

For more information, please feel free to contact:

Jatin Gupta

Partner

VGGlobal Advisors Private Limited

Mobile:+ 91 9891191000

Email: jatingupta@vgglobal.co.in

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