Monday 2 March 2015

BUDGET AND FINANCE BILL 2015 - KEY HIGHLIGHTS - DIRECT TAX

1.    Tax slab & Rates
-    It remains the same. However, surcharge has been increased by 2% and the revised rate is as under:
·      On Dividend Distribution Tax & Buy Back of Shares – 12%.
·     On Domestic Companies having Income between `1 core to `10 crore – 7% and those above `10 Crore – 12%. 
·  Individual, HUF, AOP, BOI, Artificial Juridical Persons, Firms, Cooperative Societies and Local Authorities Company other than domestic Category having taxable income above `1crore – 12%.
-   Reduction in rates of Corporate Tax promised to be reduced to 25% in next four years simultaneously with withdrawal of exemptions and deduction enjoyed by corporate.
2.    Charitable Trusts

-    Section 2(15) has been proposed to be amended to include yoga under the definition of charitable purpose on the lines of education and medical relief as a separate category which was impliedly already there as any other object of general public utility.
Further the existing limit of `25 lakhs for activities in the nature of trade, commerce or business or rendering of services thereto has been proposed to be changed to 20% of the gross receipts from such activities. 
-  Section 253 has been proposed to be amended so that Educational Institutions and hospitals which are not substantially financed by Government, if denied approval under section 10, can now appeal to ITAT when earlier the remedy was only to approach  the High Court by way of writ petition.
-  Section 11 has been proposed to be amended to prescribe form for exercising option for application of income if it falls short of 85% of income as well as furnishing statement of accumulation of income in prescribed form before the due date of furnishing the return of income.
-   Section 13 has been proposed to be amended to allow the shortfall in application of 85% of income only if the return of income and the prescribed form is filed before the due date of filing the return of income.
3.    Change in residential status of Companies
-    Section 6 has been proposed to be amended to provide that a company will be considered a resident company if at any time during the year its place of effective management is in India as against the earlier provision that the control and management of its affairs was wholly situated in India.
4.  Business deductions by way of Additional Depreciation & Investment Allowance & employment of new workmen
-    Section 32 has been proposed to be amended to provide for additional depreciation of 35% instead of 20% as per existing provisions for assesses setting up manufacturing unit and installing new plant and machinery during the period 01-04-2015 to 31-03-2020 in notified backward areas of Andhra Pradesh and Telangana.
-     50% additional depreciation under section 32(1)(iia) on assets put to use for less than 180 days during the financial year can now be claimed in immediately succeeding year.
-     Section 32AD has been proposed to be inserted to provide for deduction of 15% of the actual cost of new asset installed in the notified backward areas of Andhra Pradesh and Telangana during the specified period. 
-     Section 80JJAA has been proposed to be amended to reduce the threshold of employment of 100 new regular workmen to 50 new workmen in factory for claiming 30% deduction of additional wages. Also the deduction is now available to Non-Corporate assessee having manufacturing units.
5.    Personal Taxation
-   It has been proposed that the investments made in the Sukanya Samriddhi Account scheme will be eligible for deduction under section 80C of the Act. The interest accruing on deposits in, and withdrawals from any account under the scheme would be exempt under section 10(11A) of the Act.
-    It is proposed to increase the limit of deduction under section 80CCC from `1 Lac to `1.5 Lakhs. (However, to that extent 80C deduction gets exhausted)
-    It is proposed to increase the deduction under section 80CCD of Income Tax of up to `50,000 over and above the limit of `1.5 Lakhs on account of contribution by the individual to National Pension Scheme. (However, to that extent 80C deduction gets exhausted)
-     Section 80D has been proposed to be amended to increase the maximum limit to `30,000/- from existing `15,000/- in case of Individual and his family and to `30,000/- from existing `20,000/- in case of senior citizen.
It is also proposed to allow deduction of medical expenses in case of a very senior citizen (age of 80 years or more), if health insurance is not in force on the health of such person.
Similarly, limits in case of HUF’s is also proposed to be increased from `20,000 to `30,000/- on same terms.
-     It has been proposed that deduction under section 80DDB upto `80,000/- shall be allowed for the expenditure incurred in respect of the medical treatment of a very senior citizen and the requirement of furnishing the certificate before the due date has been done away with.
-    100% deduction for contributions to the Swachh Bharat Kosh and Clean Ganga Fund has been proposed by amending section 80G. However, any sum spent in pursuance of Corporate Social Responsibility (CSR) under section 135(5) of the Companies Act, 2013, will not be eligible for deduction from the total income of the donor. [w.e.f A.Y. 2015-16]. Donation made to National Fund for Control of Drug Abuse (NFCDA) shall be eligible for 100% deduction under section 80G of the Income-tax Act.
-     It is proposed to increase the limit of deduction under section 80U of Act in case of person with disability from `50,000/- to `75,000/- and in case of severe disability the limit has been increased from `1 Lakhs to `1.25 Lakhs. 
6.    Domestic Transfer Pricing
-   Section 92BA has been proposed to be amended to raise the threshold limit for applicability of transfer pricing regulations to “Specified Domestic Transactions” from `5 crore to `20 crore.
7.    General Anti Avoidance Rule deferred by 2 Years
-    Section 95 has been proposed to be amended to defer the controversial GAAR by 2 years to be applicable from A.Y. 2018-19.
8.    MAT removed from AOP profits
-     Section 115JB has been proposed to be amended to reduce the amount of income being the share of income from an AOP from the book profit. Correspondingly, book profit shall be increased by the amount of expenditure relatable to the above Income.
-    Income from transactions in securities (other than short term capital gains arising on transaction on which securities transaction tax is not chargeable) arising to a foreign institutional investor, is proposed to be excluded from chargeability of MAT and the profit corresponding to such income shall be reduced from the book profit.
9.    Section 115A has been proposed to be amended to reduce the rate of tax on Income by way of Royalty and Fees for Technical Services in case of Non-Residents from 25% to 10%.
10.  Reopening of assessments
-     No notice under section 148 shall be issued by an assessing officer up to four years from the end of relevant assessment year without the approval of Joint Commissioner and beyond four years without the approval of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner.
11.  New section 158AA is proposed to be inserted which underlays the procedure for appeal by the revenue when an identical question of law is pending before Supreme Court. 
12.  TDS Provisions
-    Tax to be deducted under section 194C on payment made to transporter owning more than 10 goods carriages. No TDS on transporters not owning more than 10 goods carriage at any time during the previous year provided he has furnished a declaration to this effect along with his PAN. [w.e.f 01-06-2015]
-    TDS on interest under section 194A has now been extended to recurring deposits also. 
-     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.
13.  Settlement Commission
-    Where notice under section 148 is issued for any Assessment year, the assessee can approach Settlement Commission for other Assessment years as well even if notice under section 148 for such other Assessment years has not been issued, subject to certain conditions.
-  Proceedings for assessment for any assessment year other than the proceedings for re-assessment shall be deemed to have commenced from the date on which a return of income is furnished and concluded on which assessment is made or on the expiry of two years from the end of relevant assessment year.
-     If any Order under section 245D(4) is passed without providing the terms of settlement, the proceedings before the settlement commission shall abate on the day on which such order is passed.
-     Amendment proposed in section 245K to provide that any person related to the person who has already approached Settlement Commission once, also cannot approach settlement commission subsequently. “Related Person” for this purpose shall be defined by way of explanation.
-     Assets seized under section 132 or requisition under section 132A can be adjusted against the amount of tax liability on an application made before the settlement commission under section 245C(1). 
14.  Period of charging interest under section 234B increased
-     The period of charging interest will now commence from the beginning of the assessment year in case of re-assessments, assessments pursuant to search and orders passed by settlement commission.
15.  Faster disposal of pending cases
-    A single member bench of ITAT may dispose-off a case where the total income as computed by the assessing officer does not exceed `15 Lakhs instead of earlier limit of `5 Lakhs. [w.e.f 01-06-2015]
16.  Revisionary Powers of Commissioner widened
-     W.e.f 01-06-2015 a Commissioner can revise any order which is passed
·   without making inquiries or verification which should have been made;
·   allowing relief without inquiring into the claim;
·   without following the instructions by the board; and
· without considering the decisions of Jurisdictional High Court or Supreme Court which is prejudicial to the assessee.
17.  Measures to curb Black Money transactions
-     It is proposed to amend section 269SS and 269T to prohibit acceptance or repayment in excess of `20,000/- in cash in relation to transfer of an immovable property. [w.e.f. 01-06-2015].
-  Beneficiaries of foreign assets mandatorily required to file returns irrespective of the income. Stringent penalties and jail for Black Money holders and evaders for which provisions shall be brought in the current session of Parliament as also amendment of FEMA Act  to incorporate Black Money provisions. Foreign asset may get seized if undisclosed.
-     Benami Transactions (Prohibition) Bill to be introduced to tackle domestic black money in the form of benami property, especially in real estate
18. Government to incentivize credit or debit card transactions, and dis-incentivize cash transactions.
19.  PAN mandatory for any transaction for `1 lakh or more shall be brought in.
20.  Section 271 of the Act proposed to be amended for applicability of the penalty provisions even if tax under the provisions of section 115JB or 115JC is more. 
21.  Section 288 of the Act is proposed to be amended to provide that an auditor who is not eligible to be appointed as an auditor of the Company as per the provisions of section 141(3) of the Companies Act, 2013 shall not be eligible for carrying out any audit or furnishing of any report / certificate under any provisions of the Income Tax Act in respect of that Company.
22.  Wealth Tax Abolished
-     The levy of Wealth Tax abolished, instead surcharge as stated above has been increased by 2%. [w.e.f A.Y. 2016-17]
-     Information relating to assets which is currently required to be furnished in the wealth-tax return shall be captured in the income-tax return which is proposed to be modified.

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