Monday, March 2, 2015

HIGHLIGHTS – DIRECT TAX PROPOSALS OF UNION BUDGET 2015-16


Tax Rates 

  1. No change in the basic exemption limit and the tax rates of individuals 
  2. Corporate tax rates proposed to be reduced from 30% to 25% over the next four years, starting from next financial year. 
  3. The existing rate of tax on Income by way of Royalty and Fees for technical services in case of nonresidents @25% proposed to be reduced to 10%. 
  4. Additional surcharge @ 2% being levied on income exceeding Rs. 1 crore. This surcharge would be levied in place of Wealth-tax which is proposed to be abolished. 

Deductions from Gross Total Income 

  1. Exempt-Exempt-Exempt (EEE) tax benefit proposed for assessee having a girl child and investing under the Sukanya Samriddhi Account Scheme. The investments made in the Scheme will be eligible for deduction under section 80C of the Act, the interest accruing on deposits in such account will be exempt from income tax and the withdrawal from the said scheme in accordance with the rules of the said scheme will be exempt from tax.  
  2. In view of continuous rise in the cost of medical expenditure, section 80D is proposed to be amended to raise the limit of deduction from Rs. 15,000 to Rs. 25,000. Further, the limit of deduction for senior citizens is also proposed to be increased from Rs. 20,000 to Rs. 30,000.  As a welfare measure towards very senior citizens, a deduction under section 80D is proposed for any payment made on account of medical expenditure in respect of a very senior citizen, subject to a limit Rs. 30,000. 
  3. The limit for deduction under section 80DDB is proposed to be increased to Rs. 80,000 in respect of amount paid for medical treatment of very senior citizen. 
  4. Section 80DD and section 80U is proposed to be amended to increase the limit from Rs. 50,000 to Rs. 75,000 and from Rs. 1 lakh to Rs. 1.25 lakh, as the case may be.
  5. In order to promote social security, deduction section 80CCC(1) which provides for deduction of amount paid or deposited to effect or keep in force a contract for any annuity plan of LIC or any other insurer for receiving pension from a fund set up under a pension scheme is proposed to be amended to raise the limit of deduction from Rs. 1 lakh to Rs. 1.5 lakh, within the overall limit provided in section 80CCE. 
  6. Section 80G is proposed to be amended to provide for 100% deduction in respect of donations made to the National Fund for Control of Drug Abuse. 
  7. With a view to encourage and enhance people’s participation in the national effort to improve sanitation facilities and rejuvenation of river Ganga, section 80G is proposed to be amended so as to provide 100% deduction for donations made by any donor to the Swachh Bharat Kosh and to Clean Ganga Fund. 

Measures to curb black money 

  1. In order to curb generation of black money by way of dealings in cash in immovable property transactions, section 269SS is proposed to be amended 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 specified sum is twenty thousand rupees or more. 
  2. Similarly, section 269T also is proposed to be amended so as to provide that no person shall repay any loan or deposit made with it or any specified advance received by it in relation to transfer of an immovable property whether or not the transfer takes place, 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 twenty thousand rupees or more. 

General Anti Avoidance Rule (GAAR) 

 The implementation of General Anti Avoidance Rule (GAAR) is proposed to be deferred by two years. Accordingly, it would be applicable for the financial year 2017-18 (A.Y. 2018-19) and subsequent years. Further, it is also proposed that the investments made upto 31.03.2017 shall not be subject to GAAR.

Additional Investment Allowance and provisions in respect of additional depreciation 

  1.  A new section 32AD is proposed to be inserted 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— 
    • (a) he sets up an undertaking or enterprise for manufacture or production of any article or thing on or after 1st April, 2015 in any notified backward areas in the State of Andhra Pradesh and the State of Telangana; and 
    • (b) the new assets are acquired and installed for the purposes of the said undertaking or enterprise during the period beginning from the 1st April, 2015 to 31st March, 2020. This deduction shall be available over and above the existing deduction available under section 32AC of the Act. 
  2. Further, in order to incentivise acquisition and installation of plant and machinery for setting up of manufacturing units in the notified backward area in the State of Andhra Pradesh or the State of Telangana, it is proposed to allow higher additional depreciation at the rate of 35% (instead of 20%) in respect of the actual cost of new 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 on or after the 1st day of April, 2015. 
  3. To remove the discrimination in the matter of allowing additional depreciation under section 32(1)(iia) on plant or machinery used for less than 180 days and used for 180 days or more, it is proposed to provide that the 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, shall be allowed in the immediately succeeding previous year. 

Definition of charitable purpose 

  1. The definition for charitable purpose provided under section 2(15) is proposed to be amended to include the activity of Yoga as a special category of activity to be considered as charitable purpose on the lines of education. 
  2. The definition is proposed to be further amended 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,- 
    • (i) such activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility; and 
    • (ii) the 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 . 

Cost of acquisition in the hands of resulting company 

  • There is no express provision under the Income-tax Act, with regard to value to be considered as cost of acquisition of a capital asset in the hands of resulting company on transfer of capital assets acquired on demerger. Accordingly, section 49 is proposed to be amended to provide that 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. 

Direct Taxes Code 

  • Since the jurisprudence under the Income-tax Act is well evolved and a large number of provisions of the proposed DTC have already been included in the Income-tax Act, 1961 and the remaining are proposed to be included through the Finance Bill, 2015, the Government has expressed its resolve of not going ahead with the DTC.

Service tax Changes applicable From 01.03.2015


Changes in Service Tax Rules, 1994 Vide Notification No. 5/2015-ST dated 01-03-2015 (Effective From 01-03-2015 Unless Otherwise Stated):-

Under Rule 2 of the Service Tax Rules, 1994:

  • · 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 pay 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 a representative, in such a case any agent appointed by the aggregator shall pay the tax on behalf of the aggregator. In this regard appropriate amendments under the Notification No. 30/2012-ST dated 20.6.2012 This change comes into effect immediately i.e., w.e.f. 1st March, 2015. Further, definition of the terms ‘aggregator’ and ‘brand name or trade name’ has been specifically defined in Rule 2 of the Service Tax Rules, 1994;
  • · The term ‘support’ has been omitted from the Clause (E) providing for liability of service receiver to pay Service tax under Reverse Charge in relation to support services provided or agreed to be provided by Government or Local authority;
  • · Services provided by mutual fund agents, mutual fund distributors to a mutual fund or asset management company and agents of lottery tickets to a lottery distributor or selling agent has also been included in Rule 2(1)(d) making mutual fund/ asset management company and lottery distributor/ selling agent liable for payment of Service tax under Reverse Charge vide the Notification No. 30/2012-ST dated 20.6.2012.
Under Rule 4 of the Service Tax Rules, 1994:

· Rule 4 Service Tax Rules, 1994 has been amended to provide that the CBEC shall, by way of an order, specify the conditions, safeguards and procedure for registration in service tax.

In this regard Order No. 1/15-ST dated February 28, 2015, effective from March 1, 2015 has been issued, prescribing documentation, time limits and procedure for registration for single premises. It has also been prescribed that henceforth registration for single premises shall be granted within 2 days of filing of application;

New Rule 4C has been inserted after Rule 4B of the Service Tax Rules, 1994 – Corresponding changes made in Rule 5 thereof:

· Provision for issuing digitally signed invoices, bill or challan has been added along with the option of maintaining of records in electronic form and their authentication by means of digital signatures.

It is further provided that the conditions and procedure in this regard shall be specified by the CBEC.

Under Rule 6 of the Service Tax Rules, 1994:

  1. Rule 6(6A) of the Service Tax Rules has been omitted which provided for recovery of Service tax self-assessed and declared in the return in the manner prescribed under Section 87 of the Finance Act, 1994.
  2. The same has been done consequent to the amendment brought in Section 73 of the Finance Act, 1994 enabling such recovery. This change will come into effect from the date of enactment of the Finance Bill, 2015.
  3. Consequent to the upward revision in Service tax rate, the composition rate is proposed to be revised proportionately under Rule 6(7), 6(7A), 6(7B) and 6(7C) of the Service Tax Rules, 1994 on specified services, namely, 
  • - Air Travel Agent: From “0.6%” and “1.2 %”, to “0.7 per cent.” and “1.4 per cent of Basic fares in the case of domestic bookings and international bookings respectively.
  • - Life insurance service: From “3%” and “1.5%”, to “3.5%” of the premium charged from policy holder in the first year and “1.75% in the subsequent year”.
  • - Money changing service provided by banks or authorized dealers: and 
  • - Service provided by lottery distributor and selling agent
The stated amendments shall come into effect as and when the revised Service tax rate comes into effect.



Bimal Jain

FCA, FCS, LLB, B.Com (Hons.)

E-mail:info@a2ztaxcorp.com

Web: www.a2ztaxcorp.com

Employees Under the Employees Provident Fund(EPF) to be Provided two Options


The Union Finance Minister Shri Arun Jaitley has announced that with respect to Employees Provident Fund (EPF), the employee needs to be provided two options. 

Firstly, the employee may opt for EPF or the New Pension Scheme (NPS). 

Secondly, for employees below a certain threshold of monthly income, contribution to EPF should be optional, without affecting or reducing the employer’s contribution. 

He said, with respect to ESI, the employee should have the option of choosing either ESI or a Health Insurance product, recognized by the Insurance Regulatory Development Authority (IRDA).

The Finance Minister announced that he intends to bring amending legislation in this regard, after stakeholders’ consultation.

CHANGES IN SERVICE TAX ACT THROUGH FINANCE ACT :BUDGET 2015




Budget Analysis by CA Swapnil Munot

Cell : +91 90212 65137

Mail : munotswapnil@gmail.com




CHANGES MADE IN SERVICE TAX RULES WITH EFFECTIVE DATE BUDGET 2015



Budget Analysis by CA Swapnil Munot

Cell : +91 90212 65137


Mail : munotswapnil@gmail.com

Changes under Service Tax in Budget 2015 detailed Analysis Clause by Clause By CA Bimal Jain & Team


A. Hike in Service tax rates (From date to be notified):

  • · Service tax rate has been increased from 12.36% (including Education Cess and Secondary and Higher Education Cess) to flat 14%. The ‘Education Cess’ and ‘Secondary and Higher Education Cess’ shall be subsumed in the new Service tax rate. The revised rate shall come into effect from a date to be notified.
  • · An enabling provision is being made to empower the Central Government to impose a Swachh Bharat Cess on all or certain taxable services at a rate of 2% on the value of such taxable services. The proceeds from this Cess would be utilized for Swachh Bharat initiatives. This Cess will be effective only from a date to be notified;

CHANGES IN EXCISE & CUSTOM RATES /ACT BUDGET -2015 CLAUSE BY CLAUSE BY CA BIMAL JAIN


UNION BUDGET 2015: CHANGES IN EXCISE AND CUSTOMS:

Changes in the Customs and the Central Excise law and rates of duty have been proposed through the Finance Bill, 2015 (Clauses 80 to 89, 163, 164 for Customs and Clauses 90 to 104, 163, 164, 184 and 188 for Central Excise). In order to prescribe effective rates of duty and to carry out changes in the Rules made under the respective Acts, the following notifications are being issued:

CHANGES MADE IN REVERSE CHARGE MECHANISM IN BUDGET 2015


Budget Analysis by CA Swapnil Munot  Cell : +91 90212 65137
Mail : munotswapnil@gmail.com

CHANGES MADE IN REVERSE CHARGE MECHANISM
(Changes made to Notification No 30/2012 ST vide Notification No 7/2015 ST Dated 1.3.15 )

Sr. No.
Type of Service
Type of Amendment
Liability of Service Provider
Liability of Service Receiver
Applicable from
1
Services provided by a mutual fund agent/distributor, to a mutual fund or asset management company
New Entry under RCM
Nil
100%
1st April 2015
2
Service provided by a selling/marketing agent of lottery tickets to a lottery distributor or selling agent
New Entry under RCM
Nil
100%
1st April 2015
3
Services provided by a person involving an aggregator in any manner
New Entry under RCM
Nil
100%
1st March 2015
4
Service provided by way of supply of manpower for any purpose or security services
Amendment in Percentage
Nil
100%
1st April 2015


CHANGES MADE IN SERVICE TAX ABATEMENT PROVISIONS:


CHANGES MADE IN ABATEMENT PROVISIONS:

(Changes made to Notification No 26/2012 ST by Notification No 8/2015 ST Dated 1.3.15 ) - Applicable from 1st april 2015

In Nutshell, 3 changes are made in abatement provisions. Details of the same are given under below table:

I.  Abatement percentage and Condition is rationalised and made made uniform, in case of transport of (a) goods by rail/Vessal/GTA (b) Passenger by rail

II. Abatement to Chit fund is omitted. Hence now service tax is payable on full value

III.  Service Tax on Air Travel by Business Class is increased


Budget Analysis by CA Swapnil Munot Cell : +91 90212 65137
Mail : munotswapnil@gmail.com

CHANGES MADE IN EXEMPTED LIST OF SERVICES IN BUDGET 2015


CHANGES MADE IN EXEMPTED LIST OF SERVICES IS AS UNDER:

(Amendment to Mega Exemption Notification 25/2012 ST is made vide Notification No 6/2015 ST dt 1stMarch 2015)




Budget Analysis by CA Swapnil Munot

Cell: +91 90212 65137

Mail: munotswapnil@gmail.com


Income Tax Rates-Calculator For Individuals from Fy 1985-86 to 2015-16



Finance Minister has changed the tax slab rates for Dy 2015-16 . However a New additional surcharge @ 2 has been imposed on individual/Huf having total income of more than  one crore.CMA Pravesh Sharma has compiled the rates from financial year 1985-86 to Financial year 2015-16 for us and made a small Income tax calculator for Last 30 years ,which we think is useful for our readers. Link to download the calculator is given at he end of the post.


Please report error if any to us or directly to CMA Pravesh Sharma.


Pravesh Kumar Sharma
M.Com, ACMA
B-204, Kanta Khaturiya Colony, Bikaner
9460100093