Sunday, March 1, 2015

Additional deduction of 80CCD for Contribution in New Pension Scheme (NPS) plus 80CCC Limit Increased


Under the existing provisions contained in sub-section (1) of section 80CCD of the Income-tax Act, 1961 if an individual, employed by the Central Government on or after 1st January, 2004, or being an individual employed by any other employer, or any other assessee being an individual has paid or deposited any amount in a previous year in his account under a notified pension scheme, a deduction of such amount not exceeding ten per cent. of his salary in the case of an employee and ten per cent. of the gross total income in case of any other individual is allowed. Similarly, the contribution made by the Central Government or any other employer to the said account of the individual under the pension scheme is also allowed as deduction under sub-section (2) of section 80CCD, to the extent it does not exceed ten per cent. of the salary of the individual in the previous year.

Sub-section (1A) of section 80CCD provides that the amount of deduction under sub-section (1) shall not exceed one hundred thousand rupees. Till date, under section 80CCD, only the National Pension System (NPS) has been notified by the Ministry of Finance.

With a view to encourage people to contribute towards NPS, it is proposed to omit sub-section (1A). In addition to the enhancement of the limit under section 80CCD(1), it is further proposed to insert a new sub-section (1B) so as to provide for an additional deduction in respect of any amount paid, of upto fifty thousand rupees for contributions made by any individual assessees under the NPS.

Consequential amendments are also proposed in sub-section (3) and sub-section (4) of section 80CCD. 

These amendments will take effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent assessment years.

Please Note that this is additional deduction of  50000/- Rs to Individual in addition to 1,50,000 Limit allowed in 80CCE popularly known as 80C Limit.

Raising the limit of deduction under 80CCC

Under the existing provisions contained in sub-section (1) of the section 80CCC, an assessee, being an individual is allowed a deduction upto one lakh rupees in the computation of his total income, of an 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.

In order to promote social security, it is proposed to amend sub-section (1) of the said section so as to raise the limit of deduction under section 80CCC from one lakh rupees to one hundred and fifty thousand rupees, within the overall limit provided in section 80CCE.

This amendment will take effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent assessment years.

Summary of these Two section after amendment is given as under 

Section
Particular
Old Limit
New Limit
Covered in 80CCE overall Limit of 1.5 Lakh
80CCC
Contribution to Pension policy
100000
150000
Yes
80CCD(1)
Self Investment in Pension scheme
100000
150000
Yes
80CCD(IB)
Self Investment in Pension scheme
0
50000
No (additional Limit)
80CCD(2)
Employer Contribution in NPS
Without any monetary limit
No (additional Limit)

Saturday, February 28, 2015

Service Tax changes Summary Budget 2015


The Finance Bill, 2015 presented by the Finance Minister, Mr. Arun Jaitely on 28th February, 2015 has brought with it a whole new set of changes in the indirect taxes. The basic purview taken by the government behind rationalising the transformations is to bring the current taxing provisions in line with the proposed plan of Goods and Service Tax. The Finance Minister while addressing the august gathering highlighted that the backdrop idea of adverting the taxing aspects is not only the GST but the rising concern towards the environment.

Further, the penal proceedings have been made hoarse to minimise the tax evasion by the service providers. Below is gist of proposed and fallout amendments in the Service Tax:

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


The Finance (No.2) Act, 2014, inserted section 194DA in the Act with effect from 1.10.2014 to provide 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. 

In spite of providing high threshold for deduction of tax under this section, there may be cases where the tax payable on recipient’s total income, including the payment made under life insurance, will be nil. The existing provisions of section 197A of the Act inter alia 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, therefore, proposed to amend the provisions of section 197A for making the recipients of payments referred to in section 194DA also eligible for filing self-declaration in Form No.15G/15H for non-deduction of tax at source in accordance with the provisions of section 197A.

This amendment will take effect from 1st June, 2015.

Changes in Service Tax Budget 2015


Subject: Union Budget 2015 - Changes in Service Tax - reg. 
The Finance Minister has, while presenting the Union Budget 2015-16, introduced the Finance Bill in the Lok Sabha on the 28th of February, 2015. Clauses 105 to 116 of the Bill cover the amendments made to Chapter V of the Finance Act, 1994. Chapter VI of the Bill (clause 117) contains the enabling provisions relating to levy Swachh Bharat Cess, which empowers the government to impose Cess on all or any of the taxable services at the rate of 2% of the value of taxable services. Changes are also proposed in,- 

• the Service Tax Rules, 1994 (STR); 
• the CENVAT Credit Rules, 2004(Cenvat Rules); 

Other changes are being given effect to by inserting new entries, and amending/omitting existing entries in notification Nos. 25/2012-ST, 26/2012-ST, 30/2012-ST and 31/2012-ST. Further, notification No. 42/2012-ST is being rescinded. 

Raising the limit of deduction under section 80DD and 80U for persons with disability and severe disability


The existing provisions of section 80DD, inter alia, provide for a deduction to an individual or HUF, who is a resident in India, who has incurred— 

(a) Expenditure for the medical treatment (including nursing), training and rehabilitation of a dependant, being a person with disability as defined under the said section; or 

(b) paid any amount to LIC or any other insurer in respect of a scheme for the maintenance of a disabled dependant. 

The section presently provides for a deduction of fifty thousand rupees if the dependant is suffering from disability and one lakh rupees if the dependant is suffering from severe disability (as defined under the said section). 

The existing provisions of section 80U, inter alia, provide for a deduction to an individual, being a resident, who, at any time during the previous year, is certified by the medical authority to be a person with disability (as defined under the said section). 

The said section provides for a deduction of fifty thousand rupees if the person is suffering from disability and one lakh rupees if the person is suffering from severe disability (as defined under the said section). 

The limits under section 80DD and section 80U in respect of a person with disability were fixed at fifty thousand rupees by Finance Act, 2003. Further, the limit under section 80DD and section 80U in respect of a person with severe disability was last enhanced from seventy five thousand rupees to one lakh rupees by Finance (No.2) Act, 2009. 

In view of the rising cost of medical care and special needs of a disabled person, it is proposed to amend section 80DD and section 80U so as to raise the limit of deduction in respect of a person with disability from fifty thousand rupees to seventy five thousand rupees. 

It is further proposed to amend the section so as to raise the limit of deduction in respect of a person with severe disability from one lakh rupees to one hundred and twenty five thousand rupees. 

These amendments will take effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent assessment years.

Rationalisation of definition of charitable purpose in the Income-tax Act


The primary condition for grant of exemption to a trust or institution under section 11 of the Act is that the income derived from property held under trust should be applied for charitable purposes in India. ‘Charitable purpose’ is defined in section 2(15) of the Act. The section, inter alia, provides that 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. However, this restriction shall not apply if the aggregate value of the receipts from the activities referred above is twenty five lakh rupees or less in the previous year.

The institutions which, as part of genuine charitable activities, undertake activities like publishing books or holding program on yoga or other programs as part of actual carrying out of the objects which are of charitable nature are being put to hardship due to first and second proviso to section 2(15).

The activity of Yoga has been one of the focus areas in the present times and international recognition has also been granted to it by the United Nations. Therefore, it is proposed to include 'yoga' as a specific category in the definition of charitable purpose on the lines of education.

In so far as the advancement of any other object of general public utility is concerned, there is a need is to ensure appropriate balance being drawn between the object of preventing business activity in the garb of charity and at the same time protecting the activities undertaken by the genuine organization as part of actual carrying out of the primary purpose of the trust or institution.

It is, therefore, 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,-
  • (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 twenty percent. of the total receipts, of the trust or institution undertaking such activity or activities, for the previous year .

These amendments will take effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent assessment years.

Raising the threshold for specified domestic transaction


The existing provisions of section 92BA of the Act define “specified domestic transaction” in case of an assessee to mean any of the specified transactions, not being an international transaction, where the aggregate of such transactions entered into by the assessee in the previous year exceeds a sum of five crore rupees.

In order to address the issue of compliance cost in case of small businesses on account of low threshold of five crores rupees, it is proposed to amend section 92BA to provide that the aggregate of specified transactions entered into by the assessee in the previous year should exceed a sum of twenty crore rupees for such transaction to be treated as ‘specified domestic transaction’.

This amendment will take effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent assessment years.

Changes In Excise Duty rates :Budget 2015


EXCISE 

Basic Excise duty rate has been changes from 12% to 12.50 % .However Education cess and Secondary & Higher Education Cess has been removed .

Unless otherwise stated, all changes in rates of duty take effect from the midnight of  28th February / 1st  March, 2015.

The remaining legislative changes would come into effect only upon the enactment of the Finance Bill, 2015. Retrospective amendment in the notification issued under the Central Excise Act shall have the force of law only upon the enactment of the Finance Bill, 2015 but with effect from the date indicated in the relevant clause or Schedule. These dates may be carefully noted.

1) Education Cess levied on all excisable goods as a duty of excise under section 91 read with section 93 of the Finance Act, 2004 is being fully exempted. In this regard, notification No.14/2015-Central Excise dated 1st March, 2015 refers. Similarly, Secondary & Higher Education Cess leviable on excisable goods as a duty of excise under section 136 read with  138 of the Finance Act, 2007 is also being fully exempted. In this regard, notification   No.15/2015-Central Excise dated 1st March, 2015 refers. 

2) Simultaneously, the standard ad valorem rate of duty of excise (i.e. CENVAT) is being increased from 12% to 12.5%. Specific rates of Basic Excise Duty on petrol, diesel, cement, cigarettes & other tobacco products (other than biris) are also being suitably changed. In this regard, the First Schedule to the Central Excise Tariff Act, 1985 as amended by Clause 104 of the Finance Bill, 2015 refers. These changes will come into force with immediate effect owing to a declaration under the Provisional Collection of Taxes Act, 1931. Also, see S.Nos.42, 43, 45, 50, 51, 52, 53, 90, 107, 205A, 244, 273, 278, 279, 281, 285, 286, 287, 288  and 289 of notification No.12/2012-Central Excise, dated 17th March, 2012 as amended by notification No.12/2015-Central Excise dated 1st March, 2015 refers. 


3) Other Basic Excise Duty rates (ad valorem as well as specific) with a few exceptions are not being changed. 

4) Notifications No.13/2012-Customs and No.14/2012-Customs both dated 17th March, 2012 exempt Education Cess and Secondary & Higher Education Cess leviable as CVD on imported goods. Since Education Cess and Secondary & Higher Education Cess leviable on excisable goods are being exempted in general, there will be no corresponding levy as CVD on imported goods. Hence, these notifications are being rescinded. In this regard, notification 

No.9/2015-Customs dated 1st March, 2015 refers. 

5) S.No.1A and 1B of notification No.23/2003-Central Excise, dated 31.03.2003 exempt the Customs component of Education Cess and Secondary & Higher Education Cess. Since Education Cess and Secondary & Higher Education Cess leviable on excisable goods are being fully exempted, there will be no levy of these Cesses either on CVD while calculating the aggregate of the duties of customs or on excise duty leviable under the proviso to section 3 of the Central Excise Act, 1944. Therefore, the entries S.No.1A and 1B are being omitted. 

Also, the entries at S.No.5A, 6 and 7A are being amended so as to substitute the rate of 12%  with 12.5%. 

Notification No.16/2015-Central Excise dated 1st March, 2015 refers. 


6) Notifications No.28/2010-Central Excise and No.29/2010-Central Excise, both dated 22nd June, 2010 exempt the levy of Education Cess and Secondary & Higher Education Cess on the clean energy cess leviable on coal. Since Education Cess and Secondary & Higher Education Cess are being exempted on excisable goods in general, notifications No.28/2010- Central Excise and No.29/2010-Central Excise, both dated 22nd June, 2010 are being rescinded. 

Notification No.17/2015-Central Excise dated 1st March, 2015 refers. 

7) The rate of excise duty applicable to goods covered by the Medicinal and Toilet Preparations Act, 1955 is being increased from 12% to 12.5% ad valorem. In this regard, notification No.1/2015-M&TP dated 1st March, 2015 refers. 

8) There is no change in Education Cess leviable on imported goods under section 91 read with section 94 of the Finance Act, 2004 as a duty of customs and Secondary & Higher Education Cess leviable on imported goods under section 136 read with 139 of the Finance Act, 2007 as a duty of customs. These Cesses shall continue to be levied on imported goods.


BUDGET SPEECH Arun Jaitley Minister of Finance February 28, 2015


Budget 2015-2016 Speech of  Arun Jaitley Minister of Finance February 28, 2015

Madam Speaker, 

I rise to present the Budget of the Union for the year 2015-16. 

2. I present this Budget in an economic environment which is far more positive than in the recent past. When other economies are facing serious challenges, India is about to take-off on a faster growth trajectory once again. The International Monetary Fund (IMF) has downgraded its earlier forecast of global economic growth by 0.3%, and the World Trade Organization has revised its forecast of world trade growth from 5.3% to 4%. Forecasts for India, however, have either been upgraded, or remained the same, without downgrades. Madam Speaker, we have also embraced the States as equal partners in the process of economic growth. States have been economically empowered more than ever before and it is my belief that every rupee of public expenditure, whether undertaken by the Centre or the States, will contribute to the betterment of people’s lives through job creation, poverty elimination and economic growth.

3. In the last nine months, the NDA Government headed by Prime Minister Shri Narendra Modi, has undertaken several significant steps to energise the economy. The

Raising the limit of deduction under section 80DDB


Under the existing provisions of section 80DDB of the Act, an assessee, resident in India is allowed a deduction of a sum not exceeding forty thousand rupees, being the amount actually paid, for the medical treatment of certain chronic and protracted diseases such as Cancer, full blown AIDS, Thalassaemia, Haemophilia etc. This deduction is allowed up to sixty thousand rupees where the expenditure is in respect of a senior citizen i.e. a person who is of the age of sixty years or more at any time during the relevant previous year.


The above deduction is available to an individual for medical expenditure incurred on himself or a dependant relative. It is also available to a Hindu undivided family (HUF) for such expenditure incurred on its members. Dependant in case of an individual means the spouse, children, parents, brother or sister of an individual and in case of an HUF means a member of the HUF ,wholly or mainly dependant on such individual or HUF for his support and maintenance.


Under the existing provisions of this section, a certificate in the prescribed form, from a neurologist, an oncologist, a urologist, a haematologist, an immunologist or such other specialist working in a Government hospital is required. It has been represented that the requirement of a certificate from a doctor working in a Government hospital causes undue hardship to the persons intending to claim the aforesaid deduction .Government hospitals at many places do not have doctors specialising in the above branches of medicine. For this and other reasons, it may be difficult for the taxpayer to obtain a certificate from a Government hospital.


In view of the above, 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 this deduction.

Further, it is also proposed to amend section 80DDB to provide for a higher limit of deduction of upto eighty thousand rupees, for the expenditure incurred in respect of the medical treatment of a “very senior citizen”. 

A “very senior citizen” is proposed to be defined as an individual resident in India who is of the age of eighty years or more at any time during the relevant previous year.


These amendments will take effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent assessment years.

80D Limit Increased from 15000 to 25000-Budget 2015 Deduction given for medical exp. of very senior citizen


Amendment in section 80D relating to deduction in respect of health insurance premia

The existing provisions contained in section 80D, inter alia, provide for deduction of 

a) upto fifteen thousand rupees to an assessee, being an individual in respect of health insurance premia, paid by any mode, other than cash, to effect or to keep in force an insurance on the health of the assessee or his family or any contribution made to the Central Government Health Scheme or any other notified scheme or any payment made on account of preventive health check up of the assessee or his family; and

b) an additional deduction of fifteen thousand rupees is provided to an individual assessee to effect or to keep in force insurance on the health of the parent or parents of the assessee.

A similar deduction is also available to a Hindu undivided family (HUF) in respect of health insurance premia, paid by any mode, other than cash, to effect or to keep in force insurance on the health of any member of the HUF. The section also presently provides for a deduction of twenty thousand rupees in both the cases if the person insured is a senior citizen of sixty years of age or above.

The quantum of deduction allowed under Section 80D to individuals and HUF in respect of premium paid for health insurance had been fixed vide Finance Act, 2008 at Rs.15000/- and Rs.20,000/- (for senior citizens). In view of continuous rise in the cost of medical expenditure, it is proposed to amend section 80D so as to raise the limit of deduction from fifteen thousand rupees to twenty five thousand rupees. It is further proposed to raise the limit of deduction for senior citizens from twenty thousand rupees to thirty thousand rupees.

Further, very senior citizens are often unable to get health insurance coverage and are therefore unable to take tax benefit under section 80D. Accordingly, as a welfare measure towards very senior citizens ,it is also proposed to provide that any payment made on account of medical expenditure in respect of a very senior citizen, if no payment has been made to keep in force an insurance on the health of such person, as does not exceed thirty thousand rupees shall be allowed as deduction under section 80D. 

The aggregate deduction available to any individual in respect of health insurance premia and the medical expenditure incurred would however be limited to thirty thousand rupees. Similarly aggregate deduction for health insurance premia and medical expenditure incurred in respect of parents would be limited to thirty thousand rupees.

Example:

(i) For Individual and his family Rs.

                                                     Health insurance premia 21,000

(ii) For parents

                                                   Health insurance of Mother : 18,000

                 Medical expenditure on father (very senior citizen) 15,000

          Deduction eligible u/s 80D Rs. 21000 + Rs. 30000 = Rs. 51,000

It is also proposed to define a ‘very senior citizen’ to mean an individual resident in India who is of the age of eighty years 

or more at any time during the relevant previous year.

These amendments will take effect from the 1st April, 2016 and will, accordingly, apply in relation to the assessment year

2016-17 and subsequent assessment years.