VIMAL TANDON & CO.CHARTERED ACCOUNTANTS

BUDGET 2014-2015HIGHLIGHTS

DIRECT TAXES

Individual Basic exemption limit for men, women and HUF resident in India

increased by Rs. 50,000.

There is no change in the rate of income tax, surcharge , education and SHE cess. The rates for AY 2015-16 will remain the same as in AY 2014-15.

Surcharge: The amount of Income-Tax computed as above, shall be increased by surcharge @ 10% of such Income-Tax in the case, the person has taxable income exceeding Rs.1 Crore.

Cess: 3% cess on tax in all cases

Individual Rebate: The rebate under Section 87A inserted by Finance Act, 2013

being Rs. 2,000/- for individual resident assessee, whose Taxable Income does not exceed Rs. 5,00,000/- to continue.

Deduction u/s 80C – The limit of investments eligible for deduction under section 80C has been increased from Rs. 1,00,000/- to Rs. 1,50,000/-.

Investment cap in Public Provident Fund increased from Rs. 1,00,000/- to Rs. 1,50,000/-.

Income tax slabs for individual (Male/Female)/HUF taxpayers:

Income slab(AY 2014-15)

Income slab(AY 2015-16)

Rates of Income Tax

Upto Rs. 2,00,000 Upto Rs. 2,50,000 Nil

Rs. 2,00,001 to Rs. 5,00,000 Rs. 2,50,001 to Rs. 5,00,000 10%

Rs. 5,00,001 to Rs. 10,00,000

Rs. 5,00,001 to Rs. 10,00,000

20%

Above Rs. 10,00,000 Above Rs. 10,00,000 30%

Income tax slabs for senior citizens:

Age Group60-80yrs

Age Group80yrs and above

Rates of Income Tax

Upto Rs. 3,00,000 Upto Rs. 5,00,000 Nil

Rs. 3,00,001 to Rs. 5,00,000 10%

Rs. 5,00,001 to Rs. 10,00,000

Rs. 5,00,001 to Rs. 10,00,000

20%

Above Rs. 10,00,000 Above Rs. 10,00,000 30%

Capital Gains That the rollover relief under the section 54(1) where capital gains arises from

transfer of a residential house (long-term) and 54F(1) where capital gains arises from transfer of a long-term capital asset, not being a residential house, is available if the investment is made in only one residential house that is situated in India.

That the investment made by an assessee in the long-term specified asset u/s 54EC, out of capital gains arising from transfer of one or more original asset, during the financial year in which the original asset or assets are transferred and in the subsequent financial year does not exceed fifty lakh rupees.

Amendments effective from 10th July, 2014.

An unlisted security and a unit of a mutual fund (other than an equity oriented mutual fund) shall be a short-term capital asset if it is held for not more than thirty-six months.

The capital gains arising on transfer of mutual funds other than equity-oriented funds to be taxes at 20% instead of the current concessional rate of 10%. 

Domestic Companies The income tax rate for firms remains unchanged at 30%.

Education Cess : 2% Secondary and Higher Education Cess: 1%.

Expenditure on Corporate Social Responsibility (CSR) made, wherever applicable, being in the nature of application of income, not to be allowed as deduction.

Trading in shares by a company shall not be deemed as speculation business for the purpose of Section 73.

Domestic Companies Section 115-O of the Act provides that a domestic company shall be liable for payment

of additional tax at the rate of 15 percent on any amount declared, distributed or paid by way of dividends to its shareholders. Section 115-R of the Act similarly provides for levy of additional income-tax in respect of income distributed by the mutual funds to its investors at the rates provided.

To ensure that tax is levied on proper base, the amount of distributable income and the dividends which are actually received by the unit holder of mutual fund or shareholders of the domestic company need to be grossed up for the purpose of computing the additional tax.

Dividend Amount distributed Increase by Rs. 15 [i.e. (85*0.15)/ (1‐0.15)]

Rs. 85

Increased amount Rs.100DDT @ 15% of Rs. 100 Rs. 15Tax payable u/s 115‐O is  Rs.15

Dividend distributed to shareholders Rs.85

Foreign Companies The income tax rates remain unchanged at 40%

Surcharge: 2%.

Education Cess : 2% Secondary and Higher Education Cess: 1%

Firms

The income tax rate for firms remains unchanged at 30%.

Education Cess : 2% Secondary and Higher Education Cess: 1%.

Limited Liability Partnership

The income tax rate for firms remains unchanged at 30%.

Education Cess : 2% Secondary and Higher Education Cess: 1%.

Trusts Explanation added to Section 10(23C) to clarify that a university or other educational

institution, hospital or other institution shall be considered as being substantially financed by the Government if the Government grant to a university or other educational institution, hospital or other institution during the relevant previous year exceeds a percentage (to be prescribed) of the total receipts (including any voluntary contributions), of such university or other educational institution, hospital or other institution.

Where a trust or an institution has been granted registration for purposes of availing exemption under section 11, and the registration is in force for a previous year, then such trust or institution cannot claim any exemption under any provision of section 10 [other than that relating to exemption of agricultural income and income exempt under section 10(23C)]. Similarly, entities which have been approved or notified for claiming benefit of exemption under section 10(23C) would not be entitled to claim any benefit of exemption under other provisions of section 10 (except the exemption in respect of agricultural income).

Income for the purposes of application shall be determined without any deduction or allowance by way of depreciation or otherwise in respect of any asset, acquisition of which has been claimed as an application of income under these sections in the same or any other previous year.

Trusts In case where a trust or institution has been granted registration under section 12AA

of the Act, the benefit of sections 11 and 12 shall be available in respect of any income derived from property held under trust in any assessment proceeding for an earlier assessment year which is pending before the Assessing Officer as on the date of such registration, if the objects and activities of such trust or institution in the relevant earlier assessment year are the same as those on the basis of which such registration has been granted.

No action for reopening of an assessment under section 147 shall be taken by the Assessing Officer in the case of such trust or institution for any assessment year preceding the first assessment year for which the registration applies, merely for the reason that such trust or institution has not obtained the registration under section 12AA for the said assessment year.

However, the above benefits would not be available in case of any trust or institution which at any time had applied for registration and the same was refused under section 12AA or a registration once granted was cancelled.

Alternate Minimum Tax The existing provisions of section 115JC of the Act provide that where the regular

income tax payable by a person, other than a company, for a previous year is less than the alternate minimum tax for such previous year, the person would be required to pay income tax at the rate of eighteen and one half per cent on its adjusted total income. The section further provides that the total income shall be increased by deductions claimed under Part C of Chapter VI-A and deductions claimed under section 10AA to arrive at adjusted total income.

Under the Act, the investment linked deductions have been provided in place of profit linked deductions. These profit linked deductions are subject to alternate minimum tax (AMT). Accordingly, with a view to include the investment linked deduction claimed under section 35AD in computing adjusted total income for the purpose of calculating alternate minimum tax, it is proposed to amend the section so as to provide that total income shall be increased by the deduction claimed under section 35AD for purpose of computation of adjusted total income. The amount of depreciation allowable under section 32 shall, however, be reduced in computing the adjusted total income.

These amendments will take effect from 1st April, 2015 and will, accordingly, apply in relation to the assessment year 2015-16 and subsequent assessment years.

Deductions and Exemptions Deduction u/s 80C - The limit of investments eligible for deduction under section 80C has been

increased from Rs. 1,00,000/- to Rs. 1,50,000/-.

Investment cap in Public Provident Fund increased from Rs. 1,00,000/- to Rs. 1,50,000/-.

Deduction limit on account of interest on loan u/s 24(b) in respect of self occupied house property raised from Rs. 1.5 lakh to Rs. 2 lakh.

Investment allowance at the rate of 15 percent to a manufacturing company that invests more than Rs. 25 crore in any year in new plant and machinery. The benefit to be available for three years i.e. for investments upto 31.03.2017.

Investment linked deduction extended to two new sectors, namely, slurry pipelines for the transportation of iron ore, and semi-conductor wafer fabrication manufacturing units.

10 year tax holiday extended to the undertakings which begin generation, distribution and transmission of power by 31.03.2017.

In case of non deduction of tax on payments, 30% of such payments will be

disallowed instead of 100 percent.

The concessional rate of TDS u/s 194LC on interest paid on borrowing in foreign

currency extended from 30.06/2015 to 30.06.2017. Tax incentive extended to all

types of bonds instead of only infrastructure bonds.

Tax Deduction at Source/ Tax Collection at Source

Income arising to foreign portfolio investors from transaction in securities to be treated as capital gains.

Concessional rate of 15 percent on foreign dividends without any sunset date to be continued.

Any sum of money, received as an advance or otherwise in the course of negotiations for transfer of a capital asset to be taxed under the head Income from Other Sources if such sum is forfeiter or the negotiations do not result in transfer of such capital asset.

Eligible transaction in respect of trading in commodity derivatives carried out in a recognised association and chargeable to commodities transaction tax under Chapter VII of the Finance Act, 2013 shall not be considered to be a speculative transaction.

General

INDIRECT TAXES SERVICE TAX

Service tax rate retained at 12%.

Amendment in existing services:

Service tax leviable currently on sale of space or time for advertisements in broadcast media, namely radio or television, has been extended to cover such sales on other segments like online and mobile advertising. Sale of space for advertisements in print media, however, would remain excluded from service tax. Print media is being defined in service tax law for the purpose. This change will come into effect from a date to be notified later, after the Finance (No.2) Bill, 2014 receives the assent of the President.

New Services Taxed:

Service tax is proposed to be levied on services provided by radio taxis or radio cabs, whether or not air-conditioned [section 66D (o)(vi)]. The abatement presently available to rent-a-cab service would also be made available to radio taxi service, to bring them on par. This change will come into effect from a date to be notified later, after the Finance (No.2) Bill, 2014 receives the assent of the President.

Changes to Mega Exemption – Notification No. 25/2012-ST:-

Exemption extended to clinical research on human participants is being withdrawn.

Exemption extended to air-conditioned contract carriages like buses is being withdrawn.

Exemption in respect of services provided to Government or local authority or governmental authority, will be limited to services by way of water supply, public health, sanitation conservancy, solid waste management or slum improvement and upgradation.

Services by RBI, from outside India, in relation to management of foreign exchange reserves has been exempted.

Tour operator services to a foreign tourist exempt, if the same is provided in relation to the tour conducted wholly outside India.

Changes to Mega Exemption – Notification No. 25/2012-ST:-

Exemption extended so far in respect of renting of immovable property service received by educational institutions, stands withdrawn.

Service tax exempted on loading, unloading, storage, warehousing and transportation of cotton, whether ginned or baled.

Goods transport services for transport of organic manure by vessel, rail or road.

Service provided by life insurance business under all life micro-insurance schemes approved by the Insurance Regulatory Development Authority, where sum assured does not exceed INR Insurance Regulatory Development Authority, where sum assured does not exceed Rs. 50,000/-

Service provided by Employees‟ State Insurance Corporation (ESIC) during the period prior to 1.7.2012 is proposed to be exempted from service tax.

Changes to Mega Exemption – Notification No. 25/2012-ST:-

All services by hotel, inn, guest house, club, campsite for lodging or residential purposes exempt , wherein the tarriff value is less than Rs. 1000 per day. Earlier, it was linked with renting only.

Any other commercial place, rented out, providing service by way of accommodation, including dharmashalas or ashram or such other entities brought within the ambit of service tax. To remove any ambiguity, the word “commercial” is being omitted. Renting of vacant land or buildings for hotels would continue to be taxable irrespective of the hotel’s declared tariff.

Interest on Late Payment

Extent Of Delay Simple interest rate per annum

Up to six months 18%

More than six months & up to one year

18% for first six months, and 24% for the period of delay beyond six months

More than one year 18% for first six months, 24% for second six months, and 30% for the period of delay beyond one year

Interest on Late PaymentSmall Scale sector

(Assessee whose taxable turnover doesn’t exceed Rs. 60 Lacs)

Extent Of Delay Simple interest rate per annum

Up to six months 15%

More than six months & up to one year

15% for first six months, and 21% for the period of delay beyond six months

More than one year 15% for first six months, 21% for second six months, and 27% for the period of delay beyond one year

E-payment of service tax is being made mandatory with

effect from the 1st Oct 2014.

Relaxation from e-payment may be allowed by the Deputy

Commissioner/Asst. Commissioner on case to case

basis [Notification 09/2014-ST].

E-Payment

Service provided by a Director of Company or body corporate to the said

company to be brought under the reverse charge mechanism; service

receiver, who is a body corporate will be the person liable to pay service tax.

Services provided by Recovery Agents to Banks, Financial Institutions and

NBFC to be brought under the reverse charge mechanism; service receiver

will be the person liable reverse charge mechanism; service receiver will be

the person liable to pay service tax. [Notification 9/2014 -ST and 10/2014-

ST]

Changes to Service Tax Rules

Changes to take effect from 1st October, 2014.

Provision for prescribing conditions for determination of place of provision of repair service carried out on temporarily imported goods is being omitted. The second proviso to rule 4(a) is being amended to prescribe that it would suffice for the purpose of exclusion of repair service from applicability of rule 4(a) that the goods imported for repair are exported after repair without being put to any use other than that which is required for such repair. It may please be noted that this exclusion does not apply to goods that arrive in the taxable territory in the usual course of business and are subject to repair while such goods remain in the taxable territory, e.g., any repair provided in the taxable territory to containers arriving in India in the course of international trade in goods will be governed by rule 4.

Changes to Place of Provision of Services Rules

The term intermediary will include a person who arranges or facilitates supply of goods or services such as commission agent or consignment agent and hence the place of provision of the same would be the place of the service provider and shall be covered under rule 9(c ) POP.

The place of provision for services of hiring of aircraft and vessels (other than yachts) up to a period of one month would be based on location of recipient (currently, the same is based on location of service provider).

Changes to Place of Provision of Services Rules

The first Proviso to rule 7 of the Point of Taxation Rules (POTR) is being amended to provide that point of taxation in respect of reverse charge will be the payment date or the first day that occurs immediately after a period of three months from the date of invoice, whichever is earlier. This amendment will apply only to invoices issued after 1st October 2014. A transition rule is being prescribed (new rule 10 of POTR).

Applicable From 01.10.2014

Changes to Point of Taxation Rules

A manufacturer or a service provider shall take credit on inputs and input services within a period of six months from the date of issue of invoice, bill or challan w.e.f. 1st September,2014 [ newly inserted proviso to rule 4 (1) and fifth proviso to rule 4(7) refer]

Under reverse charge mechanism (except in case of partial reverse charge) Cenvat Credit can be availed on payment of service tax. The condition to pay invoice value to the service provider has been dispensed with effective from 11 July 2014.

Cenvat credit reversed on account of non-receipt of export proceeds can be taken again, if export proceeds are received within one year from the specified period.

Changes to CENVAT Credit Rules

Under goods transport agency service, the condition for non-availment of Cenvat Credit is required to be satisfied only by the service provider and not by the service recipient.

Under rent-a-cab operator and tour operator services, Cenvat Credit would be available in respect of service tax paid by sub-contractor in the same line of business. (01.10.2014)

Transfer of credit by large taxpayer from one unit to another no longer permitted (effective from 11 July 2014)

Taxable portion in respect of transport of goods by vessel is being reduced from 50% to 40%. Effective service tax will decrease from the present 6.18% to 4.944%, with effect from 1st October, 2014.

Changes to CENVAT Credit Rules

In renting of motor vehicle, where the service provider does not take abatement the portion of service tax payable by the service provider and service receiver will be modified as 50% each. This change will come into effect from 1st of October 2014.

In Rule 2A of the Service Tax (Determination of Value) Rules, 2006, category “B” and “C” of works contracts are proposed to be merged into one single category, with percentage of service portion as 70%; this change will come into effect from 1st October, 2014. This rationalization by way of merger of categories has been made to avoid disputes of classification between these two categories.

Simplification of Partial Reverse Charge mechanism

Operational Amendments:

The resident private limited company is being included as a class of persons eligible to make an application for Advance Ruling in service tax.

As regards services covered under reverse charge, the requirement of furnishing service tax registration number of service provider shall be dispensed with.

A service shall be treated as exclusively used for SEZ operations if the recipient of service is a SEZ unit or developer, invoice is in the name of such unit/developer and the service is used exclusively for furtherance of authorized operations in the SEZ.

Operational Amendments:

Mandatory Pre- deposit Appeal with CCE(A) or CESTAT(First stage)------- 7.5% of tax or penalty or both; Appeal with CESTAT(Second stage)------------------10 % of tax or penalty or both It is pertinent to note that maximum amount of pre-deposit shall be Rs. 10 crores.

Rate of exchange notified by CBEC shall not be required anymore. Separate rules shall be framed to serve the purpose

BUDGET HIGHLIGHTS PRESENTATION BY :-

M/s Vimal Tandon & Co.Chartered AccountantsA-107/1, Pal Mohan Plaza, 11/56,D.B. Gupta Road, Karol Bagh,New Delhi - 110005 Telefax – 23551056Tel. 45032501Mob. 9810221653, 9868171653website - vimaltandon.com

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