Budget proposals and announcement
made by the Hon’ble Finance Minister while presenting the Union
Budget for the current fiscal
year and the corresponding amendments are segregated by Tax Research Unit (TRU)
under six broad categories:
A. Rates of Income-tax
B. Additional Resource Mobilisation
Measures
C. Measures to Promote Socio-economic
Growth
D. Relief and Welfare Measures
E. Widening of Tax Base and Anti Tax
Avoidance Measures
F. Rationalisation Measures
SECTION-A:
- SERVICE TAX
1.
Section
75 is propose to be amended to impose the interest at higher rate as follows:
Extent of Delay
|
Interest
Rate
|
Up to six months
|
18%
|
From six months and upto one year
|
24%
|
More than one year
|
30%
|
2.
Section
66D, Negative listed service, is propose to be amended as follows:
v
Clause
(g) is propose to amend to levy the service tax on online
and mobile advertising and so on, however print media is continue to be
excluded from service tax net.
v
Clause (o) is proposed to amend to levy the service tax on Radio
Cab.
3.
Following
new exemption has been provided in the Notification No. 25/2012:
v
Life micro-insurance schemes for the poor, approved by IRDA,
where sum assured does not exceed Rupees Fifty Thousand to be exempted from
service tax.
v
Transport of organic
manure by vessel, rail or road (by GTA) is being exempted.
v
Loading, unloading, packing, storage or warehousing, transport
by vessel, rail or road (GTA), of cotton, ginned or baled, is being exempted.
v
Services provided by common bio-medical waste treatment facility
operators to clinical establishments are being exempted.
v
Specialized financial services received by RBI from global
financial institutions in the course of management of foreign exchange
reserves, e.g., external asset management, custodial services, securities
lending services, etc. are being exempted.
v
Services provided by Indian tour operators to foreign tourists in
relation to a tour wholly conducted outside India are being exempted.
4.
Rule 6 has been amended so as to make e-payment of service tax
mandatory for all service tax payers. However, Dy. Commissioner/Asstt.
Commissioner may grant relaxation towards e-payment on case to case basis.
5.
Notification No. 25/2012 Dt. 20.06.2012 issued in pursuance to
power conferred by section 93(1) of Finance Act,1994, is amended, followings
are being withdrawn:-
v
Exemption extended to clinical research on human participants is
being withdrawn. (entry no. 7)
v
Exemption extended to air-conditioned contract carriages like
buses is being withdrawn. (entry no. 23)
v
At present, all services provided by educational institutions to
their students, faculty and staff does not attract service tax, this exemption
is being operated through the concept of ‘auxiliary educational services’. To
bring clarity, it is proposed to omit the concept of ‘auxiliary educational
services’ and specify in the notification, the services which will be exempt when
received by the educational institutions. Accordingly, in respect of services
received by an eligible educational institution:
(i)
transportation of students, faculty and staff;
(ii)
catering service including any mid-day meals scheme sponsored by
the Government;
(iii)
security or cleaning or house-keeping services in such
educational institutions; and
(iv)
services relating to admission to such institution or conduct of
examination, are being exempted from service tax.
Exemption
extended so far in respect of renting of immovable property service received by
educational institutions, stands withdrawn.
6.
Rule
2A of Service Tax (Determination of Value) Rule, 2006, is propose to be amended
to merge the Category B & C of said rule in a single category to provide
the 70% of value, as service portion.
7.
Taxable portion in respect of transport of goods by vessel to be
reduced from 50% to 40%. Effective service tax will decrease from the present
6.18% to 4.944%.
8.
Service provided by Employees’ State Insurance Corporation
(ESIC) during the period prior to 1.7.2012 to be exempted from service tax.
9.
Prior to Notification No. 10/2014 dated 11th July 2014, the
percentages of the service tax payable by the Service Provider and the Service
Receiver was prescribed as 60% and 40% respectively, in case where service
provider does not avail the abatement. The said percentages have been amended
to 50% for Service Provider as well as for Service Receiver. This amendment has
been made in order to simplify partial Reverse Charge Mechanism. However, where
the said motor vehicle has been provided on abated value whole of the Service
tax i.e. 100% shall be paid by Service Recipient and there is no change in that
proposition.
10. Explanation to
section 67F is propose to be amended, now for determination of rate of exchange
rule to be prescribed. Earlier Explanation to section 67F use the rate of
exchange as determined by the CBEC u/s 14 of Custom Act, 1962.
11. It is proposed to prescribe
a mandatory fixed pre-deposit of 7.5% of the duty demanded or penalty imposed
or both, for filing appeal before the Commissioner (Appeals) or the Tribunal at
the first stage and 10% of the duty demanded or penalty imposed or both, for
filing the second stage appeal before the Tribunal. The amount of pre-deposit
payable would be subject to a ceiling of Rs.10 Crore.
12. Followings services are brought
under the reverse charge mechanism:-
v
Service provided by a Director to a body corporate to be brought
under the reverse charge mechanism; service receiver, who is a body corporate
will be the person liable to pay service tax. (body corporate includes a
foreign company also but does not include the corporative society)
v
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 to pay service tax
13. Followings are the amendments
made in Cenvat Credit Rule, 2004:-
v
Service tax paid under full reverse charge: the condition to pay invoice value to the service provider for
availing credit of tax paid, to be omitted.
v
Re-credit of Cenvat credit reversed on account of non-receipt of
export proceeds within the specified period, to be allowed, if such export proceeds
are received within one year from the specified period on the basis of
documentary evidence of receipt of payment.
v
In case of GTA service, service receiver may avail abatement,
without having to obtain non-availment of Cenvat Credit certificate from
service provider.
v
Time limit for taking credit on input and input services: credit
shall be taken within six months from the date of the invoice or challans or
other documents specified.
14. Following amendments are made in
the Place of Provisions of Service Rules, 2012:-
v Provision for
prescribing conditions for determination of place of provision of repair
service carried out on temporarily imported goods, to be omitted.
v
Intermediary of goods to be given the same treatment as is given
to intermediary of services. Definition of ‘intermediary’ is amended to include
intermediary in respect of goods in its scope. Accordingly, with effect from
1.10.2014, an intermediary of goods, such as a commission agent of goods shall
be covered under Rule 9(c) of the Place of Provision of Services Rules, 2012.
v
Vessels (excluding yachts) and aircraft to be excluded from Rule
9(d); hiring of vessels or aircrafts, irrespective of whether short term or
long term, will be covered by the general rule, which is place of location of
the service receiver.
15. Point of Taxation
Rules, 2011, is propose to be amended, In case of reverse charge services, to
bring certainty in the determination of point of taxation, it is proposed to
provide that point of taxation will be the payment date or first day after
three months from the date of invoice, whichever is earlier.
SECTION-B:-DIRECT
TAX
1. Section 2(42A) is propose to be
amended, existing provision states that security held in a company shall be
considered as a short term, if held for a period of not more than twelve month,
however in any other case the period of twelve month is replace by the period
of thirty six month. The shorter period of twelve month is provided to
encourage the investment in security the price of which is market determined. In
view of this, it is propose that the share and unit of mutual fund (other than
equity oriented mutual fund) in an unlisted company shall be considered as a
short term, if held for a period of not more than thirty six month
2. Threshold limit not chargeable to
income tax is proposed to increase to Rs. 2.5 lakh for and individual and Rs.
3.0 lakh for senior citizen.
3. Section 116 is proposed to
substitute existing income tax authorities by the followings:-
S.
No.
|
Existing
|
New
|
1
|
Commissioner
|
Principal
Commissioner or Commissioner
|
2
|
Director
|
Principal
Director or Director
|
3
|
Chief Commissioner
|
Principal Chief
Commissioner or Chief Commissioner
|
4
|
Director General
|
Principal
Director General or Director General
|
4. Sub-section (1A) is
purpose to be inserted to section 32AC to provide the allowance of 15% of the
cost of plant & Machinery acquire and install during any previous year
commencing from 1.04.2014 to 31.03.2017 and cost exceeds the Rs. 25 crore, to
the company engaged in manufacturing of articles or goods. It is also propose
to provide that that the company eligible to claim the deduction under
sub-section (1) of section 32AC shall not be entitled to claim allowance under
sub-section (1A).
The deduction allowable under this section after the proposed
amendment in different scenario of investment is given by way of illustration
in the following table:
S. No.
|
Particulars
|
P.Y.
2013-14
|
P.Y.
2014-15
|
P.Y.
2015-16
|
P.Y.
2016-17
|
Remarks
|
1
|
Amount
of investment
|
20
|
90
|
-
|
-
|
Under
the existing section 32AC(1)
|
Deduction
allowable
|
Nil
|
16.5
|
-
|
-
|
||
2
|
Amount
of investment
|
30
|
40
|
-
|
-
|
Under
the proposed
section
32AC(1A)
|
Deduction
allowable
|
-
|
6
|
-
|
-
|
||
3
|
Amount
of investment
|
150
|
10
|
-
|
-
|
Under
the existing section 32AC(1)
|
Deduction
allowable
|
22.5
|
1.5
|
-
|
-
|
||
4
|
Amount
of investment
|
60
|
20
|
-
|
-
|
No
deduction either u/s
32AC(1)
or 32AC(1A)
|
Deduction
allowable
|
Nil
|
Nil
|
-
|
-
|
||
5
|
Amount
of investment
|
30
|
30
|
30
|
40
|
Under
the proposed
section
32AC(1A)
|
Deduction
allowable
|
Nil
|
4.5
|
4.5
|
6
|
||
6
|
Amount
of investment
|
150
|
20
|
70
|
20
|
Deduction
both u/s
32AC(1)
& 32AC(1A)
|
Deduction
allowable
|
22.5
|
3
|
10.5
|
3
|
5.
Sub
section (10) is propose to be inserted to section 10AA, which states that: Where a deduction u/s 10AA is claimed and allowed in
respect of profits of any of the specified business, referred to section 35AD (8)
(c), for any assessment year, no deduction shall be allowed under the
provisions of section 35AD in relation to such specified business for the same
or any other assessment year.
6.
Section 11 is proposed to be amended as follows:
v
Where
any income is required to be applied or set apart for application, then such
income shall be determined without any deduction or allowance of depreciation
in respect of any asset, the cost of which has been claimed as application of
income under this section in any previous year.
v
Income
derived from property held under the trust shall also include the income
mentioned u/s 10. (Due to this amendment the income specified u/s 10, which
does not form part of total income shall come under the purview of section
11&12).
7.
Section
24(b) is proposed to be amended in view of that deduction of interest on house
property loan (self owned) is enhance from 1.5 lakh to 2.0 lakh.
8.
It
is proposed to amend section 12A of the Act to provide that in case where a
trust or institution has been granted registration u/s 12AA, the benefit of
sections 11 &12 shall be available in respect of any income derived from property held under trust
in any assessment proceeding for an earlier A.Y. which is pending before the AO
as on the date of such registration subject to the condition that there is no
change in objects & activities in earlier years, on the basis of which such
registration has been granted. The AO shall not reopen the assessment u/s 147,
merely due to the reason that registration could not obtained by such trust or
institution for earlier years. (except where trust or institution at any
time had applied for registration and the same was refused u/s 12AA or a
registration once granted was cancelled.)
9.
In order to rationalize the provisions relating to cancellation
of registration of a trust, it is proposed to amend section 12AA of the Act to
provide that where a trust or an institution has been granted registration, and
subsequently it is noticed that its activities are being carried out in such a
manner that,—
v
its income does not ensure for the benefit of general public;
v
it is for benefit of any particular religious community or caste
(in case it is established after commencement of the Act);
v
any income or property of the trust is applied for benefit of
specified persons like author of trust, trustees etc.; or
v
its funds are invested in prohibited modes,
Then the Principal Commissioner or the Commissioner may cancel
the registration if such trust or institution does not prove that there was a
reasonable cause for the activities to be carried out in the above manner.
10. Explanation-2 is proposed to be
inserted to section 37(1) to disallow the expenditure incurred as corporate social responsibility referred to in section
135 of the Companies Act, 2013, however expenditure incurred which fall under
the section ranging 30 to 36 shall be allowed.
11. Section 44AE is proposed to amend
in view of that Rs. 5000 and 4500 is substituted by Rs. 7500. The existing provisions make a distinction between Heavy
Goods Vehicle (HGV) and vehicle other than Heavy Goods Vehicle for specifying
the amount of presumptive income, it is proposed to provide for a uniform
amount of presumptive income of Rs.7,500 for every month (or part of a month)
for all types of goods carriage without any distinction between HGV and vehicle
other than HGV.
12. Section 45(5) is propose to be
amended, as in existing provision enhance compensation is chargeable to Capital
Gain Tax in the previous year in which the enhanced compensation is received by
assessee, now it is proposed that enhance compensation received in pursuance of
interim order of court, Tribunal or other authority
shall be taxable in the previous year in which the
final order of such court, Tribunal or other authority is made.
13. The existing
provision of section 51 provides that the advance money forfeited shall be
reduced from the cost of relevant asset and at the same time the provision of
section 56 includes that advance money forfeited under the head income from
other source, thus this results in double taxation. To avoid this, it is
proposed to amend the section 51 and introduce the new section 56(2)(ix) as
follows:
v
Advance
money forfeited shall not be reduced from cost of asset, provided that it is
included in the income from other source u/s 56(2)
(ix).
v
As per new proposed section 56(2) (ix), if any advance money is
forfeited then such sum shall be taxable u/s 56(2) (ix).
14. Section 54EC provides the
exemption from capital gain tax to the extent of on Rs. 50 lakh, however some assessee
mis-construed the proviso of section 54EC(1) and claiming the exemption upto
Rs. one crore. Now it is proposed to insert a new proviso, which restricts the
exemption upto Rs. 50 lakh.
15. Section 40(a) is proposed to be
amended as follows:
v
As
per proposed amended section 40(a) (i) any payment (except salary) paid to
non-resident is permissible as allowable expenditure, if TDS is deducted and
paid on or before the due date u/s 139(1), earlier it was due date u/s 200.
v
As
per proposed amended section 40(a)(ia), where TDS not deducted and paid on any
specified payment in this sub-clause then 30% of such payment or expenditure
shall be disallowed (earlier it was 100%).
16. The existing
provisions of section 73 of the Act provide that losses incurred in respect of
a speculation business cannot be set off or carried forward and set off except
against the profits of any other speculation business. However, the proviso to the said section
exempts, inter alia,
transaction in respect of trading in derivatives on a recognised stock exchange
from its ambit. It is proposed to amend the aforesaid Explanation so as to provide that the provision of the Explanation shall also not be
applicable to a company the principal business of which is the business of
trading in shares.
17. The limit of section 80C is
proposed to be increase to 1.5 lakh.
18. Section 92CC is also proposed to
amend in view of that Advance Pricing Agreement shall be applied for preceding
four previous years subject to conditions as may be prescribed.
19. It is proposed to amend the
section 115BBC to tax the anonymous donation as reduced by higher of
followings:
v
5%
of total donation or
v
One
lakh
Earlier
it has been seen that Trust is paying the tax on higher of above and rest non
taxed sum of anonymous donation remained out of tax, however this is not a
proper manner, the correctly manner to tax anonymous donation is the rest
non-taxed sum should be included in the income earned from the property held
under the trust and hence taxable.
20. Section 92B (2) is proposed to
amended to given the clarity in deemed international transaction.
21. Section 115O & 115R are
purpose to be amended in view of before deduction of additional tax on income
to be distributed, such income to be distributed need to be grossed up, then deduct
CDT on gross up income.
Example:-
Income
to be distributed Rs. 8500
Rate
of CDT 15%
Gross
Up Income 8500/ (1-0.15) = 10,000
CDT 10,000*15% = 1500
22. A new section 271FAA is proposed
to be inserted to levy the penalty of Rs. 50,000 in case of non-compliance of
section 285BA (i.e. Annual Information Return).
23. Section 115JC, Alternate Minimum
Tax (AMT) is propose to be amended to bring the investment linked deduction
i.e. section 35AD in the net of AMT, however depreciation allowance u/s 32 is
to be allowed, while computing the adjusted total income.
24. The foreign portfolio investors
(referred as foreign institutional investors in the Act) face a difficulty in
characterisation of their income arising from transaction in securities as to
whether it is capital gain or business income. Further, the fund manager managing
the funds of such investor remains outside India under the apprehension that
its presence in India may have adverse tax consequences. Therefore, in order to
end this uncertainty, it is proposed to amend the Act to provide that any
security held by foreign institutional investor which has invested in such
security in accordance with the regulations made under the Securities and
Exchange Board of India Act, 1992 would be treated as capital asset only so
that any income arising from transfer of such security by a Foreign Portfolio
Investor (FPI) would be in the nature of capital gain.
25. There does not
exist any express provision in the Act for enabling a deductor to file
correction statement (i.e. Revise TDS Return), it is proposed to amend section
200 of the Act to allow the deductor to file correction statements.
Consequently, it is also proposed to amend provisions of section 200A of the
Act for enabling processing of correction statement filed.
26. No order shall be
made under section 200(1) deeming a person to be an assessee in default
for failure to deduct the whole or any part of the tax from a person resident
in India, at any time after the expiry of seven years from the end of the
financial year in which payment is made or credit is given. Earlier it was six
year.
27. A new concept to finance the
infrastructure project and real estate project is propose to be introduced
named Infrastructure investment Trust (IIT) and Real Estate Investment Trust
(REIT).
28. Under the existing provisions of
section 10(10D) of the Act, any sum received under a life insurance policy,
including the sum allocated by way of bonus on such policy is exempt subject to
fulfillment of conditions specified under the said section. Therefore, the sum
received under a life insurance policy which does not fulfill the conditions
specified under section 10(10D) are taxable under the provisions of the Act.
In
order to have a mechanism for reporting of transactions and collection of tax
in respect of sum paid under life insurance policies which are not exempted
under section 10(10D) of the Act, it is proposed to insert a new section
194DA in the Act to provide for
deduction of tax at the rate of 2 per cent. on sum paid under a life insurance
policy, including the sum allocated by way of bonus, which are not exempt under
section 10(10D) of the Act. In order to reduce the compliance burden on the
small tax payers, it has also been proposed that no deduction under this
provision shall be made if the aggregate sum paid in a financial year to an
assessee is less than Rs.1,00,000/-
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