1. TAX PROPOSALSin the Finance Bill,2015THE INSTITUTE OF
CHARTERED ACCOUNTANTS OF INDIA
2. Authored by CA.Dilip B.Desai I Supported & researched by
CA.Soumen Adak CA.Manish Sheth CA.Neha PaulDirect Tax Committee
Indirect Tax Commitee CA.Tarun Jamnadas Ghia,Chairman - CA.Atul
Kumar Gupta,Chairman CA.Shyam Lal Agarwal,Vice-Chairman - CA.Sanjay
Agarwal,Vice-Chairman CA.Manoj Fadnis,President (Ex-Officio) -
CA.Manoj Fadnis,President (Ex-Officio) CA.M.Devaraja Reddy,Vice
President (Ex-Officio) - CA.M.Devaraja Reddy,Vice President
(Ex-Officio) CA.Prafulla Premsukh Chhajed - CA.Nihar N.Jambusaria
CA.Tarun Jamnadas Ghia - CA.Shriniwas Y.Joshi CA.Pankaj I. C. Jain
- CA.DhinalAshvinbhai Shah CA.Shriniwas Y.Joshi - CA.Abraham
Kallivayalil Babu CA.DhinalAshvinbhai Shah - CA.S.Santhanakrishnan
CA.S.Santhanakrishnan - CA.G.Sekar CA.Subodh Kumar Agrawal -
CA.J.Venkateswarlu CA.Vijay Kumar Gupta - CA.Subodh Kumar Agrawal
Shri Sidharth K.Birla - CA.Vijay Garg Shri Sunil Kanoria - CA.Anuj
Goyal Shri Salil Singhal - CA.Sanjiv Kumar ChaudharyCA.Atul Kumar
Gupta CA.Naveen N. D. Gupta Shri Sunil KanoriaDisclaimer: The views
contained in the publication are those of the concerned
contributors and should not be construed as the views of the
Institute or any of its Committees or Boards.No part of this
publication may be reproduced or transmitted in any form or by any
means without the permission in writing from The Institute of
Chartered Accountants of India.The Publication is distributed with
the understanding that neither the publisher nor the contributors
are responsible for the result of any action taken on the basis of
this work whether directly or indirectly.Though due care has been
exercised in publishing this book,professional advice should be
sought before placing reliance on it.Any error or omission is
regretted and would be appreciated if brought to notice. Published
by Direct Tax Committee & Indirect Tax Committee of The
Institute of Chartered Accountants of India - ICAI Bhawan,Post Box
No.7100, Indraprastha Marg,New Delhi-110002. Tel. : +91 (11) 39 89
39 89. E-mail:icaiho@ica. in website:www. icai. orgThis publication
is for the members only. Contribution:Rs.20/-
3. THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIAFOREWORDAfter
the presentation of the Union budget,our members,tax practioners
and stakeholders arevery eager to grasp the tax proposals and their
implications in as much depth as possible at the earliest for their
respective purposes. The Direct Taxes Committee has organised at
Mumbai a very comprehensive lecture meeting within a span of only
two days from the presentation of the Budget in the Parliament and
simultaneous Nation wide webcast of the clause wise analysis of tax
proposals.My sincere gratitude to the host of the meeting the
Bombay Stock Exchange.The Direct Taxes Committee led by its
Chairman CA.Tarun Ghia and Vice Chairman CA.Sanjay Agarwal deserve
special compliments for organising so meticulously a well attended
event in a short span of time. On the eve of the budget meeting,the
Direct Taxes and the Indirect Taxes Committees have brought this
comprehensive budget publication.The author of the publication
CA.Dilip Desai and his knowledge team well deserve appreciation and
compliments.Considering that the budget is the first full fledge
budget of the new NDA Government and many policy changes have been
introduced in the budget,it is certainly a stupendous task for the
authors and his knowledge team to analyse and interpret the new
proposals with clarity and depth as presented in this publication.
ICAI has been in the forefront of guiding the stakeholders and
representing for the simplification and rationalisation of the tax
laws.Such tireless exercises by the ICAI and CA fraternity has
positioned the ICAI as a partner in nation building.This
publication is one more step in that direction.I am sure this
publication has become a bench mark for the future. I congratulate
Direct Taxes Committee Chairman CA.Tarun Ghia and Vice Chairman
CA.Sanjay Agarwal and Indirect Taxes Committee Chairman CA.Atul
Gupta and Vice Chairman CA.Shyamlal Agarwal for bringing out this
maiden qualitative and comprehensive budget analysis in a time
period of only two days from the presentation of the budget. I am
sure that members and stakeholders will find the publication very
useful. CA.Manoj Fadnis PresidentDate:02-03-2015 Place:New
Delhi01
4. C: ., :2.*" THE INSTITUTE OF CHARTERED ACCOUNTANTS OF
INDIAPRESIDENT'S MESSAGEThe fullfledged yearly budget was presented
by Hon'ble Finance Minister Shri Arun Jaitley on 28 February
2015.The main objectives of this budget are to formulate laws to
curb black money,creation of jobs,upliftment of the rural masses
and to promote manufacturing and Make in India project. With an
objective to curb black money,the budget has directed for enactment
of law on black money.It also aims for achieving 3% fiscal deficit
in next three years.Several important measures have been
incorporated with a view to achieve overall development.This
includes introduction of Direct Taxes Regime,introduction of Tax
free infra bonds,introduction of Atal Pension Yojana,formulation of
Expert Committee for legislation on single window clearance
etc.Also,the budget has aimed in achieving GDP of 7.4% and to bring
inflation to 5% by the end of the year.In short,this is certainly a
progressive budget which aims at achieving sustainable economic
development. The Institute of Chartered Accountants of India (ICAI)
has always been proactive in delivering vital information to its
members and other stakeholders.For this purpose,ICAI has come up
with this publication on Changes Proposed by Union Budget 2015-16
which aptly provides in-depth study of the Union Budget 2015-16.I
heartily admire the efforts put in by the two committees i. e.
Direct Taxes Committee (DTC) and Indirect Taxes Committee (IDTC) in
bringing out this publication.I am sure this publication would
prove useful and beneficial for members in their endeavours and
help them in achieving new heights in their professional fields.
CA.Manoj Fadnis President,ICAIDate:02-03-2015 Place:New
Delhi02
5. I : , : THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIAVICE
PRESIDENT'S MESSAGEThe Finance Minister Arun Jaitley has announced
his maiden fullfledged budget on 28th Feb,2015. The biggest
challenge in this Budget was to set aside enough money to kick
start the economy without constraining the " I . . Government's
finances.It is quite evident that the Budget has announced , f far
reaching reforms especially on the tax administration front. The
Budget has aimed to achieve an objective-Banking the unbanked and
funding the funded.It proposes to create a universal social
security system for all Indians and to introduce bankruptcy
code.The Budget has taken measures to provide tax breaks and
incentives for domestic manufacturers to push the Make in India
campaign,a centrepiece of PM Modi's plan to create jobs and
rejuvenate the economy.A gamut of changes are introduced by Union
Budget 2015-16, paving a way for major changes expected to take
place like implementation of GST in April,2016, GAAR to be deferred
for two years,achieving fiscal deficit of 3% by the end of next 3
years,corporate tax rate to be reduced to 25% for next 4
years,enactment of law on black money,increase of service tax rate
to 14%,replacing wealth tax with additional surcharge of 2% on
super rich etc.This publication has addressed the major highlights
of the budget which assist the professionals in their respective
work areas. The Direct Taxes Committee (DTC) and Indirect Taxes
Committee (IDTC) have worked laboriously in bringing this
publication in such a short span of time.I sincerely appreciate the
efforts put in by them for releasing this publication. CA.Devaraja
Reddy Vice- President,ICAI. Date:02-03-2015 Place:New Delhi03
6. THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIACHAIRMAN'S
MESSAGEThe Union Budget 2015-16 has been presented in the
Parliament with a view to address the needs of all inclusive
development and sustainable economic growth.The budget is realistic
enough to strike a chord with the masses by targeting the
development for one and all.It mainly focuses on fight against the
scourge of black money,encouraging make in India and Swachh
Bharat.The thrust of this budget is effectively dealing with menace
of black money and related quantum of information to be provided
and the compliances to be followed.It ensures more transparency in
the system and will benefit the honest tax payers as it focuses on
the motto- Honest is to be spared and dishonest is to be
punished.The main highlights of the budget include enactment of law
on black money,more rigid punishments for the income
Concealers,abolishing wealth tax and replacing it with an
additional surcharge of 2% on super rich,reducing the corporate tax
rate to 25%,increasing the threshold limit of transfer pricing to
Rs.20 crores,to introduce direct tax regime that is internationally
competitive on rates without exemptions,to bring new bankruptcy
code etc.It aims at achieving the growth of 8% to 8.5%. This budget
indeed addressed to serve each & every class. The Direct Taxes
Committee of ICAI has put an initiative in bringing this
publication which will enhance the knowledge of the professionals
and will also help them to cater the needs of their clients in an
efficient manner and will enable the stakeholders to grasp salient
aspects of tax proposals. CA.Tarun Jamnadas Ghia Chairman,Direct
Taxes CommitteeDate:02-03-2015 Place:New Delhi04
7. I : , : THE INSTITUTE OF CHARTERED ACCOUNTANTS OF
INDIACHAIRMAN'S MESSAGEThe Hon'ble Finance Minister Shri Arun
Jaitley in his budget speech emphasised that taxation is an
instrument of social and economic engineering.Tax collections help
the Government to provide education,healthcare,housing and other
basic facilities to the people to improve their quality of life and
to address the problems of poverty,unemployment and slow
development.To achieve these objectives we need to have a stable
taxation policy and nonadversarial tax administration.The Union
Budget 2015-16 focuses on overall growth and development of the
economy.Introduction of GST from 1 April 2016 has been
reaffirmed.GST is expected to play a transformative role in the way
our economy functions.It will add buoyancy to our economy by
developing a common Indian market and reducing the cascading effect
on the cost of goods and services.Hike in service tax rate from
present 12.36% to 14% is a step towards introduction of GST The
rate of Central Excise Duty now stands at 12.5% with subsumation of
EC & SHEC.Certain services under Negative List have been made
taxable and certain exemptions have been withdrawn to widen the tax
base.This is also a precursor to GST regime,the basic tenet of
which is minimum exemptions. The tax proposals made by Finance
Bill,2015 also include changes like increase in time limit for
availment of CENVAT Credit to one year from 6 months.Also to
facilitate the ease of doing business,a facility of online central
excise and service tax registration in two working days has been
provided.Further,Central excise and service tax assessees will be
allowed to issue digitally signed invoices and maintain electronic
records.All the changes made are to make the tax structure user
friendly and make way for implementation of GSTThis publication
aptly brings out the changes made by the Union Budget 2015-16 on
the taxation front and is a joint effort of Direct Taxes Committee
and Indirect Taxes Committee. I hope this publication benefits you
in your endeavours. CA.Atul Gupta Chairman,Indirect Taxes
CommitteeDate:02-03-2015 Place:New Delhi05
8. THE INSTITUTE OF CHARTERED ACCOUNTANTS OF
INDIAVICE-CHAIRMAN'S MESSAGEThe changing scenario of taxation in
India in recent years has made the law if Imore complicated and
challenging.Continuous amendments in tax laws If I have rendered it
necessary for members to update themselves with the changing
scenario.The Union Budget 2015-16 has brought up with a view to
'_~-. , . cope up with the growing economic need of development.The
Finance 5 Q Minister believed that every rupee of public
expenditure,whether undertaken by the Centre or the States,will
contribute to the bettermentof people's lives through job
creation,poverty elimination and economic growth. The main
objectives of the Budget are to curb black money by introducing
more stringent laws,creation of more & more jobs for the
youth,to promote make in India by focusing on the manufacturing
sector and to uplift the rural areas and below poverty line masses
and also improve nonadversarial tax administration;effective
delivery of benefits;investment and job creation;welfare of
labour,digital connectivity;skilling our youth;efficient and better
work culture in Government,ease of doing business etc.It aims at
bringing inflation at 5% by the end of the year.It has also given
relaxation to the corporate by bringing corporate tax rate at
25%.Moreover,for having check on the inflation,it has directed to
formulate Monetary Policy Framework Agreement with RBI.In
short,this budget will lay out the roadmap for accelerating
growth,enhancing investment and passing on the benefit of the
growth process to the common man,woman,youth and child those,whose
quality of life needs to be improved. The Direct Taxes Committee of
ICAI has taken a step ahead by providing main highlights and tax
proposals arising out of the Budget 2015-16 through this
publication.I hope this publication will help in enhancing the
knowledge and expertise of the CA fraternity as well as to other
professionals. CA.Sanjay Agarwal Vice- Chairman,Direct Taxes
CommitteeDate:02-03-2015 Place:New Delhi06
9. THE INSTITUTE OF CHARTERED ACCOUNTANTS OF
INDIAVICE-CHAIRMAN'S MESSAGE The Union Budget 2015-16 popularly
called Makeinlndia Budget has beenI 7presented in the Parliament
with a view to address the needs of all ...inclusive development
and sustainable economic growth.Taxation being 34-I the key
interest area had garnered the attention on the positive front. '
'7 While GAAR has been deferred for 2 years,the game changing
reform onthe anvil like GSTis set to be introduced w. e.f.1April
2016.The major change in the area of indirect taxes cover
introduction of an all-inclusive rate of Central Excise @12.5%
subsuming the old rate on 12.36% including the cesses.Also,the rate
of Service Tax has been increased to 14% from present 12.36% in
lines with introduction of GST.Basic Custom Duty on 22 items has
also been reduced and time limit for availment of CENVAT credit has
been increased from 6 months to one year from the date of invoice.
The introduction of GST is set to bring both greater transparency
and greater investments.GST is expected to play a transformative
role in the way our economy functions.It will add buoyancy to our
economy by developing a common Indian market and reducing the
cascading effect on the cost of goods and services. The budget is
pragmatic enough to strike a chord with the masses by targeting the
development for one and all.It is quite evident that budget has
announced far reaching reforms especially on the tax administration
front.This publication is developed with an objective to acquaint
the readers with amendments in Taxation brought in by the Union
Budget 2015-16.I wish the readers all the
success.CA.ShyamlalAgarwal Vice-Chairman, Indirect Taxes
CommitteeDate:02-03-2015 Place:New Delhi07
10. ,/ .s THE INSTITUTE or CHARTERED ACCOUNTANTS or
INDIAAnalysis of Tax Proposals in the Finance Bill,2015INDEX
Sr.No.Particulars Page NO. 01 Foreword 0102 Messages 02-07DIRECT
TAXES 03 Rates of Tax 09-14 04 Personal Taxation 15-17 05 Corporate
Taxation 18-22 06 International Tax & Transfer Pricing 23-32 07
Trust & Charitable Institutions 33-40 08 Procedural &
Others 41-50 INDIRECT TAXES09 Central Excise 51-59 10 Service Tax
60-70 11 Changes in CENVAT Credit Rules,2004 71-73 12 Custom Duty
74-80 13 Glossary 81-82Qaiaiiiiatriai
11. /ra THE INSTITUTE or CHARTERED ACCOUNTANTS or INDIA[
Analysis of Tax Proposals in the Finance Bill,2015THE FINANCE BILL
2015DIRECT TAXRATES OF TAXESINCOME TAX RATES: For Individuals,Hindu
Undivided Family,Association of Persons and Body of Individuals
Income Slabs (*) Tax Rates* 0 2,50,000@ Nil2,50,001 5,00,000
5,00,001 10,00,000 10,00,001 1,00,00,00010.30% of income exceeding
Rs.2,50,000 * 25,750 plus 20.60% of income exceeding Rs.5,00,000 *
1,28,750 plus 30.90% of income exceeding Rs.10,00,000 1,00,00,001
and above * 29,09,750 plus 34.608% of income exceeding
Rs.1,00,00,000* Tax rates are inclusive of Education Cess and
Secondary Higher Education Cess @ 2% and 1% respectively. #
Surcharge has been increased from 10% to 12% in case total income
exceeds Rs.1,00,00,000.@ In case of resident individual of age 60
years or more (Senior Citizen) the basicthreshold limit of
Rs.3,00,000 remains unchanged.In case of resident individual of age
80 years or more (Very Senior Citizen) the basic threshold limit of
Rs.5,00,000 remains unchanged. + Resident individual having total
income less than Rs.5,00,000 is eligible to claim Tax Rebate u/ s
87A,being lower of tax on total income or Rs.2,000.For Co-operative
SocietiesIncome Slabs (*) Tax Rates*0 10,000 10.30%10,001 - 20,000
Rs.1,030 plus 20.60% of income exceeding Rs.10,00020,001
1,00,00,000 Rs.3,090 plus 30.90% of income exceeding Rs.20,000
1,00,00,001 and above Rs.30,86,910 plus 34.608% of income exceeding
Rs.1,00,O0,000*Tax rates are inclusive of Education Cess and
Secondary Higher Education Cess@ 2% and 1% respectively. #
Surcharge has been increased from 10% to 12% in case total income
exceeds Rs.1,00,00,0007 ",5: ff ' --4{T 3;. -.'~: :*7.T : '*t. ":,
"i" 09
12. I. /5:54 THE INSTITUTE or CHARTERED ACCOUNTANTS or INDIA[
Analysis of Tax Proposals in the Finance Bill,2015For
LocalAuthoritiesLocal Authorities are taxable at the rate of
30%.Surcharge has been increased from 10% to 12% where the total
income exceeds Rs.1,00,00,000. Education Cess is applicable at the
rate of 2%.Secondary and Higher Education Cess is applicable @ 1%
on income tax. For Partnership FirmsPartnership firms are taxable
at the rate of 30%.Surcharge has been increased from 10% to 12%
where the total income exceeds Rs.1,00,00,000. Education Cess is
applicable at the rate of 2%.Secondary and Higher Education Cess is
applicable @ 1% on income tax. For Corporates5|_ Particulars Tax
Surcharge E.Cess S & H Effective TaxNo.(%) (%) (%) E- Cess (%)
(%) 1 Domestic companies (with 30 ' 2 1 30.90total income less than
1 Cr. )2 Domestic companies (with 30 7* 2 1 33.063total income more
than 1 cr.but less than 10 Cr. ) 3 Other domestic companies 30 12*
2 1 34,608 4 Foreign companies (with 40 ' 2 1 41.20 total income
less than 1 Cr. ) 5 Foreign companies (with 40 2 2 1 42.024 total
income more than 1 cr.but less than 10 Cr. ) 6 Other foreign
companies 40 5 2 1 43,26 * Surcharge has been increased from 5% to
7%.# Surcharge has been increased from 10% to 12%.MINIMUMALTERNATE
TAX (MAT) s| _ Particulars Tax Surcharge E.Cess S & H Effective
Tax No.(%) (%) (%) E- C655 (%) (%) 1 Domestic companies (with 18.5
' 2 1 19.055 total income less than 1 Cr. )
13. W II THE INSTITUTE or CHARTERED ACCOUNTANTS or INDIA
Analysis of Tax Proposals in the Finance Bill,20152 Domestic
companies (with 18.5 7* 2 1 20.389 total income more than 1 cr.but
less than 10 Cr. )3 Other domestic companies 18,5 12* 2 1 21,3424
Foreign companies (with 18.5 ' 2 1 19.06total income less than 1
Cr. )5 Foreign companies (with 18.5 2 2 1 19.436 total income more
than 1 cr.but less than 10 Cr. )6 Other foreign companies 185 5 2 1
20,008* Surcharge has been increased from 5% to 7%. # Surcharge has
been increased from 10% to 12%. Alternate Minimum Tax (AMT)It is
applicable on all persons other than companies.In case of
Individual,Hindu Undivided Family,Association of Persons and Body
of Individuals,it applies only if Adjusted Total Income exceeds
Rs.20,00,000. Adjusted Total Income is computed by increasing Total
Income by any Deduction Claimed under chapter VIA [Sec.80-| Ato
Sec.80RRB (Except Sec.80P)] and Sec.10AA. AMT would be computed at
the rate of 18.5% on adjusted total income.Surcharge has been
increased from 10% to 12% where the adjusted total income exceeds
Rs.1,00,00,000. Education Cess is applicable at the rate of
2%.Secondary and Higher Education Cess is applicable @ 1% on income
tax. Securities Transaction Tax (S'I'| ')S'| '|' is levied on the
value of taxable securities transaction as under: SlNC,Transactions
Rate Payable byPurchaser/Seller1 Purchase/ Sale of equity shares
(delivery based) 0.1%Purchase of units of equity-oriented mutual
fund Nil Purchaser(delivery based)T"r3?. ',7:;7?". "..
14. / _: i/'''5254 THE INSTITUTE or CHARTERED ACCOUNTANTS or
INDIAAnalysis of Tax Proposals in the Finance Bill,20153 Sale of
units of equity-oriented mutual fund (delivery based) 0.001%
Seller4 Sale of equity shares,units of equity-oriented mutual fund
0.025% Seller (non-delivery based) 5 Sale of an option in
securities 0.017% Seller 6 Sale of an option in securities,where
option is exercised 0.125% Purchaser 7 Sale of a futures in
securities 0.01% Seller 8 Sale of unit of equity oriented fund to
the Mutual Fund 0.001% Seller Commodities Transaction Tax (CTT) C'|
'|' is levied on the value of taxable commodities
transaction:Transactions Rate Payable by Sale of commodity
derivative (other than agricultural 0.1% seuer Commodities) entered
in a recognised associationWealth Tax (WT) Levy of Wealth tax has
been abolished. Dividend Distribution Tax (DDT)Dividends
distributed by an Indian Company are exempt from income tax in the
hands of all shareholders.DDT shall be computed on the amount
determined after grossing up dividend paid by the rate of tax
(excluding Surcharge and Cess) on such dividend. Grossing up needs
to be done only of the Basic Rate & not of the Effective
Rate.The rates of DDT are as below: DDT Rates for CompaniesBasic
Rate Effective Rate*17.647 20.358*including Surcharge of 12% &
Education Cess
15. W _ / -~'Vl: f,THE INSTITUTE OF CHARTERED ACCOUNTANTS OF
INDIAAnalysis of Tax Proposals in the Finance Bill,2015DDT Rates
for Mutual Fund (MF) for payments to - Particulars Basic Rate
Effective Rate* (1) Distribution by MF under an Infrastructure
5.263 6.071 Debt fund scheme to a non-resident (2) To an individual
or HUF excluding (1) above 33.33 38,449 (3) To any other Person
excluding (1) & (2) 42.85 49 432 above ' *including Surcharge
of 12% & Education Cess # Excludes equity oriented funds
CAPITAL GAINS Short term Long term Particulars capital gains
capital gains tax tax Sale transactions of 15% Nil securities which
attract STT Sale transactions of securities not attracting STT
Individuals (residents and nonresidents) Progressive 20% with Slab
rate-'5 indexation;10% without indexation (for listed securities /
zero Partnerships (resident and non-resident) 30% Coupon bonds)
Resident companies 30% Overseas financial organizations specified
40% in Sec.115AB (corporate) 30% 10% (non- corporate) FIIS 30%
10%13
16. / _/ IT ITHE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA
Analysis of Tax Proposals in the Finance Bill,2015 I Other foreign
companies 40% 20% with indexation;Local Authority 30% 10% W't, ht
indexation Co-operative Society A5 Per .If l,5t_ed progressive
securities/ zero slab rates COUPON b0nd-5)1. To be increased by
Surcharge (applicable if any),Education Cess and Secondary and
Higher Education Cess. SPECIAL RATES FOR NON-RESIDENTS The
following incomes in the case of non-resident are taxed at special
rates on gross basis: Nature of Income Rate' Dividendz 20% Interest
received on loans given in foreign currency 207 to Indian concern
or Government of India Interest received on infrastructure debt
funds W referred to in Sec.10(47) Interest of the nature and extent
referred to in 59, Sec.194LC and Sec.194LD Income received in
respect of units purchased in 207 foreign currency Royalty or
technical fees 10% Interest on FCCB 10%1. These rates will further
be increased by Surcharge (applicable if any),Education Cess and
Secondary and Higher Education Cess. 2. Other than dividends on
which DDT has been paid. 3. Rate decreased from 25% to 10%.
17. I/ 'F' I~'Vl: f,THE INSTITUTE OF CHARTERED ACCOUNTANTS OF
INDIAPERSONAL TAXATIONDeduction under chapter VI-A for Individuals/
H UFsAmendments proposed under Chapter V| -Aw. e.f 01 -04-201
6.Analysis of Tax Proposals in the Finance Bill,20153B(1)80CCD
(13)Contribution to National Pension scheme (NPS) Overall ceiling
limit for SI.Nos.1, 2 & 3A Section Particulars Existing Limit
(-) Proposed Limit (-) 1 80C Payment of Life Insurance 1,50,000
1,50,000* Premium,etc.2 80CCC Contribution to certain 1,00,000
1,50,000 Pension funds 3A 80CCD 10% of salary or 10% of salary
orGTI (restricted to *1 ,00,000)1, 50,000GTIAdditional deduction up
to 50,000 on payment in excess of 10%1,50,0005 80D Health Insurance
Premium for As per separate table Individual/ HUF 6 80DD
Maintenancel medical treatment of disable dependant Disabled 50,000
75,000 - Severely disabled 1,00,000 1,25,000 7 80DDB Medical
treatment for Specified Disease - Individual 40,000 40,000 - Senior
Citizen 60,000 60,000 - Very Senior Citizen 60,000 80,000 8 80U
Deduction in case of person with disability - Disabled 50,000
75,000 Severely disabled1,00,000r; I. ;. ,v, ,'..- '$1,25,000T.
">_-.. ..: 1-15
18. W _ / six$254 THE INSTITUTE OF CHARTERED ACCOUNTANTS OF
INDIAAnalysis of Tax Proposals in the Finance Bill,2015* Deposit
made by parent or legal guardian of girl child under Sukanya
Samriddhi Account Scheme eligible for deduction u/ s
80C.Corresponding interest income and withdrawal from such account
also exempt u/ S 10(1 1A).Amendment to take effect retrospectively
w. e.f01-04-2015.5 Medical certificate may be obtained from any
specialist doctor (whether or not working in Government hospital).
#Maximum permissible deduction u/ s 80DUnder existing
provisionsSelf,Spouse & Parents Dependant (whetherScenario
children dependant Total deduction (family) or not) No one is above
60 years 15,000 15,000 30,000No one in family is above 60 years
&either one of parents are above 60 years 150O0 20000
35000Atleast one member of family is above 60 years and either one
of parents are 20,000 20,000 40,000 above 60 yearsAs
proposedSelf,Spouse & Parents Dependant (whetherScenario
children dependant Total deduction (family) or not) No one is above
60 years 25,000 25,000 50,000 No one in family is above 60 years
& 25,000 30,000 55,000either one of parents are above 60
yearsAtleast one member of family is above 60 years and either one
of parents are 30,000 30,000 60,000 above 60 yearsMedical
expenditure (where at least one member is above the age of 80 years
30,000 30,000 60,000 without any health insurance)Contribution to
schemes eligible for 100% deduction [Sec.80G]
19. C _ rl/ U$254 THE INSTITUTE or CHARTERED ACCOUNTANTS or
INDIAAnalysis of Tax Proposals in the Finance Bill,2015Under the
existing provisions of Sec.80G,contribution made to certain funds
and institutions formed for a social purpose of national
importance,like the Prime Ministers National Relief Fund,National
Foundation for Communal Harmony etc.are eligible for 100%
deduction. r It is proposed to include the following funds in the
list of such eligible institutions:- "National Fund for Control of
DrugAbuse" [w. e.f AY 2016-17] "Swachh Bharat Kosh" [w. r.e. fAY
2015-16] "Clean Ganga Fund" [w. r.e. f AY 2015-16]Enabling of
filing of Form 15G/15H for payment made under life insurance policy
[Sec.197A] [w. e.f.01-06-2015]r The Finance (No.2) Act,2014,
inserted Sec.194DA in the IT Act with effect from01-10-2014 to
provide for TDS @ 2% from payments made under life insurance
policy,which are chargeable to taxv To avoid TDS in case where tax
on total income is likely to be nil during the year, Sec.197A has
been amended to provide for submission of self declaration in Form
No.15G and 15H. Tr- *": ??;": : ~-I. '~" "Va,. . > 7..A'-,
17
20. :. /U "$254 THE INSTITUTE or CHARTERED AccouNTANTs or
INDIAAnalysis of Tax Proposals in the Finance Bill,2015CORPORATE
TAXATIONDeferment of Provisions Relating To General Anti Avoidance
Rule [w. e.f AY 2016-17]- Finance Bill proposed to defer the
implementation of General Anti Avoidance Rule implementation [GAAR]
by two years,making it applicable from AY 2018-19
onwards.Further,investments made up to 31-03-2017 are proposed to
be kept outside the applicability of GAAR. Deduction for Employment
of New Workmen [Sec.80JJAA] [w. e.fAY 2016-17]- Deduction u/ s
80JJAA is available to Indian companies on additional wages paid to
new workmen.In order to encourage employment generation,it is
proposed to extend the benefit to all assessees having
manufacturing units rather than restricting it to corporate
assessees only.It is also proposed to deny deduction to assessee
which has acquired the factory by way of transfer from any other
person or as a result of any business re- organisation. c
Further,in order to enable the smaller units to claim this
incentive,it is proposed to extend the benefit to units employing
50 instead of 100 regular workmen. lncentivising industrial
development in the State of Andhra Pradesh & Telangana
[Sec.32AD and 32(1)(iia)] [w. e.f. AY2016-17]> Additional
investment allowance [Sec.32AD]- It is proposed to insert a new
Sec.32AD to allow additional investment allowance @15% on the cost
of eligible plant & machinery acquired and installed by the
assessee in an undertaking or enterprise set up in the notified
backward areas of Andhra Pradesh and Telangana on or after
01-04-2015 for manufacture or production of any article or
thing.Further the eligible plant & machinery needs to be
acquired and installed during the period beginning from 01-04-2015
to 31-03-2020.- In order to ensure that the proposed incentive
contributes to economic growth of backward areas,it is also
proposed that plant or machinery shall not be transferred for a
period of 5 years except in the case of amalgamation or
demerger.
21. // ?i~THE INSTITUTE or CHARTERED ACCOUNTANTS or INDIA
Analysis of Tax Proposals in the Finance Bill,2015 I Comments - The
above investment allowance u/ s 32AD is in addition to the
investment allowancespecified under the existing provisions of
Sec.32AC if it fulfils the specified conditions ofboth sections.
> Higher rate of additional depreciation [32(1)(iia)]- It is
proposed to insert a new proviso below Sec.32(1)(iia) to provide
that where an assessee,sets up an undertaking or enterprise for
manufacture or production of any article or thing in the notified
backward areas ofAndhra Pradesh and Telangana on or after
01-04-2015 additional depreciation u/ s 32(1)(iia) shall be
admissible @ 35% instead of20%.Comments - The likely scenario of
benefits due to investment in the notified backward areas of
AndhraPradesh and Telangana vis-a-vis the other states is depicted
as under: Notified backwardParticulars areas of Andhra Pradesh
Other states & Telangana Year 1 Year 2 Year 1 Year 2 onwards
onwardsInvestment in plant & machinery 100 100Normal
Depreciation 15 15Investment Allowance u/s 32AC 15 15Investment
Allowance u/s 32AD 15Additional Depreciation u/ s 32(1)(iia) 35
20Depreciation in future years 50 50 65 Total benefits & flow
thereof 80 50 50 65The above table shows that 80% of the investment
during the specified period in the Notified backward areas of
Andhra Pradesh & Telangana would be eligible for deduction in
the year ofinvestment itself. :4.{T= Il.gm '9
22. /?5 THE INSTITUTE or cHARTERED ACCOUNTANTS or INDIA[
Analysis of Tax Proposals in the Finance Bill,2015Allowance of
balance 50% Additional Depreciation in immediately succeeding
previous year [Sec.32(1)(iia)] [w. e.fAY 2016-17]-
Hitherto,additional depreciation u/ s 32(1)(iia) on eligible Plant
& Machinery acquired and put to use for less than 180 days in
the previous year was restricted to 50% of the prescribed 20%. o It
is proposed to provide that the balance additional depreciation of
10% [50% of 20%] oneligible Plant & Machinery acquired &
used for less than 180 days in a previous year shall be allowed in
the immediately succeeding financial year. CommentsThe proposed
amendment fortifies the view taken in the case of DCIT vs. Cosmo
Films Ltd (2012) 13 ITR(Tri) 340 (Del),MITC Rolling Mills
P.Ltd.(ITA No.2789/Mum/2012),Birla Corporation Limited vs. DCIT (|
TANo.683 & 581 / Kol/201 1 ). Prescribed conditions on
maintenance of accounts,audit etc to be fulfilled by the approved
in house R&D facility [Sec.35(2AB)] [w. e.f.AY 2016-17]o
Sec.35(2AB) of the IT Act provides for weighted deduction of 200%
to a company engaged in the business of biotechnology or
manufacturing of the goods for the expenditure (not being
expenditure incurred on land or building) on in house R&D
facility.The company is required to enter into an agreement with
the DSIR.The company is further required to maintain separate books
of accounts and get the same audited for approval R&D facility.
- It is proposed to enlarge the procedural requirement of
fulfilment of such conditions as would be prescribed for
maintenance and audit of accounts and furnishing of reports. - It
is also proposed to provide that the report may be submitted to the
Principal CCIT or CCIT having jurisdiction over the company
claiming the weighted deduction. Commentso The DGIT (Exemptions)
does not have jurisdiction over the assessee company.In order to
have a better and meaningful monitoring mechanism for weighted
deduction u/ s 35(2AB) the facility would now be monitored directly
by the Principal CCIT or CCIT having jurisdiction over the
assessee.
23. C _ mix, 5:54 THE INSTITUTE or CHARTERED AccouNTANTs or
INDIAAnalysis of Tax Proposals in the Finance Bill,2015Cost of
acquisition and period of holding of capital asset in the hands of
resulting company in Demerger [Sec.49(1)(iii)(e)] [w. e.f.AY
2016-17]a Presently,there is no express provision in the lTAct for
determining the cost of acquisition of capital asset in the hands
of resulting company in case of transfer of capital assets by way
of demerger which is exempted u/ s 47(vib) of the Act.It is
proposed to amend Sec.49(1 )(iii)(e) of the | TAct to provide that
cost of acquisition of a capital asset acquired by the 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.Consequently,period of holding of such
asset in the hands of resulting company will also include the
period for which the asset was held by the demerged company.
Commentso The above amendment,seeks to treat demerger at par with
amalgamation with regard to cost of acquisition of capital asset as
well as period of holding in the hands of resulting company. Tax
Neutrality on merger of similar schemes of mutual funds
[Sec.47(xviii) & Sec.49(2AD)] [w. e.f.AY 2016-17]- Several
Mutual Funds are having different schemes with similar
features.SEBI has been encouraging to consolidate these mutual
funds to have simpler and fewer numbers of schemes.However,since
the process will result in transfer of unit between schemes,such
merger/ consolidation is treated as 'transfer' u/s 2(47) of the IT
Act and hence chargeable to Capital Gains tax. - To facilitate
consolidation of different scheme of mutual funds,in the interest
of investors,it is proposed to provide tax neutrality to unit
holders provided consolidation is of two or more schemes of an
equity oriented or two or more schemes of fund other than equity
oriented fund. - Accordingly,it is now proposed to insert a new
subsection (xviii) to Sec.47 to exempt transfer of a unit in a
consolidating scheme of mutual fund,in consideration to the unit of
the consolidated scheme of mutual fund. - Further,subsection (2AD)
has been inserted in Sec.49 to provide that cost of the unit
of
24. C _ max, $254 THE INSTITUTE or CHARTERED ACCOUNTANTS or
INDIAAnalysis of Tax Proposals in the Finance Bill,2015the
consolidated scheme of mutual fund received pursuant to transfer
exempt u/ s 47(xviii),shall be cost of purchase of units in the
consolidating scheme of mutual fund. a The process of such
consolidation has to be in accordance with the Securities and
Exchange Board of India (Mutual Funds) Regulations,1996 made under
the SEBI Act,1992.Amendment in the definition of Amount sought to
be evaded [Sec.271(1)(c)] [w. e.f.AY 2016-17]- Hitherto,penalty u/
s 271 (1 )(c) is levied on the amount of tax sought to be
evaded.Such penalty is computed on the amount of concealed income
or tax evaded by furnishing inaccurate particulars of income. o It
is proposed to modify the definition of amount of tax sought to be
evaded provided in Explanation 4 to clause (iii) of sub section (1)
of Sec 271 so as to compute penalty on evasion of tax in
computation of total income under normal provisions as well as
income computed u/ s115JB or 115JC of the | TAct.The computation of
amount of tax sought to be evaded will be made by the following
formula: (AB) + (CD)A Tax on assessed income as per normal
provisions. B - Tax on [assessed income as per normal provisions
minus income in respect of which particulars have been concealed or
inaccurate particulars have been furnished under normal
provisions]C - Tax on assessed income as per Sec 115JB or115JC. D -
Tax on [assessed income as per Sec 115JB or 1 15JC minus income in
respect of which particulars have been concealed or inaccurate
particulars have been furnished under Sec 115JB or Sec 115JC.
Commentso The Delhi HC in the case of CIT vs. Nalwa Sons
Investments Ltd (2010) 327 ITR 543 (Del) has held that penalty u/ s
271(1)(c) cannot be imposed on the concealment of income under
normal provisions,if the total income of the assessee is assessed
as per Sec 115JB of the IT Act.The Apex Court has also accepted the
decision of the Delhi HC & dismissed the SLP filed by the
Revenue.The proposed amendment nullifies the aforesaid decision of
the Apex Court.
25. :. /U "5:54 THE INSTITUTE or CHARTERED AccouNTANTs or
INDIAAnalysis of Tax Proposals in the Finance
Bill,2015INTERNATIONAL TAX AND TRANSFER PRICINGEligible Fund
Manager not to constitute Business Connection of offshore
investment funds - position clarified [Sec.9Aand 271 FAB] [w.
e.f.AY 2016-17]- Presently,in terms of the existing provisions of
Sec.9(1)(i) w. r.t Business Connection and Sec.6 in so far as it
relates to residential status of a person other than an
individual,an India based fund manager may create a sufficient
nexus,and hence a business connection,for the concerned offshore
Investment Fund even though such fund manager may be an independent
person.Further,income of the off-shore Investment Fund from
investment in jurisdictions other than India managed by the
India-based fund manager may be liable to tax in India due to the
location of fund manager in India and attribution of such profits
to the activity of the fund manager undertaken on behalf of the
off-shore Investment fund.Moreover,presence of the fund manager
under certain circumstances may lead to the off-shore Investment
Fund being held to be resident in India on the basis of its control
and management being in India.Accordingly,income of such offshore
Investment Fund from investments made in countries outside India
may also get taxed in India. a Accordingly,offshore Investment
Funds do not typically retain fund managers based in India,instead
many fund managers that manage India focused offshore funds,tend to
be based outside India and only have an advisory relationship in
India that provide recommendatory services. - In order to
facilitate such fund managers to have their base in India,it has
been proposed to insert a new Sec.9A to lay down a specific code
for taxability of such Offshore Investment Funds.The new section
provides that taxability of the income of the Eligible Investment
Fund from investment made in India would not be impacted by the
fact that its Eligible Fund Manager is based in India.Similarly for
income from investment made outside India,its taxability shall not
be in India for the sole reason that its Eligible Fund Manager is
based in India. - Thus the new regime proposes that the Eligible
Fund Manager in India of a Eligible Investment Fund shall not
constitute a business connection in India of the said fund on
fulfilment of specified conditions.Further,an Eligible Investment
Fund shall not be said to be resident in India merely because the
Eligible Fund Manager undertaking fund management activities is
based in India.
26. /I. / I. ~'yI. ,THE INSTITUTE OF CHARTERED ACCOUNTANTS OF
INDIAAnalysis of Tax Proposals in the Finance Bill,2015 IThe
conditions required to be fulfilled during the relevant year for
being an Eligible Investment Fund are: o the fund is not a person
resident in India;0 the fund is a resident of a country or a
specified territory with which an agreementreferred to in
sub-section (1) of Sec.90 or sub-section (1) of Sec.90A has been
entered into; 0 the aggregate participation or investment in the
fund,directly or indirectly,by persons being resident in India does
not exceed five percent of the corpus of the fund; 0 the fund and
its activities are subject to applicable investor protection
regulations in the country or specified territory where it is
established or incorporated or is a resident; o the fund has a
minimum of twenty five members who are,directly or indirectly,not
connected persons; 0 any member of the fund along with connected
persons shall not have any participation interest,directly or
indirectly,in the fund exceeding ten percent; 0 the aggregate
participation interest,directly or indirectly,of ten or less
members along with their connected persons in the fund,shall be
less than fifty percent; 0 the investment by the fund in an entity
shall not exceed twenty percent of the corpus of the fund; o no
investment shall be made by the fund in its associate entity; 0 the
monthly average of the corpus of the fund shall not be less than
Rs.100 cr. and if the fund has been established or incorporated in
the previous year,the corpus of fund shall not be less than Rs.100
cr.at the end of such previous year; 0 the fund shall not carry on
or control and manage,directly or indirectly,any business in India
or from India;0 the fund is neither engaged in any activity which
constitutes a business connectionin India nor has any person acting
on its behalf whose activities constitute a business connection in
India other than the activities undertaken by the eligible fund
manager on its behalf; 0 the remuneration paid by the fund to an
eligible fund manager in respect of fund management activity
undertaken on its behalf is not less than the arm's length price of
such activity.
27. C _ max, $254 THE INSTITUTE or CHARTERED ACCOUNTANTS or
INDIAAnalysis of Tax Proposals in the Finance Bill,2015The
conditions required to be fulfilled for being an Eligible Fund
Manager are: 0 the person is not an employee of the Eligible
Investment Fund or a connected person of the fund; 0 the person is
registered as a fund manager or investment advisor in accordance
with the specified regulations; 0 the person is acting in the
ordinary course of his business as a fund manager; o the person
along with his connected persons shall not be entitled,directly
orindirectly,to more than twenty percent of the profits accruing or
arising to the eligible investment fund from the transactions
carried out by the fund through such fund manager. However this
amendment shall not result in excluding any income from the total
income of the Eligible Investment Fund,which would have been so
included irrespective of whether the activity of the eligible fund
manager constituted the business connection in India of such fund
or not. It has also been proposed that the Fund shall furnish a
statement in a prescribed form regarding fulfilment of above
specified conditions to tax authorities within 90 days from the end
of the financial year failing which the Fund would be liable to
penalty of Rs.5,00,000Reduction in tax rates of income by way of
Royalty or Fees for Technical Services [Sec.1 1 5A] [w. e.f.AY
2016-17]c As per the existing provisions of Sec.115A of the IT
Act,the NonResident taxpayers are liable to pay tax at the rate of
25% of gross amount of income by way of Royalty and Fees for
Technical Services received from Government or an Indian concern in
pursuance of an agreement made by the foreign company with
Government or the Indian concern after the 31-03-1976, and where
such agreement is with an Indian concern,the agreement is approved
by the Central Government or where it relates to a matter included
in the industrial policy,for the time being in force,of the
Government of India,the agreement is in accordance with that
policy,and,which are not effectively connected with permanent
establishment,if any,of the non-resident in India. 0 It is proposed
to amend Sec.115A to reduce the above tax rate of 25% to 10% on the
gross amount. *" -" n.I
28. /: ./U I. =yI. r , THE INSTITUTE OF CHARTERED ACCOUNTANTS
OF INDIAAnalysis of Tax Proposals in the Finance Bill,2015
IIndirect Transfers - Deemed income taxable in India - provisions
clarified [Sec.9(1),47(viab),47(vicc),271GAand 285A] [w. e.f.AY
2016-17]Presently,Explanation 5 to Sec.9(1)(i) provides that any
share or interest in a company or an entity registered or
incorporated outside India shall be deemed to be situated in India
if the share or interest derives its value substantially from the
assets located in India.Hence,any transfer of such share/ interest
in a Foreign Company results in an indirect transfer of Indian
assets.However,the term value and substantially were not defined
under the | TAct leading to significant subjectivity and
uncertainty. The present Budget proposes to amend Sec.9(1 )(i) of
the | TAct by inserting Explanation 6 to provide clarity on the
above.Accordingly,it is proposed to provide that any transfer of
interest in a foreign company or entity shall be deemed to derive
its value substantially from the assets (whether tangible or
intangible) located in India,if on the specified date,the value of
Indian assets (not net of liabilities) exceeds the amount of Rs.10
Crs.and represents at least 50% or more of the fair market value of
all the assets (not net of liabilities) owned by such foreign
company or entity. However,certain exceptions have been carved out
vide Explanation 7 and vide amendment in Sec.47 such as: 0 Transfer
outside India of share/ interest in the foreign company/ entity
which directly owns the assets situated in India and the transferor
(whether individually or along with its AEs),neither holds the
management right or control,nor holds voting power or share capital
or interest exceeding 5% in such foreign company/ entity;or0
Transfer outside India of share/ interest in the foreign company/
entity which indirectly owns the assets situated in India and the
transferor (whether individually or along with its AEs),neither
holds the right of management or control in relation to such
foreign company/ entity,nor holds any right in,or in relation
to,such company or entity which would entitle him to the right of
management or control in the company or entity that directly owns
the assets situated in India,nor holds such percentage of voting
power or share capital or interest in such company or entity which
results in holding of (either individually or along with associated
enterprises) a voting power or share capital or interest exceeding
5% of the total voting power or total share capital or total
interest,as
29. i . THE INSTITUTE or CHARTERED ACCOUNTANTS or INDIA
Analysis of Tax Proposals in the Finance Bill,2015 I the case may
be,of the company or entity that directly owns the assets situated
in India.0 Any transfer,in a scheme of amalgamation,of a capital
asset,being a share of aforeign company,which derives,directly or
indirectly,its value substantially from the share or shares of an
Indian company,held by the amalgamating foreign company to the
amalgamated foreign company,if at least 25% of the shareholders of
the amalgamating foreign company continue to remain shareholders of
the amalgamated foreign company and such transfer does not attract
tax on capital gains in the country in which the amalgamating
company is incorporated; 0 Any transfer in a demerger,of a capital
asset,being a share of a foreign company,which derives,directly or
indirectly,its value substantially from the share or shares of an
Indian company,held by the demerged foreign company to the
resulting foreign company,if the shareholders,holding not less than
3/4th in value of the shares of the demerged foreign
company,continue to remain shareholders of the resulting foreign
company and such transfer does not attract tax on capital gains in
the country in which the demerged foreign company is incorporated.
In case where all the assets owned,directly/ indirectly,by a
company or entity are not located in India,the income of the
non-resident transferor,from transfer outside India deemed to
accrue or arise in India,shall be only such part of the income as
is reasonably attributable to assets located in India.The relevant
rules in this regard shall be prescribed. It is proposed to insert
Sec.285A vide which the Indian concern through or in which
theIndian assets are held by the foreign company or the entity
shall be under obligation tofurnish information relating to the
off-shore transaction having the effect of directly orindirectly
modifying the ownership structure or control of the Indian company
or entity.If the Indian Entity fails to do so,the income-tax
authority in terms of newly inserted Sec. 271 GA may direct that
such Indian concern shall pay,by way of penalty:-o a sum equal to
2% of the value of the transaction in respect of which such failure
has taken place,if such transaction had the effect of directly or
indirectly transferring the right of management or control in
relation to the Indian concern; 0 Rs.5,00,000in any other
case.
30. I. /5:54 THE INSTITUTE or CHARTERED ACCOUNTANTS or INDIA[
Analysis of Tax Proposals in the Finance Bill,2015CBDT to notify
rules for giving foreign tax credit of income tax paid outside
India [Sec.295] [w. e.f.01-06-2015]o Presently,Sec.91(1) of the IT
Act provides for relief to Indian residents in respect of
income-tax on the income which is taxed in India as well as in the
country with which there is no DTAA.The present mechanism is to
provide relief as a deduction from the Indian income-tax of a sum
calculated on such doubly taxed income,at the Indian rate of tax or
the rate of tax of said country,whichever is lower.In cases of
countries with which India has entered into an agreement for the
purposes of avoidance of double taxation under Sec.90 or Sec.90A,a
relief in respect of income-tax on doubly taxed income is available
as per the respective DTAAS. o Presently,the IT Act does not
provide the manner for granting such credit of taxes.Accordingly,it
is proposed to amend sub-section (2) of Sec.295 of the IT Act so as
to provide that CBDT may make rules to provide the procedure for
granting relief or deduction,as the case may be,of any income-tax
paid in any country or specified territory outside India,under
Sec.90, 90A or 91, against the income-tax payable under the | TAct.
Threshold limit for applicability of domestic transfer pricing
provisions raised from Rs.5 Crs.to Rs.20 Crs.[Sec.92BA] [w. e.f.AY
2016-17]- Existing Transfer Pricing Regulations in India vide
Sec.92BA provide that Transfer Pricing Provisions shall apply to
specified domestic transactions where the aggregate of such
transactions in the relevant previous year exceeds a sum of Rs.5
Crs. o It is proposed to amend Sec.92BA to increase the above
threshold of Rs.5 Crs.to Rs.20 Crs. Interest paid by Indian Branch
to Foreign Banking companies taxable in India and liable to
Withholding tax [Sec.9] [w. e.f.AY 2016-17]- The CBDT vide its
Circular No.740 dated 17-04-1996 had earlier clarified that branch
of a foreign company in India is a separate entity for the purpose
of taxation under the IT Act and accordingly TDS provisions would
apply along with separate taxation of interest paid to head office
or other branches of the non-resident,which would be chargeable to
tax in India. 28
31. / I IN "52:;THE INSTITUTE or CHARTERED ACCOUNTANTS or INDIA
Analysis of Tax Proposals in the Finance Bill,2015 I o The
principle enshrined in the Said Circular is now proposed to be
incorporated in the ITAct by amending Sec.9(1) to provide that in
the case of a non-resident,being a person engaged in the business
of banking,any interest payable by the permanent establishment in
India of such non-resident to the head office or any other part of
such non-resident outside India shall be deemed to accrue or arise
in India and shall be chargeable to tax in addition to any income
attributable to the permanent establishment in India and the
permanent establishment in India shall be deemed to be a person
separate and independent of the non-resident person of which it is
a permanent establishment and the provisions of the IT Act relating
to computation of total income,determination of tax and collection
and recovery would apply. o Accordingly,the PE in India shall be
obligated to deduct tax at source on any interest payable to either
the head office or any other branch or PE,etc.of the non-resident
outside India.Further,nondeduction would result in disallowance of
interest claimed as expenditure by the PE and may also attract levy
of interest and penalty in accordance with relevant provisions of
the | TAct. Concessional tax rate u/ s 194LD relating to Income by
way of interest on certain securities extended upto 30-06-2017
[Sec.194LD] [w. e.f.01-06-2015]o Sec.194LD presently provides lower
withholding tax @ 5% in case of interest payable on or after 01-06
-2013 but before 01-06-2015 to Flls and Qualified Foreign Investors
(QF| s) on their investments in Government securities and rupee
denominated bonds of an Indian Company if the rate of interest does
not exceed the rate notified by the Central Government. - To align
the eligibility period u/ s 194LC with Sec.194LD,the bill proposes
to amend Sec.194LD to extend the concessional rate of 5% upto
30-06-2017 also. IT Act and Depository Receipt Scheme,2014 aligned
to extend tax benefits to depository receipts issued against
specified securities [Sec.1 15ACA] [w. e.f.AY 2016-17]o The
Depository Receipts Scheme,2014 has been notified by the Department
of Economic affairs (DEA) vide Notification ENo.9/1/2013ECB dated
21-10-2014. This scheme replaces | ssue of Foreign Currency
Convertible Bonds and Ordinary Shares (through depository receipt
mechanism) Scheme,1993. 7 . ";)_.6!. -'. .:.29
32. /: ./U I~IV| :f, THE INSTITUTE OF CHARTERED ACCOUNTANTS OF
INDIAAnalysis of Tax Proposals in the Finance Bill,2015 IThe
current taxation scheme of income arising in respect of depository
receipts under the | TAct is aligned with the earlier scheme which
was limited to issue of Depository Receipts (DRS) based on the
underlying shares of the company issued for this purpose (i. e.
sponsored GDR) or Foreign Currency Convertible Bonds (FCCB) of the
issuing company and where the company was either a listed company
or was to list simultaneously.Besides,the holder of such DRs was a
non-resident only. As per the new scheme Depository Receipts (DRS)
can be issued against the securities of listed,unlisted or private
or public companies against underlying securities which can be debt
instruments,shares or units etc.Further,both the sponsored issues
and unsponsored deposits and acquisitions are permitted.Also,DRs
can be freely held and transferred by both residents and
non-residents. Since the tax benefits under the IT Act were
initially intended to be provided in respect of sponsored GDRS and
listed companies only,clause (a) of the explanation Sec.115ACA of
the IT Act has been amended in order to continue the tax benefits
only in respect of GDR'sagainst the issue of: o ordinary shares of
issuing company,being a company listed on a recognised stock
exchange in India;or 0 Foreign currency convertible bonds of
issuing company. Exemption to specified income of Core Settlement
Guarantee Fund [Sec.10(23EE)] [w. e.f. AY2016-17]As per the
existing provisions,income by way of contributions to the Investor
Protection Fund set up by recognised stock exchanges in India,or by
commodity exchanges in India or by a depository is exempt from
taxation. It has been proposed to exempt the specified income of
Core Settlement Guarantee Fund subject to similar conditions as
provided in case of Investor Protection Fund set up by the
Recognized Stock Exchange or Commodity Exchange or a Depository.
Where any amount standing to the credit of the Fund and not charged
to income-tax during any previous year is shared,either wholly or
in part with the specified person being any recognized clearing
corporation which establishes and maintains the Core Settlement
Guarantee Fund and the recognised stock exchange being the
shareholder
33. :]/ 'I5254 THE INSTITUTE or CHARTERED ACCOUNTANTS or INDIA[
Analysis of Tax Proposals in the Finance Bill,2015of such clearing
corporation,the whole of the amount so shared shall be deemed to be
the income of the previous year in which such amount is shared.
Residency Criteria of Companies - widened by introduction of Place
Of Effective Management concept [Sec.6] [w. e.f.AY 2016-17]a As per
the existing provisions of Sec.6 of the IT Act,a company is said to
be a resident in India in any previous year,if: - 0 it is an Indian
company;or 0 during that year,the control and management of its
affair is situated wholly inIndia. o Sec.6 is proposed to be
amended to widen the concept of residency test for companies as
under : - o it is an Indian company;or o its place of effective
management,at any time in that year,is in India. o Place of
Effective Management (POEM) shall mean a place where key management
andcommercial decisions that are necessary for the conduct of the
business of an entity as a whole are,in substance made.
Rationalisation of MAT provisions for members of an AOP and Flls
[Sec.115JB] [w. e.f. AY2016-17]o Presently,a company which is a
member of an AOP is not liable to tax in respect of share of the
income from such AOP.However,such company is liable to pay MAT on
such share of income since there is no specific exclusion under
Sec.115JB. - Accordingly,it has been proposed to amend Sec.115JB of
the IT Act to provide that the share of a member of an AOP,in the
income of the AOP,on which no income-tax is payable in accordance
with Sec.86 of the Act,should be excluded while computing the MAT
liability of the member under 115JB of the Act.The expenditures,if
any,debited to the profit loss account,corresponding to such income
are also proposed to be added back to the book profit for the
purpose of computation of MAT; o Further,vide Finance Act
(No.2),2014 it was provided that any securities held by Flls
34. W _ mix) I THE INSTITUTE or CHARTERED ACCOUNTANTS or
INDIAAnalysis of Tax Proposals in the Finance Bill,2015which has
invested in such securities in accordance with the regulations made
under the SEBI Act 1992 would be treated as a capital
asset.Consequently,the income arising to a FII from transactions in
securities would always be in the nature of capital gains. o It is
now proposed to amend Sec.115JB of the IT Act to provide that
Income from transactions in securities (other than short term
capital gains arising on transactions on which securities
transaction tax is not chargeable) arising to a FII,shall be
excluded from the chargeability of MAT and the profit corresponding
to such income shall be reduced from the book profit.The
expenditures,if any,debited to the profit loss
account,corresponding to such income are also proposed to be added
back to the book profit for the purpose of computation of MAT.
35. :. /U I5254 THE INSTITUTE or CHARTERED AccoUNTANTs or
INDIAAnalysis of Tax Proposals in the Finance Bill,2015TRUST &
CHARITABLE INSTITUTIONSTaxation Regime for Real Estate Investment
Trust (RE| T) and Infrastructure Investment Trust (Invit)
[Sec.2(13A),10(23FCA),111A(1),115UA,w. e.f.AY 2016-17 and 194-I and
194-LBA w. e.f.01-06-2015]- The Finance (No.2) Act,2014 had amended
to put in place a special taxation regime in respect of business
trusts. o Finance Bill 2015 propose to substitute business trust to
mean a trust registered as an Invit under Securities and Exchange
Board of India (Infrastructure Investment Trusts) Regulations,2014
made under SEBI Act,1992 or REIT under Securities and Exchange
Board of India (Infrastructure Investment Trusts) Regulations,2014
made under SEBI Act,1992 or the units which are required to be
listed on recognised stock exchange in accordance with aforesaid
regulations. a In order to rationalise the provision,following
proposal are made under the Finance Bill,2015 which are summarised
hereunder:Particulars Existing Provisions Proposed amendments T
Exchange of shares Sponsor Sponsor if SPVs with units of the
business trust Capital gain will be deferred and No changetaxed at
the time of sale of units of the business trust by sponsor. Unit
holder of the trust Unit holder of the trust (other than sponsor)
(other than sponsor) Not Applicable Not Applicable Sale of listed
units Sponsor Sponsor of business trust through Initial Offer
Benefit of concessional regime Benefit of concessional regime at
the time of listing is not available at the time of is available at
the time of off of business trust on offloading of units of
business loading of units of business trust recognised stock trust
exchange Parity of tax treatment on offloading of units vis-a-vis
off loading of underline shareholdingthrough an IPO
36. / I. THE INSTITUTE or CHARTERED ACCOUNTANTS or INDIA
Analysis of Tax Proposals in the Finance Bill,2015 I Particulars
Existing Provisions Proposed amendmentsS'| '|' shall be levied on
sale of units of business trust on similar lines as in case of
unlisted equity shares under an IPOLong term capital gain will be
exempt u/ s. 10(38) of IT ActShort term capital gain will be taxed
@15%Cost of units of business trust to No change be considered as
cost of shares to the sponsorHolding period of shares to be No
change included in the holding period of such securities sate f
listed Its Long term capital gain will be No change f busmess trust
exempt u/ s. 10(38) of IT ActShort term capital gain will be taxed
@15%
37. / I IN "52:;THE INSTITUTE or CHARTERED AccoUNTANTS or INDIA
Analysis of Tax Proposals in the Finance Bill,2015 I Particulars
Existing Provisions Proposed amendmentsInterest and withholding tax
thereonTrustInterest received from SPV is not taxable and as
such,no withholding of tax by SPVTrust to withhold tax @5% on
payments to non-resident unit holder and 10% in case of resident
unit holderTrustNo changeTrust to withhold tax @5% on payments to
non-resident unit holder and 10% in case of resident unit
holderDividend incomeTrustDividend by SPV to be exemptDDT to be
paid by SPV & not by TrustSponsorIncome distributed by business
trust to unit holder will be exemptUnit holder of the trust (other
than sponsor)TrustNo changeSponsor No ChangeUnit holder of the
trust (other than sponsor)Income distributed by business No change
trust to unit holder will be exempt Disposal of assets Taxable as
capital gain at No change by trust applicable rates other Income
Any other income taxable at MMR N0 Change
38. /5:54 THE INSTITUTE or CHARTERED AccoUNTANTS or INDIA
Analysis of Tax Proposals in the Finance Bill,2015 I Particulars
Existing Provisions Proposed amendmentsRental income Business trust
being REIT only arising to REIT on real estate assetheld
directlyRental income taxed at MMRSponsorIncome distributed by
business trust to unit holder will be exemptUnit holder of the
trust (other than sponsor)Income distributed by business trust to
unit holder will be exemptBusiness trust being REIT onlyNo tax in
the hands of business trustDistributed income in the nature of
rental income arising on real estate asset owned directly by REIT
shall be deemed to be income of unit holder chargeable to taxREIT
to withhold tax @10% in case of resident unit holder and at the
rate in force on any sum chargeable to tax in case of non-resident
unit holderRate in force in relation to an AY for the purpose of
TDS u/s.195, shall be rate specified in the Finance Act or the rate
specified in an agreement u/ s. 90(2) between India and Government
of any country outside IndiaNo TDS u/ s.194-|w. e.f.1 June 2015 by
REIT where income iscredited or paid to a businesstrust
directlyBusiness Trusts are required to furnish its return of
income u/ s 139(4E) of the IT ActComments - Pass through status on
rental income for RE| Ts.o RE| Ts enable investors to channelise
their investments into India's real estatesector and infrastructure
sector through a regulated mechanism.RE| Ts and | NV| Ts would also
provide liquidity to real estate and infrastructure projects.
39. W _ / -jszja THE INSTITUTE or CHARTERED AccoUNTANTS or
INDIAAnalysis of Tax Proposals in the Finance Bill,2015Time Limit
to Intimate Assessing Officer about Accumulated Fund not applied
for Charitable or Religious Purposes [w. e.fAY 2016-17]o Under the
existing provision of Sec.11(2) there is no clarity regarding the
time limit for furnishing of Form 10 r. w.r.17 of Income Tax Act
Rules,1962 to be filed before the AO informing him about
accumulation of fund which has not been applied for charitable
purpose.Further the existing provisions allows for such
accumulation,subject to conditions specified,for the period of 10
years. - In order to remove ambiguity regarding the time limit,the
proposed amendment specifies that such form shall be filed before
due dates specified u/ s 139(1).Further,accumulation of funds as
per the manner specified shall not exceed 5 years instead of 10
years. - In order to make the provision stringent,Sec.13(9) has
been introduced which provides that in case Form 10 is not
submitted on or before the due date of filing return of income u/ s
139(1),then the benefit of accumulation would not be available and
such income would be taxable at the applicable rate.Further,the
benefit of accumulation would also not be available if return of
income is not furnished before due date of filing of income. Income
of Swachh Bharat Kosh and Clean Ganga Fund Exempt From Income Tax
[Sec.10(23C)] [w. r.e. f. AY 2015-16]- The existing provisions of
Sec.10(23C) of the IT Act provide for exemption from tax in respect
of the income of certain charitable funds or
institutions.Considering the importance of Swachh Bharat Kosh and
Clean Ganga Fund,it is proposed to include these funds in the list
of eligible entities for the purpose of Sec.10(23C) exempting their
income from the purview of income tax. Mandatory furnishing of
return of income by universities and hospitals referred to in
Sec.10 (23C) [Sec.139(4C)] [w. e.fAY 2016-17]- Under the existing
provisions of Sec.139, all entities whose income is exempt u/
s10(23C),other than university or educational institution specified
in sub-clause (iiiab) and hospital or other institution specified
in sub-clause (iiiac),are mandatorily required to file their return
ofincome. , -(,3;{T= t! .. . :"iI.37
40. / I IN "52:;THE INSTITUTE or CHARTERED AccoUNTANTS or INDIA
Analysis of Tax Proposals in the Finance Bill,2015 I o It is
proposed to amend Sec.139(4C) to provide for mandatory filing of
return of income by these entities. Order passed u/ s 10(23C)
appealable to ITAT [w. e.f.01-06-2015]- Income received by a person
on behalf of any university or other education institution existing
solely for education purpose or any other purpose on behalf of any
hospital or other institution providing medical treatment,existing
solely for philanthropic purpose is not liable for tax under
sub-clause (vi) & (via) of sec.10(23C), if approved by
prescribed authority. o Hitherto,order received from the prescribed
authority is not appealable before Appealable Tribunal.It is
proposed to amend Sec.253(1),to make order passed u/ s 23(C)(vi )
or (via) as appealable to the Appealable Tribunal. Definition of
Charitable Purpose to include Yoga & Rationalisation of scope
of advancement of any other object of general public utility
[Sec.2(15)] [w. e.f.AY 2016-17]a Sec.2(15) defines Charitable
purpose to include activity in the nature of relief of the
poor,education,medical relief and advancement of any other object
of general public utility.Proviso to Sec.2(15),specifies that
advancement of any other object of general public utility shall not
be a charitable purpose,if it involves the carrying on of
commercial activity.However,this restriction shall not apply if the
aggregate value of the receipts from the activities referred above
is Rs.25,00,000 or less in the previous year. - In order to promote
Yoga which has recently received international recognition too by
the UN,it is proposed to include yoga within the ambit of
activities in the nature of Charitable Purpose. o Further it has
been proposed to provide that advancement of any other object of
generalpublic utility as mentioned in the above definition shall
not be charitable purpose unless such activity is undertaken in the
course of actual carrying out of such advancement of any other
object of general public utility and 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.
41. .1/-ixTHE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIAPass
through status for Category - I & Category - II Alternative
Investment Funds (A| F)[Sec. 115UB][w. e.f. AY 2016-17]0 Vide SEBI
(AIF) Regulations,2012, AlFs have been classified into following
threecategories:Analysis of Tax Proposals in the Finance
Bill,2015ParticularsLegal formCategory - ICategory - IICategory -
IIIFund can be set up as a Trust,Company,LLP or any other body
corporateCriteriaInvest in startup or early stage ventures or
social ventures or SMES orPrivate equity funds or debt funds which
do not fall in Category I and IIIFunds that employ diverse or
complex trading strategies andand which do not undertake leverage
or borrowing other than to meet day-to-dayinfrastructure or other
sectors or areas which the Government or regulators consider asmay
employ leverage including through investment inlisted or
unlistedsocially or economically operational derivatives desirable
requirements Investment Funds shall invest not more than 25% of the
corpus Fund shall invest not Condition in one Investee Company more
than 10% of the corpus in one Investee Company Tenure Minimum
tenure of 3 years No tenure specified- Vide Finance Act,2013,
Sec.10(23FB) r. w.s 115U was amended to provide the scope of
taxability of income of certain Category I of AIF. o It is proposed
to insert Sec.115UB to provide specific taxability regime for
Category I & Category - | |A| Fs as well.The proposals are
summarised hereunder: Income in the nature of profits and gains of
business or profession shall be taxable at the applicable
rates.Other Income such as Capital Gain & Income from other
sources shall be exempt from tax. Taxability in r hands of
AIFTaxability in c.Income in the nature of profits and gain of
business or profession hands of Unit received from AIF shall be
exempt.holder of AIF c Income received in the nature of Capital
Gain & Income from othersources shall be chargeable to
taxWithholding tax c.Income received by AIF would be exempt from
TDS requirement. r TDS @ 10% under newly proposed Sec.194LBB shall
be deducted by AIF at the time of payment of income in the nature
of Capital Gain & Income from other sources to unit holder
42. /II THE INSTITUTE or CHARTERED ACCOUNTANTS or INDIA
Analysis of Tax Proposals in the Finance Bill,2015 Carry forward
and v Losses shall be allowed to be set off and carried forward to
AIF as set-off of losses per provisions of Chapter VI but same
cannot be transferred to unit holders Dividend income A Provisions
of DDT shall not apply to the income paid by AIF to its unit
holders Return of c Mandatory for AIF to file its ROI u/ s 139 |
ncome(RO| ) Applicability Z Sec.115UB shall also apply to Certain
category I of AIF which wascovered by Sec.115U
43. :. /U I$254 THE INSTITUTE or CHARTERED AccoUNTANTs or
INDIAAnalysis of Tax Proposals in the Finance Bill,2015PROCEDURAL
& OTHERSAbolition of Wealth TaxAct,1957 [w. e.f.AY 2016-17]o
Under the existing provisions of Wealth tax Act,1957, wealthtax @
1% is levied on an Individual or HUF or Company,if the net wealth
of such person exceeds Rs.30,00,000 on the valuation date i . e.
last date of the previous year. c It is proposed to abolish the
Wealth Tax Act since revenue collection from the same is not
commensurate with the high cost of collection. a Further,to track
the wealth held by individuals and entities,it is proposed that
information relating to assets which is currently required to be
furnished in the wealth- tax return shall be captured by suitably
modifying income-tax return. Withdrawal of exemption from TDS on
payments to transport contractors owning more than ten goods
carriage [Sec.194C(6)] [w. e.f 01-06-2015]- Hitherto,as per
sub-section (6) of Sec.194C amended vide Finance (No.2) Act,2009 w.
e.f.01-10-2009, no tax was required to be deducted from any sum
paid to a transport contractor provided such contractor furnishes
his PAN. - It is proposed to amend sub-section (6) of the Sec.194C
to restrict the benefit of non deduction of tax on payment made to
only those transport contractors owning ten or less goods carriage
at any time of the previous year and a declaration to this effect
is furnished. Assessment of Income of a person other than the one
in whose case search is initiated [Sec.153C] [w. e.f.01-06-2015]0
Under the existing provisions of Sec.153C,during the course of a
search,if the A0 is satisfied that books of account or document
seized or requisitioned belong to any person other than the person
searched,then the books of accounts or documents or assets seized
or requisitioned shall be handed over to the AO having jurisdiction
over such other person and he shall proceed against such other
person. , -(,3;{T= t! .. . :"iI.4
44. /: ./U I~IVl: f,THE INSTITUTE OF CHARTERED ACCOUNTANTS OF
INDIAAnalysis of Tax Proposals in the Finance Bill,2015 IIt is
proposed that even if the books of account or document seized or
requisitioned pertain to,or any information contained
therein,relate to any person other than the searched person,then
the books of accounts or documents or assets seized or
requisitioned shall be handed over to the AO having jurisdiction
over such other person and he shall proceed against such other
person. Widening the scope of filing application before Settlement
Commission [Sec.245A] [w. e.f01-06-2015]Under the existing
provisions,an assessee may make an application before Settlement
Commission (ITSC) in respect of assessment year or years which may
be pending before AO on date on which application is
made.Presently,where a notice is issued u/ s 148, the assessee is
eligible to make application to ITSC only for that year and not for
other assessment years. It is proposed to amend clause (i) of the
Explanation to Sec.245A(b) to enable the assessee to approach ITSC
even for other assessment years where the return has been filed but
notice u/ S148 has not been issued. Hitherto,assessee can file
application in respect of those years for which proceedings have
commenced on 1st day of the assessment year and assessment has not
been completed by virtue of clause (iv) of Explanation to
Sec.245A(b). It is proposed to amend above clause to provide that a
proceeding for any assessment year shall be deemed to have
commenced from the date on which the return of income has been
furnished u/ s 139 or in response to notice u/ s 142 and concluded
on the date on which the assessment is made or on the expiry of 2
years from the end of relevant assessment year where no assessment
is made. Rectification Order by Settlement Commission
[Sec.245D(6B)] [w. e.f 01-06-2015]42Presently,Settlement Commission
(ITSC) may amend order passed u/s 245D(4) to rectify its mistake
apparent from record within 6 months from the date of order. It is
now proposed to substitute Sec.245D(6B) to provide ITSC may rectify
its order u/ s 245D(4) as follows:
45. :. /U 1$254 THE INSTITUTE or CHARTERED AccoUNTANTS or
INDIAAnalysis of Tax Proposals in the Finance Bill,2015(a) Within 6
months from the end of the month in which the order was passed
or(b) Within 6 months from the end of the month in which
application for rectification has been made (before the end of
period of 6 months) by the Principal Commissioner or Commissioner
or applicant. Immunity by Settlement Commission [Sec.245H] [w. e.f
01-06-2015]- Presently,Settlement Commission on fulfilment of
certain conditions can grant immunity from penalty &
prosecution.However,there is no requirement to record reasons in
writing as to why immunity has been granted.It is now proposed that
the ITSC will have to record reasons in writing while granting
immunity from above proceedings. Bar of subsequent application
[Sec.245K] [w. e.f 01-06-2015]- Presently,a person can approach the
ITSC once in a life time.However,such person can again approach
ITSC through a related person.This defeat the purpose of
restricting the opportunity of approaching the Commission only
once.It is now proposed that even the related persons as defined
would also not be considered as eligible for filing application.
Application of seized Cash [Sec.132B] [w. e.f 01-06-2015]- It is
proposed to amend Sec.132B to allow seized assets to be adjusted
towards the assessee's tax liability under the settlement
application in search cases. Levy of Interest u/ s 234B [Sec.234B]
[w. e.f.01-06-2015]- Hitherto,when the income assessed u/ s 147 or
153A exceeds the income determined in assessment
proceedings,interest u/ s 234B is computed @ 1% per month or a part
thereof from the date of determination of total income u/ s 143(1)
or 143(3) to the date of reassessment u/ S147 or Sec.153A. It is
now proposed to change the time frame for levy of interest u/ s
234B from 1st day of assessment year to the date of determination
of total income u/ s 147 or 153A. o It is also proposed to insert
sub-section (2A) to Sec.234B to clarify the time period for7 . ";;
_-.ff:"--4 4-
46. I. /5:54 THE INSTITUTE or CHARTERED AccoUNTANTS or INDIAi
Analysis of Tax Proposals in the Finance Bill,2015which interest @
1% for a month or part thereof would be computed when an
application is made before Settlement Commission as below: c When
an application is made to the ITSC,the additional amount of income
tax paid shall be liable to interest u/ s 234B from the 1st day of
assessment year to the date of making application. c Further,the
additional amount of tax levied by the ITSC in its order u/ s
245D(4), shall be liable to interest u/ s 234B for a period
starting from the 1st day of assessment year to the date on which
the order is passed. Simplification of TDS mechanism on withdrawal
of accumulated balance from Employees Provident Fund Scheme (EPFS)
[Sec.192A& Sec.197A] [w. e.f01-06-2015]o Under the existing
provision of Sec.10(12) withdrawal of accumulated balance by an
employee from recognized Provident Fund (RPF) is exempt from
tax,provided the employee has rendered continuous service with the
employer for more than 5 years except in specified circumstances.In
case of premature withdrawal the exemption is withdrawn and the
entire amount is taxable.Rule 10 of the PartAof the Fourth schedule
requires trustees of the RPF or the person authorized thereof to
deduct tax at the time of making payment to the employee
considering it as income under the head salaries.However,trustee
does not generally have details of year wise taxable income of the
employee. - In order to simplify the TDS application on such
withdrawal,it is proposed to insert Sec.192A to provide for fixed
rate of TDS @ 10% on withdrawal of Rs.30,000 or more.Further,in
case the payee does not furnish PAN,tax shall be deducted at the
maximum marginal rate. - To avoid TDS in case where tax on total
income is likely to be nil during the year,sub- section (1A) and
(1C) of Sec.197A has been amended to provide for submission of self
declaration in Form 15G and 15H. Modification of definition of
'accountant [Sec.288] [w. e.f 01 -06-201 5]o Explanation below
Sec.288(2) defines 'accountant as chartered accountant within the
meaning of Chartered Accountants Act,1949. The said definition
includes a person eligible to be appointed as an auditor u/ s
226(2) of the CompaniesAct,1956.
47. /: ./U I{Viki , THE INSTITUTE OF CHARTERED ACCOUNTANTS OF
INDIAAnalysis of Tax Proposals in the Finance Bill,2015 IIt is
proposed to amend the said explanation to provide that the
expression accountant means a chartered accountant who holds a
valid certificate of practice under the Chartered Accountants
Act,1949.Further,several provisions of the IT Act (e. g.
Sec.44AB,Sec.80-IA,Sec 115JB etc. ) mandate the taxpayers to
furnish audit reports and certificates issued by an 'accountant as
defined u/ s 288 for ensuring correct reporting/ computation of
taxable income.The proposed amendment also seeks to modify the term
'accountant in respect of the above provisions as follows: c A
person who is not eligible to be appointed as an auditor of a
company u/ s 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 Act in respect of that
company.Amendment on similar lines is proposed for noncompany
assessees. r ineligibility for carrying out any audit or furnishing
of any report/ certificate in respect of an assessee shall not make
an accountant ineligible for attending income-tax proceedings as
authorised representative on behalf of that assessee.A person
convicted by a court of an offence involving fraud shall not be
eligible to act as authorised representative for a period of 10
years from the date of such conviction. c A new explanation has
been inserted after sub-section (7) to provide the definitionof
relative in relation to an individual to mean
spouse,brother,sister,any lineal ascendantl descendant of the
spouse/ brother/ sister etc. Clarification on orders to be
considered as erroneous and prejudicial to the interest of revenue
[Sec.263] [w. e.f01-06-2015]Hitherto,revision proceedings u/ s 263
can be initiated by the CIT if the order passed by the A0 is
erroneous or prejudicial to the interests of the revenue.The
expressions erroneous or prejudicial to the interest of the revenue
has not been defined in the ITAct. It is proposed to insert an
Explanation in subsection (1) to Sec.263 to provide that theJW~'r.
,3: _.=4 IE 4-. . ;-2: I- A'-
48. C _ max, $254 THE INSTITUTE or CHARTERED AccoUNTANTS or
INDIAAnalysis of Tax Proposals in the Finance Bill,2015orders
passed by the A0 shall be deemed to be erroneous or prejudicial to
the interests of the revenue if the CIT or Principal CIT opines
that the same is passed : a Without making enquiry or verification
which should have been madea Allowing any relief without enquiring
into the claimc Without following the order,directions or
instructions of the Board. c Without considering the decision of
Jurisdictional HC & SC which is prejudicial to the assessee.
Widening the restriction on taking or accepting certain loan or
deposit or repayments of such loan or deposit [Sec.269SS &
269T] [w. e.f.01-06-2015]> Non acceptance of any sum as advance
or otherwise for transfer of an immovable propertyin cash
[Sec.269SS]o Hitherto,u/ s 269SS,acceptance of any loan or deposit
of Rs.20,000 or more could not be made otherwise than by way of
account payee cheque or account payee bank draft or use of
electronic clearing system.It is proposed to amend Sec.269SS of the
IT Act 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,whether or not the
transfer takes place. > Non repayment of any sum as advance for
transfer of an immovable property in cash [Sec.269T] -
Similarly,scope of Sec.269T is also proposed to be enlarged so as
to restrict repayments ofany sum of money as advance in relation to
transfer of an immovable property,whether or not the transfer takes
place. > Penalty for acceptance of advance or otherwise or
repayment thereof for transfer of an immovable property in cash
[Sec.271D & 271E]In line with the proposal made in Sec.269SS
& 269T,penalty for violation of the amendments therein are
proposed to be covered by making consequential amendment in
Sec.271D & 271E respectively46
49. /_/ ii IiTHE INSTITUTE or CHARTERED ACCOUNTANTS or INDIA
Analysis of Tax Proposals in the Finance Bill,2015 I Comments - The
amendment is proposed to curb generation of black money by way of
dealings in cashin immovable property transactions. Enhancement of
Income Limit for Decision by Single Member Bench of ITAT [w. e.f
01-06-2015]o Hitherto,a single member bench of ITAT may dispose of
any case of an assessee whose total income as computed by the AO
does not exceed Rs.5,00,000.o It is proposed to amend sub-section
(3) of Sec.255, to enhance this limit to
Rs.15,00,000.Rationalisation of provisions relating to Tax
Deduction at Source (TDS) and Tax Collection at Source (TCS) [w.
e.f01-06-2015]o Existing Provisions of Sec.200Awhich was inserted
prior to insertion of Sec.234E,does not provide for determination
of fee payable u/ s 234E.Accordingly,Sec.200A is proposed to be
amended to compute fee payable u/ s 234E at the time of processing
of TDS/ TCS Statement. - Sec.206C has been amended to provide for
filing correction statement in respect of TCS statement as
well.Previously,provision for filing correction statement was
allowed only with respect to TDS statement. - Presently,intimation
generated after processing of TDS statement is subject to
rectification u/s 154, appealable u/ s 246A and shall be deemed as
notice of demand u/ s 156 of the Act.In order to bring the
processing of TCS statement at par with the processing of TDS
statement,it is proposed to insert a new section 206CB relating to
processing of statements of TCS.Consequentially,amendment is also
proposed in Sec.154(1),Sec.156 and Sec.246A. o In order to avoid
charging of interest both u/ s 220(2) and 206C(7) on failure to pay
the tax specified in the intimation,it is proposed to insert a new
sub-section 220(2C),so as to provide that no interest shall be
charged under sub section (2) on the same amount for the same
period if it is already charged u/ s 206C(7). 7 . ";~; _-.