Union Budget 2015-16 – Taxation highlights

The following are the major tax related changes introduced in Union Budget for 2015-16 presented by Arun Jaitley in Parliament today.

Objectives of tax policy

[] Objective of stable taxation policy and a non-adveRs arial tax administration.
[] Fight against the scourge of black money to be taken forward.
[] Efforts on various fronts to implement GST from next year.
[] No change in rate of peRs onal income tax.
[] Proposal to reduce corporate tax from 30% to 25% over the next four yeaRs , starting from next financial year.
[] Rationalisation and removal of various tax exemptions and incentives to reduce tax disputes and improve administration.
[] Exemption to individual tax payeRs to continue to facilitate savings.
[] Broad themes :
— Measures to curb black money;
— Job creation through revival of growth and investment and promotion of domestic manufacturing – “Make in India” ;
— Improve ease of doing business – Minimum Government and maximum governance;
— Improve quality of life and public health – Swachh Bharat;
— Benefit to middle class tax-payeRs ; and
— Stand alone proposals to maximise benefit to the economy.

Black Money
[] Generation of black money and its concealment to be dealt with effectively and forcefully.
[] Investigation into cases of undisclosed foreign assets has been given highest priority in the last nine months.
[] Major breakthrough with Swiss authorities, who have agreed to:
— Provide information in respect of cases independently investigated by IT department;
— Confirm genuineness of bank accounts and provide non-banking information;
— Provide such information in time-bound manner; and
— Commence talks for automatic exchange of information

[] New structure of electronic filing of statements by reporting entities to ensure seamless integration of data for more effective enforcement.
[] Bill for a comprehensive new law to deal with black money parked abroad to be introduced in the current session.
[] Key features of new law on black money:
— Evasion of tax in relation to foreign assets to have a punishment of rigorous imprisonment upto 10 yeaRs , be non-compoundable, have a penalty rate of 300% and the offender will not be permitted to approach the Settlement Commission.
— Non-filing of return/filing of return with inadequate disclosures to have a punishment of rigorous imprisonment upto 7 yeaRs .
— Undisclosed income from any foreign assets to be taxable at the maximum marginal rate.
— Mandatory filing of return in respect of foreign asset.
— Entities, banks, financial institutions including individuals all liable for prosecution and penalty.
— Concealment of income/evasion of income in relation to a foreign asset to be made a predicate offence under PML Act, 2002.
— PML Act, 2002 and FEMA to be amended to enable administration of new Act on black money.
[] Benami Transactions (Prohibition) Bill to curb domestic black money to be introduced in the current session of Parliament.
[] Acceptance or re-payment of an advance of Rs 20,000 or more in cash for purchase of immovable property to be prohibited.
[] PAN being made mandatory for any purchase or sale exceeding Rupees 1 lakh.
[] Third party reporting entities would be required to furnish information about foreign currency sales and cross border transactions.
[] Provision to tackle splitting of reportable transactions.
[] Leverage of technology by CBDT and CBEC to access information from either’s data bases.

Make in India
[] Revival of growth and investment and promotion of domestic manufacturing for job creation.
[] Tax “pass through” to be allowed to both category I and category II alternative investment funds.10
[] Rationalisation of capital gains regime for the sponsoRs exiting at the time of listing of the units of REITs and InvITs.
[] Rental income of REITs from their own assets to have pass through facility.
[] Permanent Establishment (PE) norm to be modified to encourage fund manageRs to relocate to India.
[] General Anti Avoidance Rule (GAAR) to be deferred by two yeaRs .
[] GAAR to apply to investments made on or after 01.04.2017, when implemented.
[] Additional investment allowance (@ 15%) and additional depreciation (@35%) to new manufacturing units set up during the period 01-04-2015 to 31-03-2020 in notified backward areas of Andhra Pradesh and Telangana.
[] Rate of Income-tax on royalty and fees for technical services reduced from 25% to 10% to facilitate technology inflow.
[] Benefit of deduction for employment of new regular workmen to all business entities and eligibility threshold reduced.
[] Basic Custom duty on certain inputs, raw materials, inter mediates and components in 22 items, reduced to minimise the impact of duty inveRs ion.
[] All goods, except populated printed circuit boards for use in manufacture of ITA bound items, exempted from SAD.
[] SAD reduced on import of certain inputs and raw materials.
[] Excise duty on chassis for ambulance reduced from 24% to 12.5%.
[] Balance of 50% of additional depreciation @ 20% for new plant and machinery installed and used for less than six months by a manufacturing unit or a unit engaged in generation and distribution of power is to be allowed immediately in the next year.

Ease of doing business – Minimum Government Maximum Governance

[] Simplification of tax procedures.
[] Monetary limit for a case to be heard by a single member bench of ITAT increase from Rs 5 lakh to Rs 15 lakh.
[] Penalty provision in indirect taxes are being rationalised to encourage compliance and early dispute resolution.
[] Central excise/Service tax assesses to be allowed to use digitally signed invoices and maintain record electronically.11
[] Wealth-tax replaced with additional surcharge of 2 per cent on super rich with a taxable income of over Rs 1 crore annually.
[] Provision of indirect transfeRs in the Income-tax Act suitably cleaned up.
[] Applicability of indirect transfer provisions to dividends paid by foreign companies to their shareholdeRs to be addressed through a clarificatory circular.
[] Domestic transfer pricing threshold limit increased from Rs 5 crore to Rs 20 crore.
[] MAT rationalised for FIIs and membeRs of an AOP.
[] Tax Administration Reform Commission (TARC) recommendations to be appropriately implemented during the couRs e of the year.
[] Education cess and the Secondary and Higher education cess to be subsumed in Central Excise Duty.
[] Specific rates of central excise duty in case of certain other commodities revised.
[] Excise levy on cigarettes and the compounded levy scheme applicable to pan masala, gutkha and other tobacco products also changed.
[] Excise duty on footwear with leather uppeRs and having retail price of more than Rs 1000 per pair reduced to 6%.
[] Online central excise and service tax registration to be done in two working days.
[] Time limit for taking CENVAT credit on inputs and input services increased from 6 months to 1 year.
[] Service-tax plus education cesses increased from 12.36% to 14% to facilitate transition to GST.
[] Donation made to National Fund for Control of Drug Abuse (NFCDA) to be eligible for 100% deduction u/s 80G of Income-tax Act.
[] Seized cash can be adjusted towards assessees tax liability.

Swachh Bharat
[] 100% deduction for contributions, other than by way of CSR contribution, to Swachh Bharat Kosh and Clean Ganga Fund.
[] Clean energy cess increased from Rs 100 to Rs 200 per metric tonne of coal, etc. to finance clean environment initiatives.
[] Excise duty on sacks and bags of polymeRs of ethylene other than for industrial use increased from 12% to 15%.
[] Enabling provision to levy Swachh Bharat cess at a rate of 2% or less on all or certain services, if need arises.
[] Services by common affluent treatment plant exempt from Service-tax.
[] Concessions on custom and excise duty available to electrically operated vehicles and hybrid vehicles extended upto 31.03.2016.

Benefits to middle class tax-payers
[] Limit of deduction of health insurance premium increased from Rs 15000 to Rs 25000, for senior citizens limit increased from Rs 20000 to Rs 30000.
[] Senior citizens above the age of 80 yeaRs , who are not covered by health insurance, to be allowed deduction of Rs 30000 towards medical expenditures.
[] Deduction limit of Rs 60000 with respect to specified decease of serious nature enhanced to Rs 80000 in case of senior citizen.
[] Additional deduction of Rs 25000 allowed for differently abled peRs ons.
[] Limit on deduction on account of contribution to a pension fund and the new pension scheme increased from Rs 1 lakh to Rs 1.5 lakh.
[] Additional deduction of Rs 50000 for contribution to the new pension scheme u/s 80CCD.
[] Payments to the beneficiaries including interest payment on deposit in Sukanya Samriddhi scheme to be fully exempt.
[] Service-tax exemption on Varishtha Bima Yojana.
[] Concession to individual tax-payeRs despite inadequate fiscal space.
[] Lot to look forward to as fiscal capacity improves.
[] ConveRs ion of existing excise duty on petrol and diesel to the extent of Rs 4 per litre into Road Cess to fund investment.
[] Service Tax exemption extended to certain pre cold storage services in relation to fruits and vegetables so as to incentivise value addition in crucial sector.
[] Negative List under service-tax is being slightly pruned to widen the tax base.
[] Yoga to be included within the ambit of charitable purpose under Section 2(15) of the Income-tax Act.
[] To mitigate the problem being faced by many genuine charitable institutions, it is proposed to modify the ceiling on receipts from activities in the nature of trade, commerce or business to 20% of the total receipts from the existing ceiling of Rs 25 lakh.13
[] Most provisions of Direct Taxes Code have already been included in the Income-tax Act, therefore, no great merit in going ahead with the Direct Taxes Code as it exists today.
[] Direct tax proposals to result in revenue loss of Rs 8315 crore, whereas the proposals in indirect taxes are expected to yield Rs 23383 crore. Thus, the net impact of all tax proposals would be revenue gain of Rs 15068 crore.

[] Increase in basic custom duty:
— Metallergical coke from 2.5 % to 5%.
— Tariff rate on iron and steel and articles of iron and steel increased from 10% to 15%.
— Tariff rate on commercial vehicle increased from 10 % to 40%.
[] Basic custom duty on digital still image video camera with certain specification reduced to nil.
[] Excise duty on rails for manufacture of railway or tram way track construction material exempted retrospectively from 17-03-2012 to 02-02-2014, if not CENVAT credit of duty paid on such rails is availed.
[] Service-tax to be levied on service provided by way of access to amusement facility, entertainment events or concerts, pageants, non recoganised sporting events etc.
[] Service-tax exemption:
— Services of pre-conditioning, pre-cooling, ripening etc. of fruits and vegetables.
— Life insurance service provided by way of Varishtha Pension Bima Yojana.
— All ambulance services provided to patients.
— Admission to museum, zoo, national park, wile life sanctuary and tiger reserve.
— Transport of goods for export by road from factory to land customs station.
[] Enabling provision made to exclude all services provided by the Government or local authority to a business entity from the negative list.
[] Service-tax exemption to construction, erection, commissioning or installation of original works pertaining to an airport or port withdrawn.
[] Transportation of agricultural produce to remain exempt from Service-tax.
[] Artificial heart exempt from basic custom duty of 5% and CVD.
[] Excise duty exemption for captively consumed intermediate compound coming into existance during the manufacture of agarbathi.