A) Income Tax Highlights of Budget Proposals Ambalal Patel & Co. i. Tax rates There is no change in Rates of Income Tax, Surcharge or Education Cess. However there are changes in Slabs of Income tax for Individual below the age of Sixty Years, HUF etc FY 2013 14 FY 2014 15 Current Slab Tax Rate Proposed Slab Tax Rate Upto 200000 Nil Upto 250000 Nil For the Senior Citizen (60 years or More) tax exemption is proposed to Rs.3 lacs as against the Present slab of Rs.2.5 lacs. ii. Section 2 (42A) Short term capital gains Capital gains on sale of Shares of unlisted company shall be considered as short term if it is held for a period of 36 months or less. (w.e.f. 1 4 2014 i. e. A. Y. 2015 16). Up to 31 3 2014, even shares of unlisted companies were considered as long term if they held for more than 12 months. Similarly, for units other than equity oriented units, long term will be considered only if it is held for more than 36 months. (This provision is made to curb misuse of fixed maturity plan wherein people were investing money for one year and one day were not paying any tax due to indexation.) iii. Section 11 Trust Income to be applied for accumulation shall be considered without allowing depreciation on assets which were claimed as application of income in any past year.
iv. Section 24( FY 2014 15) Housing Loan Interest Deduction Deduction on account of Housing loan available under the head Income from House property upto Rs.1,50,000/ is proposed to increase upto Rs.2,00,000/. v. Section 32AC Investment allowance At Present, in case of Company, Investment allowance at 15 % of plant & machineries installed between 1 4 2013 to 31 3 2015 if total cost of such P&M is more than Rs. 100 crores is available. Now it is proposed that in case of company, investment allowance of 15% of Plant & machinery installed between 1 04 2014 to 31 03 2015 if total cost of such P & M is more than 25 crores (FY 2014 15). The Companies which has taken such allowance in FY 2013 14 are not entitled for this new proposal of Lower Investment CAP of 25Crs. vi. Section 37 An Expenditure incurred on the activities relating to Corporate Social Responsibility (CSR) u/s 135 of the Companies Act,2013 shall not be allowed as Business Expense (FY 2014 15). vii. Section 40(a)(i) FY 2014 15 Onwards At present Payment of Interest, Royalty, Fees for technical Service or other sums paid to NON RESIDENT is disallowed in the previous year if TDS deducted on such payment is not paid within due dates as specified under section 200(1). Now, if the said TDS is deposited before filing the Return or before the Due date of filing the Return specified u/s 139(1), then such expense will be allowed as expense in the Previous year. And if it is paid in subsequent year, after the due date, it is allowed in subsequent year. (Till date such provisions were applicable
only for payments made to resident but not in case of payments made to nonresident is also covered.) viii. Section 40(a)(ia) FY 2014 15 Onwards At present if TDS is not deducted/not paid before the due date specified u/s 139(1) on the payments made to RESIDENT, then 100% of such expenses are disallowed. Now it is proposed that instead of 100% only 30% of such expenditure is disallowable (effectively 10% tax instead of 30% tax). Moreover, if such TDS is paid in subsequent year, then only 30 % of such payment is allowable. ix. Section 43(5) FY 2013 14(Retrospective) Trading in Commodities Derivatives will be business transaction only if Commodity Transaction Tax (CTT) is charged otherwise it will be considered as Speculative Business Transaction. x. Section 44AE At present good carriage in a business of plying of goods carriage up to 10 vehicles, presumptive income is Rs. 5000 per month in case of heavy goods and Rs. 4500 per month in case of other vehicles. Now for both kind of vehicles, presumptive income will be Rs. 7500 per month. xi. Section 45 It is proposed to add Proviso to Section 45(5) so as to provide that Compensation received as per the interim order is taxable under the head Capital Gain in the previous year in which the final order is passed. (FY 2014 15).
X. Section 54 Capital Gain Exemption for Investment in Residential House Up to 31 3 2014, profit on sale of residential house is exempt if new residential house is purchased. However, now it is clarified that such exemption is allowed if one house is purchased/constructed in India. xii. Section 54EC Capital Gain Bond Limit of Rs. 50 lacs for Investment in Capital Gain Bond shall be qua Assessee and NOT Qua FINANCIAL YEAR ( FY 2014 15 onwards). So only Rs. 50 lacs will be allowed to be invested by the assessee. ( However, the wordings of the provisions are so drafted that if assessee earns long term capital gains for two consecutive years, he can invest only in one year and hence in other year he is not eligible for making investment ) xiii. Section 56 It is proposed to provide that any forfeiture of Advance money received on Cancelation of the transfer of capital assets will be treated as Income from Other Sources(FY 2014 15 onwards). Up to 31 3 2014, such amount was considered as reduction of cost and was taxable only if such amount exceeds the cost. xiv. Section 73(Explanation) Presently if any company where any part of its business consist of purchase or sale of shares, such business shall be deemed to be speculation business. It is proposed to amend the said explanation w.e.f. FY 2014 15 so as to provide that this explanation shall not be applicable to the company whose principal business is of Trading in Shares.
xv. Section 80 C /80CCD /80 CCE (FY 2014 15 onwards) Present limit of aggregate limit of deduction of Rs.1 lac has been proposed to Increase to Rs.1.5 lacs. Also it is proposed to Increase the Maximum investment limit in a Financial Year in PPF account from 1 to 1.5 lacs.(fy 2014 15 onwards) xvi. Section 115BBD It is proposed to Continue Tax on Dividend received from foreign companies is 15 % for FY 2014 15 onwards also. xvii. Section 140 Signing of Income tax return will be done away w.e.f.01.10.2014. However, verification of the return will continue. xviii. Section 145 The income will be computed as per the income computation and disclosure standards instead of accounting standards. So the department will come out with the income computation and disclosure standards. xix. Section 194DA TDS on payments made above Rs. 1,00,000/ under life Insurance policy(other than policy amount is exempt u/s 10(10D)) at the rate of 2%. xx. Section 200 Provisions relating to correction and amendment of TDS returns are introduced.
xxi. Section 269SS & 269T Acceptance of loans and repayment of loan is allowed even by electronic mode in addition to account payee cheque/bank draft. xxii. Section 285BA Person who is responsible for registering, or, maintaining books of account or other document containing a record of any specified financial transaction or any reportable account as may be prescribed under any law for the time being in force, shall furnish a statement in respect of such specified financial transaction or such reportable account which is registered or recorded or maintained by him and information relating to which is relevant and required for the purposes of this Act, to the income tax authority or such other authority or agency as may be prescribed. For the purposes of sub section (1), specified financial transaction means any (a) transaction of purchase, sale or exchange of goods or property or right or interest in a property; or (b) transaction for rendering any service; or (c) transaction under a works contract; or (d) transaction by way of an investment made or an expenditure incurred; or (e) transaction for taking or accepting any loan or deposit, which may be prescribed: Provided that the Board may prescribe different values for different transactions in respect of different persons having regard to the nature of such transaction: Provided further that the value or, as the case may be, the aggregate value of such transactions during a financial year so prescribed shall not be less than fifty thousand rupees. xxiii. Provisions relating to business trust has been introduced.
B) Service tax i. There is no change in rates of service tax of 12.36%. ii. Changes in Exemption notification(25/2012) (w.e.f 11.07.2014) a) Services provided by operators of the Common Bio medical Waste Treatment Facility to a clinical establishment by way of treatment or disposal of biomedical waste or the processes incidental thereto are now Exempt. b) Services by way of technical testing of newly developed drugs on human participants will be Taxable. c) Clause 9 is substituted in respect of Education services to give more clear exemption and limited to services specified therein by deleting the definition of Auxiliary Education Services: Services provided, (a) by an educational institution to its students, faculty and staff; (b) to an educational institution, by way of, (i) transportation of students, faculty and staff; (ii) catering, including any mid day meals scheme sponsored by the Government; (iii)security or cleaning or house keeping services performed in such educational institution; (iv)services relating to admission to, or conduct of examination by, such institution; ; d) Now service tax will be levied on renting of Commercial place meant for Residential or lodging purpose(earlier was exempt if declared tariff was below 1000 per day). e) Now there will be no Service tax on Transportation by Road, rail or vessel of Organic Manure, Cotton( Ginned or Baled). f) Service by Air Conditioned Contract carriage including Radio Taxi, for transport of passenger is now Taxable.
g) Services provided to Govt., Local Authority or Govt, Authority by way of water supply, public health, sanitation conservancy, solid waste management or slum improvement and up gradation is Exempt. h) Services by way of loading, unloading, packing, storage or warehousing of rice, cotton, ginned or baled is Exempt; i) Services provided by a tour operator to a foreign tourist in relation to a tour conducted wholly outside India is Exempt. iii. Changes in Abatement Notification 26/2012 (w.e.f 11.07.2014) 1) Cenvat credit on Input Service in respect of Renting of Motor cab is available to the Service Provider who is in the Business of Renting of Motor Cab which was not available earlier(1.10.2014). 2) Abatement of 40% is available to the person providing Transport of Passenger Service by a contract carriage other than motor cab. 3) Cenvat Credit on Input Service of tour Operator is available to Tour operator Service Provider which was not available earlier(01.10.2014). iv. Changes in Service Tax Rules,1994 E payment Every assessee shall electronically pay the service tax payable by him, through internet banking (Rule6(2)) (W.e.f. 01.10.2014). v. Changes in Reverse Charge Mechenism Noti. No 30/2012 (01.10.2014) 1) In respect of Renting of Motor Vehicle entry (b) Upto 30.09.2014 WEF 01.10.2014 Service Provider Service Receiver Service Provider Service Receiver 60% 40% 50% 50% vi. Changes in Works Contract Service Tax (Determination of Value) Rules,2006 In case of works contract in respect of Repairs and Maintenance of immovable property, service tax is payable on 70% of total value as against 60% (01.10.2014).
vii. Changes in Interest on late payment( Section 75) Upto 30.09.2014 W.e.f. 01.10.2014 Period of Delay Rate of simple interest 18% p.a. Up to 6 months Upto 12 Months More than 12 months 18 % p.a. for 1 to 6 months 18% pa. for 1 to 6 months 24% p.a.for 6 to 12 months 18% pa. for 1 to 6 months 24% p.a.for 6 to 12 months 30% p.a. beyond 12 months C) Miscellaneous : i) Kisan Vikas Patra (KVP) will be reintroduced. ii) NSC with Insurance cover will be introduced. iii) Best possible efforts will made to Introduce GST at the earliest. iv) IFRS Conversion to be made recommendatory from FY 2015 16 and Mandatory from FY 2016 17.