Tax Benefits/ Exemptions to Individual/ HUF
·
Basic Exemption Limit for FY 2014-15 is
increased to Rs. 250000/- for individuals (whether male or female) below 60
years of age. For persons of 60 years or above, the basic exemption limit is
raised to Rs. 300000/-
·
Limit for Deduction u/s 80C has been increased
to Rs. 150000/-. Simultaneously, investment in PPF per year is increased to Rs.
150000/- (Earlier Rs. 100000/-).
·
Deduction u/s 24(b) for interest payment towards
loan taken for self occupied houses increased to Rs. 200000/- (Earlier Rs. 150000/-)
·
Section 115-O/115R levy additional income tax on
income/divided distributed by companies or mutual funds. Earlier, the tax was
calculated @ 15% on the net income/ distributed. Now, the tax shall be paid on
the gross income distributed. For eg. If a dividend of Rs. 100 is distributed,
earlier it was 15% of dividend paid i.e. Rs. 15/-. But now the dividend has to
be grossed up by dividing the dividend amount by (1-tax rate). Accordingly, the
tax would be Rs. 17.65. Additional burden on the companies or we may say less
income in the hands of shareholders.
·
Sec 2(42A) now provides that an unlisted
security and a unit of mutual fund (other than an equity oriented mutual fund)
shall be short term capital assets if it is held for not more than 36 months.
Long Term Capital Gain Tax on debt oriented mutual fund
·
LTCG on debt oriented fund shall be 20%. Earlier
it was 20% after indexation and 10% without indexation.
Taxability of Real Estate Investment Trusts (REIT) and
Infrastructure Investment Trust (INVIT)
These trusts would raise capital
by way of issue of units to be listed on a recognized stock exchange. The income
bearing assets would be held by the trust by acquiring interest in an Indian
Company (SPV) from the sponsor
·
Taxability on par with listed equity shares i.e.
LTCG is exempt on the listed units of REIT/INVIT and STCG @ 15% on such units
·
In case of Capital gains arising to sponsor at
the times of exchange of shares in SPVs with units of the business trusts, the
taxation of gains shall be deferred and taxed at the time of disposal of units
by the sponsor. However, preferential tax regime (as in case of listed equity
shares) shall not be available to sponsor.
·
Interest received by business trust from SPV is
not taxable in the hands of trust and no withholding tax at the level of SPV.
However, in case of payment of income component of income distributed, trust
shall effect withholding tax at rate of 5% for non-residents and 10% for
residents unit holder
·
In case of ECB by trusts, withholding rate of 5%
on interest to be paid
·
Dividend received by the trust from SPV shall be
exempt in the hands of trust and such dividend distributed to unit holders
shall also be exempt. However, SPV shall pay DDT on dividend paid to trusts.
·
Capital gain is taxable in the hands of trust,
but on distribution, such capital gain shall be exempt in the hands of unit
holders.
Investment allowance to a Manufacturing Company
·
Deduction of 15% u/s 32AC for investment in new plant
& machinery if the amount exceeds Rs. 25 Crore.
100% Deduction of Capital Expenditure on Specified Business
·
100% Deduction is allowed of Capital Expenditure
(excluding land, goodwill and financial instrument) u/s 35AD for investment in
specified business. Two new businesses are included i.e.
o
Laying and operating a slurry pipeline for the transportation
of iron ore
o
Setting up and operating a semiconductor wafer
fabrication manufacturing unit
·
If such asset is not used for the purpose of
such business for eight years, deduction claimed earlier shall be income after
deducting depreciation.
·
As per Sec 115JC, total income of the company
shall be increased by the deduction claimed u/s 35AD (and decreased by the
depreciation allowable u/s 32) for the purpose of computing of Alternate
Minimum Tax (AMT).
Taxability of advance for transfer of a Capital Asset
·
Advance received against transfer of capital
asset and forfeited thereafter shall be taxable under the head “Income from
other Sources” as per Section 56(2)
(Earlier, Sec 51
covered these situations and the amount forfeited was reduced from the cost of
acquisition of Capital Asset. If the amount forfeited exceeds the cost of
acquisition, the cost of acquisition was reduced to nil and excess amount was
treated as capital receipt not taxable in light of Apex Court decision in
Travancore Rubber & Tea Co.)
Taxation of Charitable Trusts and Institutions
·
Where a trust or an institution has been granted
registration for purposes of availing exemption under section 11, and the
registration is in force for a previous year, then such trust or institution
cannot claim any exemption under any provision of section 10 [other than that
relating to exemption of agricultural income and income exempt under section
10(23C)] and vice versa.
·
Under section 11 and section 10(23C), income for
the purposes of application shall be determined without any deduction or
allowance by way of depreciation or otherwise in respect of any asset,
acquisition of which has been claimed as an application of income under these
sections in the same or any other previous year.
·
Term “Substantially Financed by the Government”
used in Sec 23AC, explained.
·
Powers of Commissioner to cancel the
registrations of such trusts/ institutions widened.
·
Exemption from income also granted for period
before registration.
Transfer Pricing
·
Introduction of Roll-back mechanisms in Advance
Pricing Agreements (APA). Arm’s Length Price (ALP) determined in APA is valid
for previous 4 years also.
·
TPO is also empowered to levy penalty u/s 271G
in addition to the AO and CIT(A)
·
Definition of international transaction rationalized
Tax Deduction at Source (TDS)
·
To claim the expenditure, TDS on payment made to
non-residents can be deposited before filing of return [Sec 40(a)(i)]
·
In case
of non-deduction or non-payment of TDS from certain payments made to residents,
only 30% of the expenditure shall be disallowed. [Sec 40(a)(ia)]
·
Disallowance u/s 40(a)(ia) shall extend to all
payments on which tax is deductible
·
Time limit for 2 years to treat payer as
assessee in default has been dispensed with.
·
Time limit of 6 years for TDS Statements not
filed, extended to 7 years.
·
An income tax authority may for the purpose of checking
of compliance of TDS may survey any premises and enquire about books of
accounts etc u/s 133A
·
Central Government to notify the income computation
and disclosure standards to be followed by any class of persons or in respects
of any class of income.
·
AO may make best judgement assessment u/s 144,
if the income is not computed in accordance with the standards notified u/s 145(2)
of the Act.
Other amendments
·
Extension of the sunset date under section 80-IA
for the power sector to 31-03-2017
·
Withholding tax of 5% on interest paid towards foreign
borrowings via long term bonds
·
Dividend income from foreign companies to
continue to be taxed @ 15%
·
Income arising from transfer of securities by a
Foreign Portfolio Investor (FII) would be in the nature of Capital Gain
·
TDS @ 2% from payments (Not covered u/s 10(10D))
made by the Insurance Companies under a life insurance policy if it exceeds Rs.
100000/- in a year.
·
Corporate Social Responsibility (CSR)
expenditure not allowed as deduction u/s 37
·
Presumptive income u/s 44AE = Rs 7500 per month
per vehicles, whether HGV or other than HGV (Heavy Goods Vehicle)
·
Transfer of Government Security (carrying a
periodic payment of interest) by one non-resident to other non-resident shall
be exempt from capital gains tax.
·
Transaction in respect of trading in Commodity
derivatives carried out in recognized association and chargeable to CTT is not
speculative transaction.
·
In case of Capital gains arising from transfer
of an asset by way of compulsory acquisition, the amount received in pursuance
of an interim order of the authority shall be income of the previous year in
which final order is made.
·
Sec 54/54F exemption only when the investment is
made in one residential house situated in India
·
Limit of Rs. 50 Lakh u/s 54EC explained. Total investment
of Rs. 50 Lakhs only is to be allowed, even if covering two financial years.
·
New Section 133C inserted to empower the
prescribed income tax authority to issue notice to person, whose information is
in possession of such authority, requiring him to furnish information or
documents.
·
Failure to produce books of accounts and
documents as required in any notice issued u/s 142(1) or failure to comply with
a direction issued u/s 142(2A) mandatorily requires rigorous imprisonment upto
1 year and fine.
·
Sec 285BA includes more transactions and reportable
accounts to be furnished by specified persons to the income tax authority.
·
Assessment of income of a person other than the
searched person u/s 153C only if the Assessing officer of such other person is satisfied
that books etc seized or requisitioned have a bearing on the determination of
the total income of such other person.
·
Credit of Alternate Minimum Tax u/s 115C shall
be allowed.
Regards
Rahul Jain
