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Thursday, July 10, 2014

THE MODI BUDGET 2014 : DIRECT TAX HIGHLIGHTS



A.              DIRECT TAXES

INDIVIDUALS / HUF / AOP / BOI

Ø  No change in income tax rates.
Ø  Income Tax Exemption limit increased to Rs. 2.5 Lakh from Rs. 2 lakh. For Senior citizens exemption limit increased to Rs. 3 lakh.    
Ø  Deduction u/s 80C increased to Rs. 1.5 lakh from Rs. 1 lakh
Ø  Deduction for Interest on housing loan for Self Occupied property increased to Rs. 2 Lakh from 1.5 lakh.

CORPORATES:
Ø  No change in Corporate Tax rate.
Ø  Investment allowance at 15% for 3 years to manufacturing company which invest more than Rs. 25 crore in plant and machinery.
Ø  10 Years Tax Holiday for Power Sector if begins generation, distribution & transmission of Power by 31.03.2017.
Ø  Investment Linked deduction extended to two new ventures ; Slurry Pipeline for transportation of Iron Ore & Semi Conductor wafer fabrication manufacturing units. 
Ø  Expenditure on Corporate Social Responsibility [CSR] shall not be allowed as deduction while calculating business income.
Ø  For Non-deduction of TDS, only 30% of the expenditure will be disallowed instead of earlier disallowance of 100% of the expenditure, if TDS rate is between 1% - 10%.
Ø  For business of plying, hiring or leasing goods carriage [up-to 10 vehicle], the presumptive income shall be Rs. 7500/- per month.
Ø  Credit of Alternative Minimum Tax will now be available to taxpayers and allowed to carry forward to adjust normal tax liability of succeeding years.


INTERNATIONAL TRANSACTIONS / NRI / FOREIGN TAXATION:

Ø  Roll Back Provisions for Advance Pricing Agreement Scheme, as per which APA taken for future transactions will also applicable for transactions of preceding four years [subject to conditions].
Ø  “Range Concept” introduced in Transfer Pricing provisions as per which Arm’s Length Price shall be calculated based on Multi-year data instead of single year data.
Ø  Transfer Pricing Officer [TPO] can levy penalty u/s 271G.
Ø  Dividend received from Foreign Company shall be taxed at Concessional rate of 15%. No sunset clause.
Ø  Income Arising to Foreign Portfolio Investors from Transaction in securities will be treated as capital gains and will tax accordingly.
Ø  TDS on any Interest payment made for “any bonds” issued in foreign currency shall be deducted @ 5% [earlier it was only on “Infrastructure bonds”]. The eligible date extended to 31.03.2017.

OTHER PROVISIONS:
Ø  Long Term capital Gain of units of Mutual Funds [other than Equity oriented funds] shall be taxed @20%. Further, units have to hold at least 36 months for treating it as long term.
Ø  To qualify as Long term capital assets, Unlisted securities is required to be hold for at-least 36 months instead of earlier period of 12 months.
Ø  Advance Ruling shall be extended to Resident Taxpayers and existing number of benches of Advance Ruling shall be increased.
Ø  More Stringent Provisions related to furnishing of Annual Information Return.    
Ø  For resolving the disputes, Scope of Settlement Commission will be expanded.
Ø  Dividend distribution tax shall be paid on gross dividend paid instead on dividend net of taxes.    
Ø  Tax Regime to Infrastructure Investment Trusts and Real Estate Investment Trusts to set up in accordance with regulations of SEBI. 
Ø  Compulsory Imprisonment and fine, if the  assesses willfully fails to produce books of accounts and other details as required in section 142(1) or 142(2A)

OTHET MAJOR ANNOUNECEMNTS:
Ø  A high Level committee constituted by CBDT shall take care of issue of indirect transfer on retrospective amendments on case to case basis.
Ø  No more Retrospective Amendments in Tax Laws.
Ø  60 New Aaykar Seva Kendra to be opened in financial year 2014-15 to promote tax payer friendly services.
Ø  Government will review the Direct Tax Code [DTC] in its present shape and review it.

1 comment:

  1. Offhand Reactions (IMPROMPTU):

    Almost everyone, including active and proactive professional tax advisers- mainly, lawyers and CAs having something to do or other with the Budget proposals of the newly installed government, have sought to and brought to focus the 'highlights'. Even so, it is sad to observe that, in so doing, in one's conviction, some of the deficiencies, hidden or otherwise, it is noted, have not been even touched upon, for reasons not known. One such aspect that appears to have been simplistically glossed over, despite it being of the most concern to the tax payers relates to 'retrospective' changes in the law. So much so, by and large, the impression floated around, unwittingly or otherwise, in learned circles is that if were to go by the effective dates specified, the empowered ministries in general, and the Revenue in particular, have done their best to live up to the repeated assurance to do away with the age old obnoxious weakness of retrospective legislation - which the towering legal luminary/tax expert of our own times (’Nani’) was never tired of referring to and ridiculing remorsefully as, ‘change mania’, ‘obsessive attitude’, the historical fact of successive governments failure to save the tax payer from being made the victim of ‘palpable injustice’, and so on. But, it seems that is not a well-founded impression.
    Anyone, devoutly caring and wishing to know more, may consider it worthwhile to take a note of useful hints available on a ‘silver platter’ in public domain; random samples HERE:

    Govt clears confusion on date of debt MF tax hike

    Higher tax may not apply to debt funds redeemed before Budget

    The inevitable grave doubt taxpayer seems to have been ultimately left to live with, as ever in the past, in the words of judiciary, is whether , at best, the attempts made are tantamount to ‘small repairs’; For a brief but useful discussion, recommended to read:

    Retrospective Tax Legislation and 'Small Repairs'

    Now, over to active / proactive tax law experts, for an insightful exploratory exercise, with the objective of serving the common good!

    Open to 'EDIT'

    ReplyDelete