The Finance Bill, 2015 proposes to make amendments in direct tax provisions by proposing amendments to the Income-tax Act, 1961, Wealth-tax Act, 1957, Finance Act, 1994 and Finance (No.2) Act, 2004. A gist of the main amendments is given below:-
Direct
Taxes
2.
Rates of tax
2.1
It is proposed that there will be no change in the rate of personal income-tax
and the rate of tax for companies in respect of income earned in the financial
year 2015-16, assessable in the assessment year 2016-17.
2.2
It is further proposed to levy a surcharge @12% on individuals, HUFs, AOPs,
BOIs, artificial juridical persons, firms, cooperative societies and local
authorities having income exceeding ` 1 crore. Surcharge in the case of
domestic companies having income exceeding ` 1 crore and upto ` 10 crore is
proposed to be levied @ 7% and surcharge @ 12% is proposed to be levied on
domestic companies having income exceeding Rs. 10 crore.
2.3
It is further proposed that in the case of foreign companies the surcharge will
continue to be levied @2% if the income exceeds ` 1 crore and is upto ` 10
crore, and @5% if the income exceeds Rs. 10 crore.
2.4
It is also proposed to levy a surcharge @12% as against current rate of 10% on
additional income-tax payable by companies on distribution of dividends and
buyback of shares, or by mutual funds and securitisation trusts on distribution
of income.
2.5
The education cess on income-tax @ 2% for fulfilment of the commitment of the
Government to provide and finance universalised quality based education and 1%
of additional surcharge called ‘Secondary and Higher Education Cess’ on
tax and surcharge is proposed to be continued for the financial year 2015-16
for all taxpayers.
3.
A. Measures to curb black money
3.1
With a view to curbing the generation of black money in real estate, it is
proposed to amend the provisions of section 269SS and 269T of the Income-tax
Act so as to prohibit acceptance or re-payment of advance in cash of ` 20,000
or more for any transaction in immovable property. It is also proposed to
provide a penalty of an equal amount in case of contravention of such
provisions.
3.2
Offence of making false declaration/documents in the transaction of any
business relating to Customs (section 132 of the Customs Act) to be predicate
offence under PMLA to curb trade based money laundering.
4.
B. Job creation through revival of growth and investment and promotion of
domestic ‘manufacturing’ and ‘Make in India’.
4.1
Taking into account the representations received from various stakeholders and
international developments in this regard, it is proposed to defer
applicability of General Anti Avoidance Rule (GAAR) by 2 years.
Accordingly, it is proposed to be applicable for income of the financial year
2017-18 (A.Y. 2018-19) and subsequent years. It is also proposed that the
investments made upto 31.03.2017 shall not be subjected to GAAR.
4.2
With a view to streamline the taxation regime of Alternative Investment Funds
(AIFs), it is proposed to provide pass through status to all the sub-categories
of category-I and also to category-II AIFs governed by the regulations of
Securities and Exchange Board of India (SEBI).
4.3
With a view to facilitate relocation of fund managers of offshore funds in
India, it is proposed to modify the permanent establishment (PE) norms.
4.4
With a view to give effect to the provisions of section 94 of the Andhra
Pradesh Reorganisation Act, 2014, it is proposed to provide an additional
investment allowance (@15%) and additional depreciation (@15%) to new
manufacturing units set-up during the period 01.04.2015 to 31.03.2020 in
notified areas of Andhra Pradesh and Telangana.
4.5
In respect of Real Estate Investment Trusts (REITs) and Infrastructure
Investment Trusts (INViTs), it is proposed to provide that the sponsor will be
given the same treatment on offloading of units at the time of listing as would
have been available to him if he had offloaded his shareholding of special
purpose vehicle (SPV) at the stage of direct listing. Further, the rental
income arising from real estate assets directly held by the REIT is also
proposed to be allowed to pass through and to be taxed in the hands of the unit
holders of the REIT.
4.6
It is proposed to amend the provisions of section 194LD of the Income-tax Act
so as to extend the period of applicability of reduced rate of tax at 5% in
respect of income of foreign investors (FIIs and QFIs) from corporate bonds and
government securities, from 31.5.2015 to 30.06.2017.
4.7
With a view to obviate the problems faced by small companies and to facilitate
the inflow of technology, it is proposed to amend the provisions of section
115A of the Income-tax Act so as to reduce the rate of tax on royalty and fees
for technical services from 25% to 10%.
4.8
With a view to facilitating generation of employment, it is proposed to amend
the provisions of section 80JJAA of the Income-tax Act so as to provide that
tax benefit under the said section shall be available to a ‘person’ deriving
profits from manufacture of goods in a factory and paying wages to new regular
workmen. The eligibility threshold of minimum 100 workmen is proposed is to
reduced to fifty.
4.9
Additional depreciation @ 20% is allowed on new plant and machinery installed
by a manufacturing unit or a unit engaged in generation and distribution of
power. However, if the asset is installed after 30th September of
the previous year only 10% of the additional depreciation is allowed. It
is proposed to allow the remaining 10% of the additional depreciation in the
subsequent previous year.
5.
C. Minimum government and maximum goverance to improve the ease of doing
business
5.1
Section 9 of the Income-tax Act was amended by Finance Act, 2012 to clarify
that if an asset, being a share of, or interest, in a company or an entity
derives its value, directly or indirectly, substantially from an asset situated
in India, the gain arising from transfer of such share or interest shall be
taxable in India. After the clarificatory amendment, a large number
of representations were received from various quarters seeking clarification on
certain terms used in the amended provisions. An Expert Committee was
also constituted to look into the concerns. Taking into account the
recommendations made by the Expert Committee and the concerns raised by the
various stakeholders, it is proposed to amend the provisions of the Income-tax
Act so as to provide that:-
•
the share or interest shall be deemed to derive its value substantially from
the assets located in India, if on the specified date, the value of such assets
represents at least fifty per cent of the fair market value of all the assets
owned by the company or entity. However, the indirect transfer provisions
would not apply if the value of Indian assets does not exceed ` 10 crore.
Further, the principle of proportionality will apply to the taxation of gains
arising from indirect transfer of Indian assets.
•
the Indian entity shall be obligated to furnish information relating to the
offshore transactions having the effect of directly or indirectly modifying the
ownership structure or control of the Indian company or entity. In case
of non-compliance, a penalty is also proposed.
•
the indirect transfer provisions shall not apply in a case where the transferor
of share or interest in a foreign entity, along with his associated
enterprises, neither holds the right of control or management nor holds voting
power or share capital or interest exceeding five percent. of the total voting
power or total share capital in the foreign company or entity, directly or
indirectly, holding the Indian assets.
•
the capital gains shall be exempt in respect of transfer of share of a foreign
company deriving its value, directly or indirectly, substantially from the
shares of an Indian company, under a scheme of amalgamation or demerger.
5.2
It is proposed to amend the provisions of section 92BA of the Income-tax Act so
as to increase the threshold limit for applicability of transfer pricing
regulations to specified domestic transactions from `5 crore to `20 crore.
5.3
It is proposed to amend the provisions of section 2(15) of the Income-tax Act
so as to include ‘yoga’ as a specific category of activity in the definition of
‘charitable purpose’ and also to provide relief for activities in the nature of
business undertaken by genuine charitable organizations subject to the
condition that aggregate receipts from such activity is less than 20% of the
total receipts.
5.4
It is proposed to exempt the income of Core Settlement Guarantee Fund
established by Clearing Corporations as per mandate of SEBI.
5.5
It is proposed to amend the provisions of section 255 of the Income-tax Act so
as to increase the monetary limit from ` 5 lakh to ` 15 lakh, for a case to be
heard by a Single Member Bench of the ITAT.
5.6
It is proposed to amend the provisions of the Income-tax Act so as to provide
tax neutrality on transfer of units of a scheme of a Mutual Fund under the
process of consolidation of schemes of Mutual Funds as per SEBI Regulations,
1996.
5.7
It is proposed to amend the provisions of the Income-tax Act so as to provide a
mechanism to pre-empt the repetitive appeals by the revenue in the same
assessee’s case on the same question of law year after year.
5.8
It is proposed to empower the Board to prescribe rules for grant of relief in
respect of taxes paid in foreign jurisdictions.
5.9
It is proposed to abolish the levy of Wealth-tax with effect from 2016-17
(Assessment Year) for reducing the compliance burden on the tax payers. The
revenue loss on account of such abolition is proposed to be compensated by
increase in the existing surcharge by 2% in case of domestic companies and all
non corporate taxpayers.
5.10
With a view to rationalise the dispute resolution mechanism available to
taxpayer in the form of Settlement Commission, it is proposed to provide that
while making an application to the Settlement Commission for an assessment year
which has been re-opened by the Assessing Officer, the assessee can make an
application for other assessment years in which the proceedings could be
re-opened provided the return of income for such assessment years has been
furnished by the assessee.
6.
D. Improving the quality of life and public health through Swachh Bharat
Initiatives
6.1
It is proposed to provide that the donations (other than the CSR contributions
made in accordance with section 135 of the Companies Act, 2013) made to Swachch
Bharat Kosh (by both resident and non-resident) and Clean Ganga Fund (by
resident) shall be eligible for 100% deduction under section 80G of the
Income-tax Act.
7.
E. Benefits to middle class taxpayers
With
a view to encourage savings and to promote health care among individual
taxpayers, a number of measures are proposed to be taken by way of incentives
under the Income-tax Act. The same are enumerated below:-
7.1
It is proposed to provide that investment in Sukanya Samriddhi Scheme will be
eligible for deduction u/s 80C and any payment from the scheme shall not be
liable to tax.
7.2 It is
proposed to increase the limit of deduction u/s 80D of the Income-tax Act from
` 15,000 to ` 25,000 on health insurance premium (in case of senior citizen
from ` 20,000 to `
30,000).
It is also proposed to allow deduction of expenditure of similar amount in case
of a very senior citizen not eligible to take health insurance.
7.3
It is proposed to increase the limit of deduction in case of very senior citizens
u/s 80DDB of the Income-tax Act on expenditure on account of specified diseases
from ` 60,000 to ` 80,000.
7.4
It is proposed to increase the limit of deduction u/s 80DD of the Income-tax
Act in respect of maintenance, including medical treatment of a dependant who
is a person with disability, from ` 50,000 to `75,000. It is also
proposed to increase the limit of deduction from ` 1 lakh to `1.25 lakh in case
of severe disability.
7.5
It is proposed to increase the limit of deduction u/s 80U of the Income-tax Act
in case of a person with disability, from ` 50,000 to ` 75,000. It is
also proposed to increase the limit of deduction from ` 1 lakh to `1.25 lakh in
case of severe disability.
7.6
It is proposed to increase the limit of deduction u/s 80CCC of the Income-tax
Act on account of contribution to a pension fund of LIC or IRDA approved
insurer from ` 1 lakh to ` 1.5 lakh.
7.7
It is proposed to increase the limit of deduction u/s 80CCD of the Income-tax
Act on account of contribution by the employee to National Pension Scheme (NPS)
from ` 1 lakh to ` 1.50 lakh. It is also proposed to provide a deduction
of upto ` 50,000 over and above the limit of ` 1.50 lakh in respect of
contributions made to NPS.
7.8
It is proposed to amend the provisions of section 197A of the Income-tax Act so
as to provide the facility of filing self-declaration of non-deduction of tax
by the recipients of taxable maturity proceeds of life insurance policy.
7.9
Under the existing provisions of the Income-tax Act, an individual buying an
immovable property from a resident is required to deduct tax but is not
required to obtain TAN for depositing the tax so deducted. With a view to
extend the same facility to an individual or HUF purchasing an immovable
property from a non-resident, it is proposed to relax the requirement of
obtaining TAN by the individual or HUF who is required to deduct tax on
acquisition of immovable property from a non-resident.
7.10
It is proposed to provide that donation made to National Fund for Control of
Drug Abuse (NFCDA) shall be eligible for 100% deduction under section 80G of
the Income-tax Act.
7.11
Details of tax deductions referred to in para 99.
·
|
Deduction u/s 80C
|
Rs 1,50,000
|
·
|
Deduction u/s 80CCD
|
Rs 50,000
|
·
|
Deduction on account of interest
on house property loan (Self occupied property)
|
Rs 2,00,000
|
·
|
Deduction u/s 80D on health
insurance premium
|
Rs 25,000
|
·
|
Deduction u/s 80D on health
insurance premium
|
Rs 25,000
|
·
|
Exemption of transport allowance
|
Rs 19,200
|
Total
|
Rs 4,44,200
|
8.
F. Stand alone proposals to maximise benefits to the economy
8.1
It is proposed to provide for chargeability of interest paid by a permanent
establishment (PE) or a branch of foreign bank to its Head Office (HO) and
other overseas branches under the source rule of taxation and for treating the
PE or branch as a taxable entity for computation of income and for purpose of
levy of TDS.
8.2
With a view to providing a uniform method of computation of period of stay in
Indian for the purposes of determination of ‘resident’ status in the case of a
India seafarer, whether working on a Indian-ship or foreign-ship, it is
proposed to provide an enabling power to CBDT to prescribe the same in the
rules.
8.3
In search cases, it is proposed to allow seized cash to be adjusted towards the
assessee’s tax liability under his settlement application.
8.4
With a view to ensuring proper deduction of tax on payments made to
non-residents, it is proposed to amend the provisions of section 195 of the
Income-tax Act so as to provide for enabling power to the CBDT for capturing
information about prescribed foreign remittances which are claimed to be not
chargeable to tax.
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