budget 2015-2016

VIMAL TANDON & CO.CHARTERED ACCOUNTANTS

BUDGET 2015-2016

HIGHLIGHTS

DIRECT TAXES

Individual

Basic exemption limit for men, women and HUF resident in India unchanged.

There is no change in the rate of income tax, surcharge, education and SHE cess.

The rates for AY 2016-17 will remain the same as in AY 2015-16.

Surcharge: The amount of Income-Tax computed as above, shall be increased by

surcharge @ 10% of such Income-Tax in the case, the person has taxable incomeexceeding `1 Crore.

Additional surcharge @ 2% being levied on income exceeding ` 1 crore. This

surcharge would be levied in place of Wealth-tax which is proposed to be

abolished.

Cess: 3% cess on tax in all cases

Transport allowance exemption increased from ` 800 per month to ` 1,600 per

month

Income tax slabs for individual

(Male/Female)/HUF taxpayers:

Income slab

(AY 2014-15)

Income slab

(AY 2015-16)

Rates of Income

Tax

Upto ` 2,00,000 Upto ` 2,50,000 Nil

` 2,00,001 to ` 5,00,000 ` 2,50,001 to ` 5,00,000 10%

` 5,00,001 to ` 10,00,000 ` 5,00,001 to ` 10,00,000 20%

Above ` 10,00,000 Above ` 10,00,000 30%

Income tax slabs for senior citizens:

Age Group

60-80yrs

Age Group

80yrs and above

Rates of Income

Tax

Upto ` 3,00,000 Upto ` 5,00,000 Nil

` 3,00,001 to ` 5,00,000 10%

` 5,00,001 to ` 10,00,000 ` 5,00,001 to ` 10,00,000 20%

Above ` 10,00,000 Above ` 10,00,000 30%

Capital Gains

There is no express provision under the Income-tax Act, with regard to value to be

considered as cost of acquisition of a capital asset in the hands of resulting company

on transfer of capital assets acquired on demerger. Accordingly, section 49 is

proposed to be amended to provide that the cost of acquisition of an asset acquired

by resulting company shall be the cost for which the demerged company acquired the

capital asset as increased by the cost of improvement incurred by the demerged

company.

Mutual Funds

Unit holders : -

Exempt from capital gains tax if Consolidation of two or more :-

• Equity oriented schemes

• Other than Equity oriented schemes

Cost of new units and period of holding, the same as for the earlier units/ scheme

Domestic Companies

The income tax rate for firms remains unchanged at 30%.

Surcharge: The amount of Income-Tax computed as above, shall be increased by

surcharge @ 7% of such Income-Tax in the case, the company has taxable incomeexceeding `1 Crore but not exceeding ` 10 Crore.

Surcharge @ 12% of such Income-Tax in the case, the company has taxable incomeexceeding `10 Crore.

Education Cess : 2% Secondary and Higher Education Cess: 1%.

Corporate tax rates proposed to be reduced from 30% to 25% over the next four years,

starting from next financial year.

Foreign Companies

The income tax rates remain unchanged at 40%

Surcharge: The amount of Income-Tax computed as above, shall be

increased by surcharge @ 2% of such Income-Tax in the case, thecompany has taxable income exceeding `1 Crore but not exceeding ` 10

Crore.

Surcharge @ 5% of such Income-Tax in the case, the company has taxableincome exceeding `10 Crore.

Education Cess : 2% Secondary and Higher Education Cess: 1%

Firms



increased by surcharge @ 12% of such Income-Tax in the case, the firmhas taxable income exceeding `1 Crore.


Limited Liability Partnership



increased by surcharge @ 12% of such Income-Tax in the case, the firm has taxable income exceeding `1 Crore.


Trusts

The definition for charitable purpose provided under section 2(15) is proposed to be

amended to include the activity of Yoga as a special category of activity to be

considered as charitable purpose on the lines of education.

The definition is proposed to be further amended to provide that the advancement of

any other object of general public utility shall not be a charitable purpose, if it involves

the carrying on of any activity in the nature of trade, commerce or business, or any

activity of rendering any service in relation to any trade, commerce or business, for a

cess or fee or any other consideration, irrespective of the nature of use or application,

or retention, of the income from such activity, unless,-

(i) such activity is undertaken in the course of actual carrying out of such

advancement of any other object of general public utility; and

(ii) the aggregate receipts from such activity or activities, during the previous year, do

not exceed 20% of the total receipts, of the trust or institution undertaking such

activity or activities, for the previous year .

Trusts

It is proposed to amend the Act to provide that Form 10 (for accumulation of income

to be applied in future for specific purpose) shall be filed before the due date of filing

the return of income. In case Form 10 is not submitted before the due date, then

benefit of accumulation would not be available and such income would be taxable at

the applicable rate.

Deductions and Exemptions

Deduction u/s 80C –Special Small Saving Scheme for the welfare of the girl child by the name of

Sukanya Samriddhi Account Scheme has been introduced with the following proposed benefits :-

The Investment made in the Scheme will be eligible for deduction u/s 80C up to ` 150000/- .

The interest accruing on the deposit in such account will be exempt from Income Tax.

Any withdrawal from the said scheme in accordance with the rules of the scheme will be

exempt from tax.

Deduction u/s 80D – It is proposed to raise the limit of deduction from ` 15,000 to ` 25,000. Further,

the limit of deduction for senior citizens is also proposed to be increased from ` 20,000 to ` 30,000.

As a welfare measure towards very senior citizens, a deduction under section 80D is proposed for

any payment made on account of medical expenditure in respect of a very senior citizen, subjectto a limit ` 30,000.

The limit for deduction under section 80DDB is proposed to be increased to ` 80,000 in respect of

amount paid for medical treatment of very senior citizen.


Section 80DD (Persons with disability and severe disability) and section 80U Persons withdisability and severe disability) is proposed to be amended to increase the limit from ` 50,000 to `75,000 and from ` 1,00,000/- to ` 1,25,000/-, as the case may be.

In order to promote social security, deduction section 80CCC(1) which provides for deduction of

amount paid or deposited to effect or keep in force a contract for any annuity plan of LIC or any

other insurer for receiving pension from a fund set up under a pension scheme is proposed to beamended to raise the limit of deduction from ` 1 lakh to ` 1.5 lakh, within the overall limit provided

in section 80CCE.

An additional deduction in respect of any amount paid, of upto ` 50,000/- for contributions made by

any individual assesses under the National Pension Scheme (NPS). This limit is not coveredunder the overall limit of ` 1,50,000/- mentioned in section 80CCE of the Act except of section

80CCD(1).

Section 80G is proposed to be amended to provide for 100% deduction in respect of donations

made to the National Fund for Control of Drug Abuse.

With a view to encourage and enhance people’s participation in the national effort to improve

sanitation facilities and rejuvenation of river Ganga, section 80G is proposed to be amended so as

to provide 100% deduction for donations made by any donor to the Swachh Bharat Kosh and to

Clean Ganga Fund.


A new section 32AD is proposed to be inserted to provide for an additional investment allowance

of an amount equal to 15% of the cost of new asset acquired and installed by an assessee, if -

(a) he sets up an undertaking or enterprise for manufacture or production of any article or thing on

or after 1st April, 2015 in any notified backward areas in the State of Andhra Pradesh and the

State of Telangana; and

b) the new assets are acquired and installed for the purposes of the said undertaking or enterprise

during the period beginning from the 1st April, 2015 to 31st March, 2020.

This deduction shall be available over and above the existing deduction available under section

32AC of the Act.

The benefits of deduction under section 80JJJA of the Act shall be available to all assesses and

threshold for weighted deduction from tax for wages of new workmen reduced from 100 to 50 i.e.

if any industrial undertaking engaged in the manufacture or production of article or thing, hires

more than 50 employees or 10% of employees of preceding year, which ever is higher, there shall

be allowed a deduction of an amount equal to thirty per cent of additional wages paid to the new

regular workmen employed in the previous year for three assessment years including the

assessment year relevant to the previous year in which such employment is provided.

It is proposed to amend the provisions of section 192 of the Act to provide that the

person responsible for paying, for the purposes of estimating income of the assessee

or computing tax deductible under section 192(1) of the Act, shall obtain from the

assessee evidence or proof or particulars of the prescribed claim (including claim for

set-off of loss) under the provisions of the Act in the prescribed form and manner. For

example, house rent allowance, interest payment for claiming loss from self occupied

house property, etc.

It is proposed to insert a new provision in Act for deduction of tax at the rate of 10%

on pre-mature taxable withdrawal from Employee Provident Fund Scheme

(EPFS). However, to reduce the compliance burden of the employees having

taxable income below the taxable limit, it is also proposed to provide a threshold ofpayment of ` 30,000/- for applicability of this proposed provision

Tax Deduction at Source/ Tax

Collection at Source

It is proposed to amend the definition of time deposits so as to include recurring

deposits for the purpose of deduction of tax at source u/s 194A. The existing

threshold limit of Rs 10,000 for non-deduction of tax shall also be applicable in case

of interest payment on recurring deposits to safeguard interests of small depositors

It is proposed to amend the provisions of the section 194A of the Act to expressly

provide from the prospective date of 1st June, 2015 that the exemption provided from

deduction of tax from payment of interest to members by a co-operative society under

section 194A(3)(v) ) of the Act shall not apply to the payment of interest on time

deposits by the co-operative banks to its members.

It is proposed to amend the provisions of section 194A of the Act to provide that the

computation of interest income for the purposes of deduction of tax under section

194A of the Act should be made with reference to the income credited or paid by the

banking company or the co-operative bank or the public company which has adopted

core banking solutions and not branch wise.



It is proposed to amend the provisions of section 194C to provide that the relaxation

of non deduction of tax at source shall only be applicable to transporters who is

eligible to compute his income as per the provisions of section 44AE of the Act i.e. a

person who is not owning more than 10 goods carriage at any time during the

previous year and who also furnished a declaration to this effect along with his PAN.

All other transporters are liable for tax deduction at source under the provisions of

section 194C.

It is proposed to amend the provisions of section 195 of the Act to provide that the

person responsible for paying any sum, whether chargeable to tax or not, to a non-

resident individual or foreign company, shall be required to furnish the information of

the prescribed sum in such form and manner as may be prescribed.

It is further proposed to insert a new provision in the Act to provide that in case of

non-furnishing of information or furnishing of incorrect information under sub-section(6) of section 195 of the Act, a penalty of one lakh ` shall be levied.



It is also proposed to amend the provisions of section 273B of the Act to provide that

no penalty shall be imposable under this new provision if it is proved that there was

reasonable cause for non furnishing or incorrect furnishing of information under sub-

section (6) of section 195 of the Act.

These amendments will take effect from 1st June, 2015.



Wealth tax proposed to be abolished and a super surcharge @ 2% to be introducedfor persons having ` 1 crore plus income.

The existing rate of tax on Income by way of Royalty and Fees for technical services

in case of non-residents @ 25% proposed to be reduced to 10%.

Exempt-Exempt-Exempt (EEE) tax benefit proposed for assessee having a girl child

and investing under the Sukanya Samriddhi Account Scheme. The investments made

in the Scheme will be eligible for deduction under section 80C of the Act, the interest

accruing on deposits in such account will be exempt from income tax and the

withdrawal from the said scheme in accordance with the rules of the said scheme will

be exempt from tax.

In order to curb generation of black money by way of dealings in cash in immovable

property transactions, section 269SS is proposed to be amended so as to provide

that no person shall accept from any person, any loan or deposit or any sum ofmoney exceeding ` 20,000/-, whether as advance or otherwise, in relation to transfer

of an immovable property otherwise than by an account payee cheque or account

payee bank draft or by electronic clearing system through a bank account, if theamount of such loan or deposit or such specified sum is twenty thousand ` or more.

General

To remove the discrimination in the matter of allowing additional depreciation under

section 32(1)(iia) on plant or machinery used for less than 180 days and used for 180

days or more, it is proposed to provide that the balance 50% of the additional

depreciation on new plant or machinery acquired and used for less than 180 days

which has not been allowed in the year of acquisition and installation of such plant or

machinery, shall be allowed in the immediately succeeding previous year.

Share of Profit received from an AOP by a company proposed to be excluded while

computing the Minimum Alternate Tax liability of the company u/s 115JB of the Act.

The expenditure, if any. Debited to the profit & loss account, corresponding to such

income are also proposed to be added back to the book profit for the purpose of

calculation of Minimum Alternate Tax.

General

INDIRECT TAXESSERVICE TAX

Service tax rate increased from at 12.36% to 14% (Education Cess and S&HEducation Cess shall be subsumed in Service Tax).

The new tax rate shall come into effect from a date to be notified after enactment ofthe Finance Bill, 2015

An enabling provision to levy Swachh Bharat cess at a rate of 2% of the value of

taxable services on all or certain services, if need arises, thereby taking the effective

rate of tax to 16%.

Amendment in existing services: (Effective from 01st April, 2015)

Construction, repair, maintenance, renovation or alteration services to Government, local

authority or governmental authority of buildings or structures meant for use as educational,

clinical, art or cultural or for use other than commerce or industry has been made taxable

Exemption to construction, erection, commissioning or installation of original works to an

airport or port is withdrawn.

Services provided by way of access to amusement facility such as rides/ theme parks etc,

have been made taxable.

Services Tax to be levied on service by way of entertainment events or concerts, pageants,

non-recognized sporting events, music concerts, award functions where amount charged ismore than ` 500 has been made taxable. However, exhibition of cinematographic films,

circus, dance, theatrical performance including drama and ballets, or recognized sports

event would continue to be exempt

Fee of performing artist in folk or classical art form of music, dance or theater would beexempt only to limit of ` 1,00,000 per performance. Exemption is not available to brand

ambassador.

Transportation of food stuff other than food grains, by rail, road or vessel would be taxable.

Food grains will include rice, pulses, flour, milk and salt

Agency services by mutual fund agents and distributors to mutual fund or AMC are

subjected to levy. Similarly, selling or marketing agency of a lottery to a distributor is also

taxable. However, Service tax is payable by service recipient under reverse charge.

Exemption withdrawn on certain telecommunication services provided for public use.


Extension of benefit to certain sectors

All ambulance services to patients for travelling to and from clinical establishments are

exempted.

Life insurance services by way of Varishtha Pension Bima Yojana would be exempt

Exemption to services of pre-conditioning, pre-cooling, ripening, waxing, retail packing,

labeling of fruits and vegetable without altering their essential characteristic

Admission to museum, zoo, national park, wild life sanctuary and tiger reserve are

exempted

Exemption to transportation of goods by road from place of removal extended to land

custom station. Earlier exemption available till inland container depot, container freight

station, port or airport.

Service provided by way of exhibition of movie by the exhibitor (theatre owner) to the

distributor or association of persons consisting of such exhibitor as one of it’s members is

being exempted.

Service provided by common effluent plant operator for treatment of effluent is exempt.


Owing to piling litigation, word ‘Government’ has been defined in newly inserted Section

65B (26A) of the Act. Government would now mean Central, State and Union territory

governments along with their departments but excludes certain entities.

Taxability issues on activities by chit fund foreman to chit fund and lottery relates activities

are proposed to be resolved by amendment in definition of ‘service’. Moreover, abatement

of 30 per cent in valuation is withdrawn.

Clarification on classification of input services used for providing output services has been

made by inserting an illustration under the Section 66F (1) of the Act.

In another step to clarify the position of statue, Bill proposes to amend the definition of

‘consideration’ under Section 67 of the Act to empower inclusion of the value of

reimbursements in the value of taxable services in the principle statue. Similarly, amount

retained by lottery distributor or selling agent over and above commission or fee shall be

part of consideration for service.

Service tax is levied on manufacture or job work of liquor for human consumption by way of

amendments in Negative list and mega exemption clauses.

All services provided by Government and local authorities are subjected to Service tax levy

except those are specifically exempted

Amendment in existing services: (Effective from Enactment of Bill)

Revised Rates in certain Services (Effective from Enactment of Bill)

Service Old Rate New Rate

Air Travel Agent (Domestic

Bookings)

0.6% 0.7%

Air Travel Agent (International

Bookings)

1.2% 1.4%

Life Insurance Service 3% and 1.5%

respectively

3.5 and 1.75%

respectively

Lottery distributor and selling

agent

` 7,000/- & `

10,000/-

` 8,200/- & `

12,800/-

respectively.

Revised Rates in certain Services (Effective from Enactment of Bill)

Service Old Rate New Rate

Money Changer

Service

(a) 0.12 per cent. of the gross

amount of currency exchanged foran amount upto ` 100,000, subject

to the minimum amount of ` 30; and

(b) ` 120 and 0.06 per cent. of the

gross amount of currencyexchanged for an amount of `exceeding ` 100,000 and upto `

10,00,000; and

(c) ` 660 and 0.012 per cent. of the

gross amount of currencyexchanged for an amount of `

exceeding 10,00,000, subject tomaximum amount of ` 6000

(a) 0.14 per cent. of the gross

amount of currency exchanged foran amount upto ` 100,000, subject to

the minimum amount of ` 35; and

(b) ` 140 and 0.07 per cent. of the

gross amount of currency exchangedfor an amount of ` exceeding `100,000 and upto ` 10,00,000; and

(c) ` 770 and 0.014 per cent. of the

gross amount of currency exchangedfor an amount of ` exceeding

10,00,000, subject to maximumamount of ` 7000

Revision of Abatement (Effective from 01st April, 2015)

Service Earlier

abatement

Proposed

abatement

Transport of goods and

passengers by rail 70% 70%

No credit of

Inputs, Capital

goods and Input

services is

allowed

Transport of goods by road 75%

Transport of goods by vessel 60%

Transport of passengers by air in

economy class 60% 60%

Transport of passengers by air in

higher class 60% 40%

It is being prescribed specifically in this section that consideration for

service shall include:

all reimbursable expenditure or cost incurred and charged by the service

provider. The intention has always been to include reimbursable

expenditure in the value of taxable service. However, in some cases courts

have taken a contrary view. Therefore, the intention of legislature is being

stated specifically by this provision.

amount retained by the distributor or selling agent of lottery from gross sale

amount of lottery ticket, or, as the case maybe, the discount received, that is

the difference in the face value of lottery ticket and the price at which the

distributor or selling agent gets such tickets;

Valuation of Taxable Services

Stringent limit of six months for availing credit from date of invoice is

relaxed to one year.

In case of payments under partial reverse charge, service recipient

can now avail credit after paying its portion of Service tax.

Changes to CENVAT Credit Rules

Present system of partial reverse charge on manpower supply and security

agency service is proposed to be replaced by full reverse charge.

Accordingly, if manpower supply and security agency service are provided

by individual, HUF, firm to a body corporate, body corporate will be liable to

discharge full Service tax liability

Partial Reverse

Charge mechanism

Operational Amendments:

Rationalization of penalties (Effective from Enactment of Bill)

A. A Penalty in cases of fraud, collusion, mis-statement etc is restricted to 100 per cent of

Service tax levy.

However, benefit of reduced penalty is available in following manner:

• If Service tax along with interest is paid within 30 days of issuance of SCN, 15 per cent

penalty; and

• In case where SCN is adjudicated and Service tax along with interest and reduced

penalty is paid within 30 days of the order against SCN, 25 per cent penalty

B. Penalty in cases other than of fraud, collusion, mis-statement etc is restricted to 10

per cent of Service tax levy. Similar to above, benefit of reduced penalty is available

in following manner:

• If Service tax along with interest is paid within 30 days of issuance of SCN, 15 per cent

penalty; and

• In case where SCN is adjudicated and Service tax along with interest and reduced

penalty is paid within 30 days of the order against SCN, 25 per cent penalty

C. In both cases i.e. A and B, if appellate remedy is availed and subsequently tax is

reduced, benefit of reduced penalty of 25 per cent would be available if Service tax

along with interest and reduced penalty is paid within 30 days of the appellate order

Operational Amendments:

Recovery can be made under Section 87 of the Act without issuance of any show cause

notice in cases where Service tax has been self-declared in returns but remains un-paid.

Section 80 that provided for waiver of penalty in specified situations is being omitted.

Provision for issuing digitally signed invoices is being added along with the option of

presentation of records in electronic form.

BUDGET HIGHLIGHTS PRESENTATION BY :-

M/s Vimal Tandon & Co.Chartered AccountantsA-107/1, Pal Mohan Plaza, 11/56,D.B. Gupta Road, Karol Bagh,New Delhi - 110005 Telefax – 23551056

Tel. 45032501

Mob. 9810221653, 9868171653

website - vimaltandon.comcharteredaccountantindelhi.com

e-mail. - [email protected]@gmail.com

budget 2015-2016

Business

income tax rates

rate of income tax

incometax act

incometax comp

income slabay

aboverates of income

month income tax slabs

taxable income exceeding