Description
This Budget this year was the first full year Budget and everyone was keen to see the direction laid out in the Budget which will pave way for the next 4 years. To the credit of the FM one must compliment him for being firm in his action and the force with which he proposes to see India as a Cashless society. A tall target to achieve and it will be particularly interesting to watch how it is implemented.
FOREWORD
Dear Reader,
In a bold step to tell the world that India is now ready to meet Global Standards, the FM has
taken several measures like announcing that GST will be surely applicable from 1
st
April,
2016, Corporate Tax rates will be brought down by 5% over the next 4 years, no
retrospective amendments and various changes in taxation of REITs, VCCs and AIFs.
These along with other measures lays down the road map ahead although the proof of the
pudding will lie in the implementation of the policies laid down.
Strong measures to curb generation and concealment of black money has been initiated by
a comprehensive law which will also take care of black money parked abroad. Retaining
foreign assets would lead to action for seizure of equivalent assets in India, rigorous
imprisonment for 10 years and penalty upto 300% with no option to approach Settlement
Commission. Non-filing of return or filing of return with inadequate disclosures to be
punished with rigorous imprisonment upto 7 years, undisclosed income from foreign assets
to be taxed at maximum marginal rate, disclosure of foreign assets in the tax return even if
there is no taxable income are some of the measures to curb black money and an indicator
of the will of the Government to bring about a Swachh Bharat not only in the environment but
also in the fiscal environment.
The upward revision in Excise Duty and Service Tax are clearly a move to align the tax rates
as a forerunner to the implementation of GST. Deferment of GAAR for 2 years, scrapping
DTC, abolition of Wealth Tax are welcome features of this Budget.
The Economic Survey places India in a sweet spot since the domestic demand is picking up,
inflation is brought under control, crude oil prices have tapered down and the Rupee has
also stabilized. The fiscal deficit is expected to be 3.9% in 2015-16 and drop to 3.6% in
2016-17 and 3% in 2017-18. With the projected GDP for the current year between 8 to 8.5%,
the stage is set for a double-digit growth rate.
A Gold monetisation scheme, to be introduced this year, will allow depositors to earn interest
on their gold investments while keeping their holding in Gold intact and the issue of
Sovereign Gold Bonds will provide a good option for those who want to invest in Gold. An
indigenous gold coin carrying the Ashok Chakra will be developed to reduce the demand for
coins minted outside India thereby providing the ability to recycle gold available in India.
For the individual tax payer the threshold limit and the tax slabs and rates remain unchanged
with an increase in deduction towards health insurance policy from Rs. 15,000 to Rs. 25,000,
contribution to National Pension Scheme upto Rs. 50,000 for individuals, increase in
deduction of transport allowance from Rs. 9,600 to Rs. 19,200.
On the indirect tax front, Service Tax and Excise Duty have been increased to 14% and
12.50% respectively. The tax base in Service Tax has been further widened by realigning
mega exemption, tweaking a few definitions and pruning the negative list.
It is proposed to issue tax free bonds for infrastructure projects in rail, road and irrigation
projects.
We look forward to a Swachh Economy,
THE BACKSPACE
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The Uni on Budget 2015-16
DISCLAIMER
This document is not for public distribution and has been circulated solely for your information and
must not be reproduced, redistributed or transmitted in any form or by any means without permission
in writing from our firm. Person in possession of this document is required to observe these restrictions.
This material is for the personal information of the authorized recipient and we are not soliciting
any action based upon it. It is for the general information and does not constitute a personal
recommendation or take into account the particular objectives, financial situation, or needs of individual
clients and should not be considered as professional advice. We are not responsible for any error or
omission but the same is regretted and would be appreciated if brought to our notice.
The budget proposals are liable to amendment during the passage of the Finance Bill through Parliament.
The information given in the Document provides a bird’s eye view on the changes proposed and should
not be relied for the purpose of economic decisions. Each economic decision would call for specific
reference of the relevant status. In consistency with our policy of not recognizing any liability on matters
not covered where specific advice is given, we do not accept any responsibility for any decision taken
based on information contained herein.
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The Uni on Budget 2015-16
CONTENTS
Chapter Topic Page No.
1. Highlights From Finance Bill ............................................................... 1
2. Key Policy Proposals ............................................................................ 3
3. Direct Tax Proposals ............................................................................. 5
4. Service Tax .......................................................................................... 13
5. Rate of Tax For A.Y. 2016-17 ............................................................. 16
6. TDS & TCS Chart ............................................................................... 19
7. TDS & TCS Chart ............................................................................... 22
8. Highlights of Companies Act, 2013 .................................................. 23
The Uni on Budget 2015-16
1 Chapter I–Highlights From Finance Bill
Chapter I
HIGHLIGHTS FROM FINANCE BILL
DIRECT TAXES
• No change proposed in the tax rates for income earned during financial year 2015-
16 i.e. A.Y. 2016-17.
• Announcement to reduce corporate rate of tax from 30% to 25% over the next 4
years commencing from the next financial year.
• Surcharge to be increased by 2% for individuals and domestic companies.
• Transport allowance (exempt from tax) to be increased from Rs. 800 p.m. to Rs.
1,600 p.m.
• Deduction u/s 80 C was already available for Sukanya Samridhi Scheme. Now all
the withdrawals and interest accrued on such scheme will also be available with
retrospective effect w.e.f. 1.4.2015.
• Deduction in respect of contribution to certain pension funds increased from Rs.
1 lakh to Rs. 1.50 lakhs u/s 80 CCC Payment to notified pension scheme will be
available upto Rs. 50,000 u/s 80 CCD(1B).
• Deduction under section 80D for health insurance to be increased by Rs. 10,000
for various category of assesses.
• Contribution for Swachh Bharat Kosh and Clean Ganga Fund (other than CSR)
eligible for 100% deduction u/s 80 G without 10% overall cap.
• Contribution to National Fund for control of Drug Abuse eligible for 100%
deduction u/s 80 G.
• Wealth Tax abolished from next year i.e. A.Y. 2016-17. However details of assets
held by a person to be declared in the income tax return.
• Applicable limit for Domestic transfer pricing increased from 5 crores to 20 crores.
• Tax on royalty paid to foreign companies has been reduced from 25% to 10% u/s
115A.
• Incentive for employment of new workmen @ 30% of additional salary cost u/s
80JJAA relaxed as the limit for employing regular workmen reduced from 100 to
50 workmen.
• MAT provision rationalized to provide that FIIs would not suffer MAT on capital
gains except where such income qualifies as short term capital gains on which STT
is not paid.
• Permanent Establishment (PE) norm to be tweaked to woo fund managers to
relocate to India.
• Scope of Section 269 SS & 269 T currently prohibits acceptance and repayment of
loans and deposits exceeding Rs. 20,000 in cash. The scope is now proposed to be
enlarged to include acceptance or repayment of advances for immovable property
in cash exceeding Rs. 20,000.
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2 Chapter I–Highlights From Finance Bill
• Individuals or HUFs required to deduct Tax at Source on acquisition of immovable
property from Non-residents need not apply for TAN for this purpose.
• No changes proposed in respect of deductions for computing business or
professional income.
• Clarification made to the effect that concealment penalty u/s 271(1)(c) applicable
to provisions of MAT and AMT.
• General Anti Avoidance Rule to be deferred for 2 years and thereafter to apply
prospectively.
• Remittances to non-residents to be certified and data made available even if TDS
is not required u/s 195.
• Concept of residential status of a Company introduced in line with the DTC. A
company incorporated outside India to be a resident in India if its place of effective
management at any time during the year is situated in India. This will have a
huge impact on Companies having outbound investments in corporate entities from
India.
INDIRECT TAXES
• Service Tax rate is being increased from 12.36% to 14% with an enabling provision
to increase it by a further 2% as Swachh Bharat Cess.
• Negative list pruned by amending the definition of entertainment and excluding
amusement facilities such as rides, bowling alleys, amusement arcades, water parks,
theme parks, etc. thereby making the access fees to such places liable to service
tax.
• Similarly service tax to be levied on admission tickets to concerts, non-recognized
sporting events, pageants, music concerts and award functions, if the amount
charged for admission is more than Rs. 500.
• Currently Service Tax is applicable on “Support Services” provided by Government.
It is proposed to exclude all such services from the Negative list thereby making it
taxable.
• Any bill, invoice, challan can be authenticated by a digital signature.
• Registration number can be obtained online within 2 days of application.
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3 Chapter II–Key Policy Proposals
Chapter II
KEY POLICY PROPOSALS
BATTLE AGAINST BLACK MONEY - MEASURES
Equipped with an agreement between India and Swiss authorities to get information
where required, confirm genuineness of bank accounts in a time bound manner and
automatic exchange of data, the Finance Minister has decided to come down very
heavily on black money stacked in India as well as outside India. He has decided to
take strict measures giving a deafening alarm for all black money hoarders to come out
clean before being caught. The popular expectation is that before any harsh measures
are implemented one last opportunity will be given to come out clean but contrary
to expectations, no such announcement has been made so far. The FM proposes to
reduce the circulation of cash and take steps towards a cashless society. The measures
proposed by the FM are as under:
• The Foreign Exchange Management Act, 1999 (FEMA) is being amended to the
effect that if any foreign exchange, foreign security or any immovable property
situated outside India is held in contravention of the provisions of this Act, then
action may be taken for seizure and eventual confiscation of assets of equivalent
value situated in India. These contraventions are also being made liable for levy
of penalty and prosecution with punishment of imprisonment up to five years.
• Tax evasion by holding foreign assets to be dealt with sternly including rigorous
imprisonment upto 10 years, penalty of 300%, non-compoundable and cannot be
taken before the Settlement Commission.
• Non-filing of return or filing of return with inadequate disclosures would be
punishable with rigorous imprisonment upto 7 years.
• Beneficial owner or beneficiary of foreign assets will be mandatorily required to
file return even if there is no taxable income.
• Any undisclosed income from a foreign asset will be taxed at the maximum
marginal rate.
• Anybody including banks, financial institutions or any other individuals helping
him will be considered as an abettor and will be liable for prosecution and penalty.
• Date of Opening of foreign account would be mandatorily required to be specified
by the assessee in the return of income.
• Concealment of income or evasion of income in relation to a foreign asset to be
made a predicate offence under Prevention of Money Laundering Act, 2002.
• Bill for a comprehensive new law to deal with black money parked abroad to be
introduced in the current session.
• Benami Transactions (Prohibition) Bill to curb black money to be introduced in the
current session.
• Acceptance or repayment of an advance of Rs. 20,000 or more in cash for purchase
of immovable property to be prohibited.
• PAN made mandatory for any purchase or sale exceeding Rs. 1 lakh.
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4 Chapter II–Key Policy Proposals
• Third party reporting entities would be required to furnish information about
foreign currency sales and cross border transactions.
• Leverage of technology by CBDT & CBEC to access information from either’s
databases.
• New structure of electronic filing of statements by reporting entities to ensure
seamless integration of data for more effective enforcement.
MONETIZING GOLD
India being a large consumer of gold every year almost 800 to 1000 tons of gold is
imported. Although stocks of gold in India are estimated to be over 20,000 tonnes,
this gold is neither traded nor available in circulation. The FM therefore proposes to
introduce a Gold Monetization Scheme whereby depositors will be allowed to deposit
or withdraw gold, earn interest on gold lying in the metal account and the Government
will be able to give gold loans in their metal account.
An alternate financial asset will also be developed by way of a Sovereign Gold Bond
as an alternative to purchasing gold. The Bond will carry a fixed rate of interest and
will also be redeemable in cash in terms of the face value of the gold at the time of
redemption.
To reduce the demand for imported coins minted outside India, an Indian Gold Coin
with Ashok Chakra on its face will be developed. This will help recycle the gold
available in India and reduce gold smuggling.
BANKRUPTCY CODE
A comprehensive bankruptcy code of global standards to be introduced
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5 Chapter III–Direct Tax Proposals
Chapter III
DIRECT TAX PROPOSALS
Rate of Tax
• No change in personal and corporate tax rates.
• No change in tax slabs.
• Rate of corporate tax proposed to be reduced from 30% to 25% over next 4 years
by correspondingly reducing exemptions. However, in the current year, the rate
remains the same.
• The rate of surcharge has been increased by 2% and the revised rates are as under:
— For Individuals: In case the income is in excess of INR 10 million, the
surcharge on tax payable will be levied at 12%.
— For Domestic Companies: In case the income is in excess of INR 10 million,
the surcharge on tax payable will be levied at 7% and 12% if the income is
in excess of INR 100 million.
— For Foreign Companies: The rate of surcharge continues to remain the same.
— Dividend distribution tax increased to 20.358% and Buy back tax to 23.072%.
Wealth Tax Abolished
• Currently, wealth tax is payable @1% on taxable assets in excess of INR 30 lakhs.
• It is proposed to completely abolish wealth tax (in exchange of which higher rate
of surcharge has been introduced).
• Detailed information of an assessee’s wealth to be disclosed in the income-tax
return to track the wealth of an individual.
Deductions
• Exemption of transport allowance from salary income increased to INR 1,600 per
month.
• Medical premium deduction increased from INR 15,000 to INR 25,000 for
individuals and from INR 20,000 to INR 30,000 for senior citizens.
• For very senior citizens (over 80 years age), deduction for medical expenditure upto
INR 30,000 shall be allowed provided there is no health insurance in force.
• Deduction upto INR 1,50,000 to be allowed under section 80C for deposits made
in the Sukanya Samriddhi Account Scheme for the welfare of a girl child. Interest
rate @ 9.1% will be paid in this account and interest as well as withdrawals will
be exempt from tax.
• Contribution to National Pension Scheme and notified pension schemes to be
increased from INR 100,000 per annum to INR 150,000 per annum, subject to
conditions and overall limits towards specified investments.
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Chapter III–Direct Tax Proposals
• Additional deduction of INR 50,000 per annum to be available in respect of the
individual’s contribution to National Pension Scheme.
• Deduction for expenditure on medical treatment for persons with disability and
severe disability increased to INR 75,000 and INR 125,000 respectively.
• Limit for deduction for any annuity plan of LIC of India raised from INR 100,000
to INR 150,000.
• No TDS to be withheld on certain life insurance policies chargeable to tax if the
insured furnishes Form 15G/15H.
• Donations / Contributions eligible for 100% deduction under section 80G will now
include Swachchh Bharat Kosh and Clear Ganga Fund without the limit of 10% of
GTI.
• Donation to the National Fund for Control of Drug Abuse eligible for 100%
deduction under section 80G.
• Deduction in respect of additional wages (section 80JJAA): Benefit extended to
all assesses having manufacturing units rather than restricting it to corporate
assesses only. Further, in order to enable the smaller units to claim this incentive,
it is proposed to extend the benefit under the section to units employing even 50
instead of 100 regular workmen.
Residency status in respect of Companies – Place of effective management
(POEM)
• The concept of PEOM is an internationally recognized concept and was also a part
of the Direct Taxes Code.
• A Company shall be a resident in India if:
— It is an Indian Company, or
— Its place of effective management, at any time in that year, is in India
• Further, POEM is defined to mean a place where key management and commercial
decisions that are necessary for the conduct of business of an entity as a whole
are, in substance made.
• Shell companies, SPVs or operating companies can be treated as an Indian
Company if its PEOM is in India. Accordingly, all the provisions of Income-tax Act
will apply to such companies.
• In determining the POEM various circumstances ought to be taken into account
like:
— where key management and commercial decisions that are necessary for the
conduct of the entity’s business are made
— where board of directors makes its decisions on important policies essential
for the management of the company
— where the actions to be taken by the entity are determined
— Board meeting currently held via video conferencing, etc could fall in the net.
— Email correspondence, telephone calls, shareholder agreements, etc can
determine POEM.
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7 Chapter III–Direct Tax Proposals
• A few Dont’s under POEM: Board meetings in India, decisions in India, preparation
of accounts in India, Memorandum / Articles / SHAs to be carefully drafted,
Pass though status for Alternate Investment Funds (AIF)
• The existing provisions provide that income of a Venture Capital Company or a
Venture Capital Fund from investment in a Venture Capital Undertaking shall be
exempt from taxation in the hands of the fund and taxable in the hands of the
investors.
• It is proposed to facilitate taxation in case of pooled investment vehicles i.e.
Alternative Investment Funds (AIF) as under:
— Income from profits and gains of business shall be taxable in the hands of the
AIF.
— Income, other than income from profits and gains of business, shall be taxed
in the hands of the unit holders and not in the hands of the AIF.
— Withholding tax in case of distribution of component of income (other than
income which is taxable in the hands of the AIF) at 10 per cent to unit
holders.
— If in any year there is a loss (either current loss or the loss which remained to
be set off) at the AIF level, it shall not be allowed to be passed through to the
unit holders but would be carried forward at fund level to be set off against
income of the next year in accordance with the provisions of Chapter VI of
the Act.
— The total income of the investment fund shall be charged to tax;
o at the rate or rates as specified in the Finance Act of the relevant year,
where such fund is a company or a firm; or
o at maximum marginal rate in any other case
— The provisions of Chapter XII-D (Dividend Distribution Tax) or Chapter
XII-E (Tax on distributed income) shall not apply to the income paid by an
investment fund to its unit holders.
— The AIF is required to furnish its return of income.
— The AIF shall also provide the details of various components of income, etc.
to the prescribed income-tax authority and the unit holders.
Fund managers’ presence in India not to constitute business connection of
offshore funds
• To facilitate location of fund managers of off-shore funds in India, it is proposed
that incase of eligible investment funds, the fund management carried out through
an eligible fund manager acting on behalf of such fund should not constitute
business connection in India of the said fund and such fund should also not be
regarded as a resident in India.
• This is a positive move by the government. However, with the stringent conditions
prescribed for eligible investment funds and managers, it could be difficult for any
funds to take benefit of this provision.
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Chapter III–Direct Tax Proposals
Indirect Transfers
• The existing provisions of section 9 deal with cases of income which are deemed
to accrue or arise in India. Explanation 5 to section 9 (1) (i) inserted by Finance
Act, 2012 with retrospective effect from 1.04.1962 clarified that an asset or capital
asset, being any share or interest in a company or entity registered or incorporated
outside India shall be deemed to be situated in India if the share or interest
derives, directly or indirectly, its value substantially from the assets located in
India.
• The following amendments are proposed in the provisions of section 9 relating to
indirect transfer:
— the share or interest of a foreign company or entity shall be deemed to derive
its value substantially from the assets (whether tangible or intangible) located
in India, if on the specified date, the value of Indian assets,-
a. exceeds the amount of ten crore rupees; and
b. represents at least fifty per cent of the value of all the assets owned by
the company or entity.
— any income on transfer of a share or interest deriving, directly or indirectly, its
value substantially from assets located in India will be on proportionate basis,
when all of the underlying assets of such company or entity are not located
in India.
• However, the aforesaid provision will not apply and no income shall be deemed
to accrue or arise to the non-resident if the transferor neither holds the right to
management or control in relation to such company or entity, nor holds voting
power or share capital or interest exceeding 5 percent of the total voting power or
total share capital or total interest of such company or entity, directly or indirectly.
• Any capital gain arising from a transfer of share of a foreign company in a scheme
of amalgamation or demerger, subject to compliance of certain conditions, shall also
not be deemed to accrue or arise in India under the said Explanation.
Tax rate on income from Royalty and Fees for Technical Services
• It is proposed to reduce the rate of tax on Income by way of Royalty and Fees for
technical services in case of non-residents from the current 25% to 10%.
• The rate of tax was increased from 10% to 25% vide the Finance Act, 2013 and the
reversion of tax rates to 10% is a welcome move and will help promote the ‘Make
in India’ initiative, as also curtail treaty shopping exercises.
Special tax regime for Real Estate Investment Trust (REITs) and
Infrastructure Investment Trust (Invit)
• Background:
— This concept was introduced in the Budget 2014. It is a security that sells
like a stock and invests in real estate directly, either through properties
or mortgages. REITs receive special tax considerations and typically offer
investors high yields, as well as a highly liquid method of investing in real
estate and with smaller ticket sizes. It also spreads the risk on investment
in one real estate property by an individual as compared to investments in
multiple projects. The hassle of paper work, stamp duty, etc. of the investor
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9 Chapter III–Direct Tax Proposals
will be reduced which could be an added advantage. REITs were given a “Pass
through” status for the purpose of taxation i.e. no tax is levied on interest
income earned by the trust from the SPV.
• Capital Gains on Sponsors:
— Earlier, the sponsors were subject to tax on sale of the units and no
preferential capital gains tax regime (even where STT was payable) was made
available to sponsors in respect of units of Business Trust.
— It is proposed that sale of units of Business Trust by the sponsor would be
eligible for beneficial capital gains tax regime (where STT has been paid).
Accordingly, long term gains (held for more than 36 months) will be exempt,
short term gains will be taxable at 15%
• Rental Income
— The rental income arising to REIT from the real estate property directly held
by the REIT eligible for pass through status. Accordingly, such income will
be exempt for the REIT and chargeable to tax in the hands of the REIT unit
holders on distribution. The tenant or lessee is not required to withhold tax
on payment of rent to the REIT, but the REIT in turn would withhold tax at
10 per cent on distribution of such income to the resident unit holders and at
applicable rates on the distribution to the non-resident unit holders.
Incentives for Andhra Pradesh and Telangana
For promoting industrialization and economic growth in the aforesaid states, it is
proposed to provide incentives (as detailed below) for manufacturing undertaking or
enterprise set up in notified backward areas in these states:
• Additional depreciation
— It is proposed to provide for additional depreciation at the rate of 35% (instead
of 20%) on new plant and machinery acquired and installed in the notified
backward area between the period 01 April 2015 and 31 March 2020.
• Additional Investment allowance
— A new section 32AD is proposed to be introduced to provide for additional
investment allowance of 15% on new asset acquired and installed in the
notified backward area.
— This deduction will be in addition to the investment allowance at the rate of
15% currently available under section 32AC of the Act.
— Safeguards are proposed to be introduced in relation to transfer of assets to
ensure that undertakings actually contribute to economic growth by carrying
on manufacturing activities for a substantial period.
Amendment to the definition of charitable purpose
• It is proposed to include Yoga in the definition of charitable purpose on the same
lines as education, medical, relief, etc.
• Is further proposed to be 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,
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Chapter III–Direct Tax Proposals
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:
— such activity is undertaken in the course of actual carrying out of such
advancement of any other object of general public utility; and
— the aggregate receipts from such activity or activities during the previous year,
do not exceed twenty per cent of the total receipts, of the trust or institution
undertaking such activity or activities, of that previous year.
• Income of charitable trust/organisation in excess of fifteen per cent can be
accumulated for exemption only if the prescribed Form is filed by it on or before
the due date of income tax return. Further, even the return of income would need
to be filed by such charitable trust/organisation within the relevant due date.
Minimum Alternate Tax (MAT)
• The share of a member of an AOP, in the income of the AOP, on which no income-
tax is payable in accordance with the provisions of section 86 of the Act, should
be excluded while computing the MAT liability of the member under 115JB of the
Act.
• Income from transaction in securities (other than STCG arising on which STT is
not chargeable) arising to FII excluded from the ambit of MAT by excluding both,
the income and corresponding expenses, in the computation.
Settlement Commission (SC)
• Where notice under Section 148 has been issued for any assessment year, an
assessee can approach the SC for any other year which is currently not permitted.
• SC permitted to rectify any mistake apparent on record within 6 months in certain
cases.
Revision of Order under Section 263 which is prejudicial to the interest of
revenue
• The Principal Commissioner / Commissioner can revise the assessment order in the
following cases which are deemed to ‘erroneous and prejudicial to the interests of
the revenue’, where the order:
— is passed without making inquiries or verification;
— is passed allowing any relief without inquiring into the claim;
— has not been made in accordance with any order, direction or instruction
issued by CBDT; or
— has not been passed in accordance with any decision, prejudicial to the
taxpayer, rendered by the jurisdictional High Court or Supreme Court in the
case of the taxpayer or any other person.
• The amendment tends to widen the power of revision, which may be contrary to
settled position of law. The insertion of the words ‘in the opinion of’ would also
be debatable, as the question can arise whether the opinion of the AO can be
substituted at a later date.
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11 Chapter III–Direct Tax Proposals
Other Provisions
• In order to curb generation of black money in immovable property transactions,
section 269SS and 269T have been amended to prohibit persons to accept or
repay an amount in excess of INR 20,000 for transactions in immovable property
otherwise than an account payee cheque or draft.
• Concessional rate of 5% TDS on interest payment incase of interest payable to FIIs
and QFIs on their investments in Government Securities.
• Additional depreciation: As a form of rationalization, 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.
• Domestic Transfer Pricing: Currently, domestic TP is applicable specified domestic
transactions where the total of such transactions exceed INR 5 crores in a year. It
is proposed to increase this limit to INR 20 crores. This move will bring small and
medium enterprises out of the domestic transfer pricing.
• Requirement of Tax Account Number (TAN) relaxed in certain cases like
individuals not having tax audit and undertaking one time transactions where tax
would be withheld. In such cases, the PAN needs to be quoted instead of the TAN.
• Filing return of income made mandatory for educational institutions and hospitals
wholly or substantially financed by the government.
• Notice for reopening of assessment under Section 148 to be initiated within 4 years
only on obtaining approval of Joint Commissioner and within 6 years on obtaining
approval from the Chief Commissioner of income-tax.
• Benefit of no deduction of tax on payments to transporters (in the business of
pying, hiring or leasing goods carriage) who submit PAN now limited to only those
transporters who own not more than 10 carriages at any time during the pervious
year).
Withholding tax (TDS):
— Interest earned on recurring deposits now liable for TDS
— Threshold limits for TDS on interest payable to depositors to be applied at an
entity level for banking company/co-operative society/ public company where
core banking solutions have been adopted instead of branch level.
— TDS applicable in respect of any payment of interest on time deposits by the
co-operative bank to its member.
• Restrictions on Chartered Accountants (CA):
— CAs who disqualify to be auditors as per section 141(3) of the Companies
Act, 2013 being relatives of directors, indebted to the Company or having
business relations, in full time employment, etc would now disqualify to be a
tax auditor or issue any certificates.
• Penalty for concealment
— Section 271 (1) (c) of the IT Act provides for levy of penalty on the amount of
‘tax sought to be evaded’ where there is concealment of income or furnishing
inaccurate particulars of income.
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Chapter III–Direct Tax Proposals
— The aforesaid provision is proposed to be amended to extend its applicability
to cases where tax has been computed under Section 115JB/ Section 115JC
(MAT).
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13 Chapter IV–Service Tax
Chapter IV
SERVICE TAX
General
• The rates of service tax revised from 12.36% to 14%.
• A new cess in the name of Swachh Bharat Cess @2% of value of taxable service is
proposed to be levied on the value of services from such date as may be notified.
• GST proposed to be introduced from 1st April, 2016.
New Item added for Taxation through Service Tax Rules
• Services Rendered By Aggregator Of Services:
Taxable, if by using the brand name of the aggregator (without physical presence
of aggregator in India). The tax will be payable by the provider i.e. aggregator. The
aggregators, illustratively, would be providers of marketing of services e.g.: Amazon,
Flipkart, Snapdeal, Uber, OlaCabs, Quikr, Zomato, FoodPanda, OLX, Housing,
Mydala, Cashkaro, Stayzilla etc. who apparently provide services of aggregator.
Typically such insertion is made in Rule 2 (1) (d) of Service Tax Rules, which
normally puts the liability on recipient as against, in this case, it is a liability of
provider, thus adding complexity.
The Service Tax Rules further provides that if the aggregator does not have physical
presence in the taxable territory, he shall appoint a person in taxable territory for
paying service tax. This would also include a seller of foreign services and availing
services of aggregator in India.”
Exemption withdrawn by amending Negative list & Mega Exemption List
• Services provided by way of access to amusement facility providing fun or
recreation by means of rides, gaming devices or bowling alleys in amusement
parks, amusement arcades, water parks and theme parks
• Services by way of admission to entertainment event of concerts, pageants, musical
performances, concerts, award functions and sporting events other than the
recognized sporting events, if the amount charged is more than INR 500 for right
to admission to such an event.
• Services provided by performing artist in folk or classical art form will be taxable
if the consideration charged is more than INR 1,00,000
• However, Services by way of admission to entertainment event, namely, exhibition
of cinematographic film, circus, recognized sporting events, dance, theatrical
performance including drama and ballet shall be continued, through the exemption
route
• Services of manufacture / production of alcoholic liquor.
• Any service provided by Government or local authority to a business entity will
be liable to service tax unless forming a part or negative or mage exemption list.
The Uni on Budget 2015-16
14
Chapter IV–Service Tax
• Transportation by rail or vessel or goods carriage within India for tea, coffee,
jaggery, sugar, milk products and edible oil will no longer be exempt.
• Services of mutual fund agent, distributer to a mutual fund / asset management
company and selling of lottery tickets brought under the net of reverse charge
mechanism.
• Services in relation to making telephone calls.
• Present exemption in respect of construction, erection, commissioning by
government, of Airports or Ports withdrawn.
New exemptions
• Exhibition of movie by exhibitor (theatre owner) to distributor or AoP consisting
of such exhibitor as one of its members.
• Service by way of right to admission to
— Exhibition of cinematographic film, circus, dance or theatrical performance
including drama or ballet
— Recognized sporting events
— Concerts, pageants, award functions, musical performances, sporting events
other than a recognized sporting event, where consideration for admission is
less than INR 500 per person
• Services of effluent treatment by an operator of Common Effluent Treatment Plant.
• Services by way of transportation of a patient in an ambulance.
• Pre-conditioning, pre-cooling, ripening, waxing, retail packing, labelling services of
fruits and vegetables.
• Transport of export goods by road from the place of removal to a land customs
station.
• Services by way of admission to a museum, national park, wildlife sanctuary, tiger
reserve or zoo.
• Services of life insurance business provided under the Varishtha Pension Bima
Yojana.
Abatement of Service Tax
Sr.
No.
Taxable Service Tax Base
1 Air transport of passenger (other than economy) 60
2 Transport by rail, road, vessel 30
3 Service provided in relation to chit fund 100
The Uni on Budget 2015-16
15 Chapter IV–Service Tax
Summary of old and new composite rates
Sr.
No.
Taxable Service New rate Existing Rate
1 Life Insurance services
— For 1st year
— Subsequent years
3.5% of premium
1.75% of premium
3% of premium
1.5% of premium
2 Air tickets by travel agent
— Domestic bookings
— I n t e r n a t i o n a l
bookings
0.7% of basic fare
1.4% of basic fare
0.6% of the basic fare
1.2% of basic fare
3 Forex currency
Upto INR 1 lakh
1 lakh to 10 lakhs
Above 10 lakhs
0.14% (min Rs. 35)
Rs. 140 + 0.07%
Rs. 770 + 0.014%
0.12% (min Rs. 30)
Rs. 120 + 0.06%
Rs. 660 + 0.012%
Other key amendments
• Reverse Charge Mechanism: Manpower supply services provided by individual,
HUF or a partnership firm to a body corporate are being brought under full reverse
charge mechanism.
• Cenvat credit to be allowed under partial reverse charge by the service receiver
withour linking it to the payment to the service provider.
• Any bill, invoice, challan can be authenticated by a digital signature.
• Registration number can be obtained online within 2 days of application.
• Service tax to be levied on all reimbursable expenditure or cost incurred and
charged by service provider (subject to rules as may be prescribed). Some courts
had taken a contrary view in the past and this now clearly brings out the intent of
the law.
The Uni on Budget 2015-16
16
Chapter V–Rate of Tax For A.Y. 2016-17
Chapter V
RATE OF TAX FOR A.Y. 2016-17
TABLE 1
Particulars Threshold
limit for
Surcharge
(Rs.)
Tax Rates
Without
Surcharge
With
Surcharge
Every Individual, HUF, AOP & BOI
Up to Rs. 2,50,000 Nil N.A.
Rs. 2,50,001 to Rs. 5,00,000 10.30% N.A.
Rs. 5,00,001 to Rs. 10,00,000 20.60% N.A.
Rs. 10,00,001 onwards 1,00,00,000 30.90% 34.608%
Every Resident Individual (60 yrs or more but
less than 80 yrs)
Up to Rs. 3,00,000 Nil N.A.
Rs. 3,00,001 to Rs. 5,00,000 10.30% N.A.
Rs. 5,00,001 to Rs. 10,00,000 20.60% N.A.
Rs. 10,00,001 onwards 1,00,00,000 30.90% 34.608%
Every Resident Individual (more than 80 yrs)
Up to Rs. 5,00,000 Nil N.A.
Rs. 5,00,001 to Rs. 10,00,000 20.60% N.A.
Rs. 10,00,001 onwards 1,00,00,000 30.90% 34.608%
Co-operative Society
Up to Rs. 10,000 10.30% N.A.
Rs. 10,001 to Rs. 20,000 20.60% N.A.
Rs. 20,001 onwards 1,00,00,000 30.90% 34.608%
Partnership Firm 1,00,00,000 30.90% 34.608%
Local Authority 1,00,00,000 30.90% 34.608%
Domestic Company
Up to Rs. 10,00,00,000 1,00,00,000 30.90% 33.063%
Rs. 10,00,00,001 onwards 10,00,00,000 30.90% 34.608%
Company other than Domestic Company
Up to Rs. 10,00,00,000 1,00,00,000 41.20% 42.024%
Rs. 10,00,00,001 onwards 10,00,00,000 41.20% 43.260%
The Uni on Budget 2015-16
17 Chapter V–Rate of Tax For A.Y. 2016-17
Particulars Threshold
limit for
Surcharge
(Rs.)
Tax Rates
Without
Surcharge
With
Surcharge
Minimum Alternate Tax
Domestic Company
Up to Rs. 10,00,00,000 1,00,00,000 19.055% 20.3889%
Rs. 10,00,00,001 onwards 10,00,00,000 19.055% 21.3416%
Company other than Domestic Company
Up to Rs. 10,00,00,000 1,00,00,000 19.055% 19.4361%
Rs. 10,00,00,001 onwards 10,00,00,000 19.055% 20.008%
Alternate Minimum Tax
LLP, Firms 1,00,00,000 19.055% 21.3416%
Individual, HUF, AOP & BOI having income
more than Rs. 20,00,000
1,00,00,000 19.055% 21.3416%
STCG on assets other than listed securities
Individual, HUF, AOP & BOI 1,00,00,000 As per
slab
As per
slab
Partnership Firm 1,00,00,000 30.90% 34.608%
Domestic Company
Up to Rs. 10,00,00,000 1,00,00,000 30.90% 33.063%
Rs. 10,00,00,001 onwards 10,00,00,000 30.90% 34.608%
Company other than Domestic Company
Up to Rs. 10,00,00,000 1,00,00,000 41.20% 42.024%
Rs. 10,00,00,001 onwards 10,00,00,000 41.20% 43.260%
LTCG on assets other than Listed
Securities
Individual, HUF, AOP & BOl 1,00,00,000 20.60% 23.072%.
Partnership Firm 1,00,00,000 20.60% 23.072%
Domestic Company
Up to Rs. 10,00,00,000 1,00,00,000 20.60% 22.042%
Rs. 10,00,00,001 onwards 10,00,00,000 20.60% 23.072%
Company other than Domestic Company
Up to Rs. 10,00,00,000 1,00,00,000 20.60% 21.012%
Rs. 10,00,00,001 onwards 10,00,00,000 20.60% 21.630%
The Uni on Budget 2015-16
18
Chapter V–Rate of Tax For A.Y. 2016-17
TABLE 2
Particulars Tax Rates
Dividend Distribution Tax 20.36%
Buy Back Tax 23.07%
Securities Transaction Tax
Delivery based purchase of an Equity Share in a Company 0.100%
Delivery based purchase of an units of an Equity Oriented Fund NIL
Delivery based Sale of an Equity Share in a Company on Stock
Exchange
0.100%
Delivery based Sale of an units of an Equity Oriented Fund on Stock
Exchange
0.001%
Sale of a Futures in securities 0.01%
Sale of unit of an Equity Oriented Fund to the Mutual Fund 0.001%
Sale of unlisted equity shares under an offer for sale to public 0.20%
Commodity Transaction Tax
Sale of a Commodity Derivative 0.01%
The Uni on Budget 2015-16
19 Chapter VI–TDS & TCS Chart
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The Uni on Budget 2015-16
20
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21 Chapter VI–TDS & TCS Chart
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22
Chapter VI–TDS & TCS Chart
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The Uni on Budget 2015-16
23 Chapter VII–Highlights of Companies Act, 2013
Chapter VII
HIGHLIGHTS OF COMPANIES ACT, 2013
The Companies Act, 2013 is progressive legislation conforming to current economic,
commercial and social realities. The Act is also quite outward looking and in several
areas attempts to harmonize with international standards and practices. The Ministry
of Corporate Affairs has so far notified and made effective 283 sections, out of total
470 sections and introduced rules for 19 Chapters that are mostly relating to such
notified sections. The Act confers power onto the Central Government to make and
amend the said rules that has an overpowering effect on the provisions of the Act
leading to perplexity of interpretation and applicability of law. Companies should not
under estimate the impact of the new act, as the implementation of the 2013 Act is
not hassle free. Implications and consequences can be severe if the Company fails to
take immediate steps for implementation of the 2013 Act. Further, the Companies Act
(Amendment) Bill, 2014 has been passed in Lok Sabha which proposes further changes
if it gets Rajya Sabha consent.
Important Concepts:
1. The Act introduces the concept of “Dormant Company” which has a legal identity
and minimal compliance requirement.
2. The Act defines and introduces the concept of “officer in default” which levy’s
huge personal responsibility and penalty in case of default on the part of the
Company. The definition broadly covers all the personals who control, influence
and manage the affairs of the company.
3. Provision for obtaining a Compliance Certificate which was issued by a practising
Company Secretary has been removed. Now on, the Companies having capital
above 5 crore have to mandatorily appoint a whole time Company Secretary, which
includes private companies.
4. Restriction has been imposed on the Auditors not to render list of other services. A
mechanism has been formed under the Act, which facilitates the Auditor to report
a fraud to the Central Government.
5. Directors’ Report explicitly requires detailed information and reporting regarding
the management and affairs of the Company. Such information includes the
remuneration and appointment criteria of Key Management Personal (KMP) and
Directors, the details of the loans, guarantees or investments, risk management
policy of the Company, etc.
6. Director and KMP are personally and severally liable for the affairs of the Company
in which he is/was a Director/KMP during that particular event.
7. Directors are liable for the actions taken by the board in his absence, if he has
adopted the minutes of that particular meeting in which he was absent.
8. The Act provides for certain disqualifications for directors. Further, the roles and
responsibilities and liability of the directors have increased substantially. Code of
Conduct for the Independent Directors has been introduced.
The Uni on Budget 2015-16
24
Chapter VII–Highlights of Companies Act, 2013
9. Private companies do not require a certificate of commencement to start its
business operations.
10. Penalty for delay in Annual filing and other statutory filings with the ROC has been
remarkably increased.
11. Penalty for failure to file the Financial Statements of the Company within the
stipulated time frame will lead to heavy penalty on the company as well as officers
in default. The said penalty may be extended upto Rs. 10 lac for the Company and
imprisonment and/or fine for each officer in default.
12. Quorum for the Annual General Meeting of the public companies has been raised
under the new act.
13. Act provides for a specific method for calculating the Depreciation on the assets.
Life of the assets has been stipulated and depreciation has to be provided
accordingly, which requires for the creation of fixed asset register.
14. Class of Companies have an obligation to comply with the Indian Accounting
Standards from 1st April, 2015.
15. Auditor shall report about the existence of adequate Internal Financial Control
System and its operative effectiveness for the financial years on and after 1st April,
2015.
16. Private Companies need to take Shareholders approval in order to accept borrowing
exceeding its paid-up share capital and free reserves.
17. Restrictions and prohibitions are imposed regarding political contribution made by
the Companies.
18. Granting of loan or guarantee to the director or parties in which the Director is
interested has been prohibited.
19. Act explicitly prohibits the Insider Trading in the Company which includes private
Companies.
20. Stringent provisions have been imposed on creation, modification and satisfaction
of charges within or outside India.
21. Subsidiary company can hold shares in the holding company as trustee, even if the
holding or Subsidiary is beneficiary of the same, which was not allowed under the
old Act.
22. Provisions related to appointment of Managing Director/Whole Time Director/
Manager shall be applicable to private companies also.
doc_846151337.pdf
This Budget this year was the first full year Budget and everyone was keen to see the direction laid out in the Budget which will pave way for the next 4 years. To the credit of the FM one must compliment him for being firm in his action and the force with which he proposes to see India as a Cashless society. A tall target to achieve and it will be particularly interesting to watch how it is implemented.
FOREWORD
Dear Reader,
In a bold step to tell the world that India is now ready to meet Global Standards, the FM has
taken several measures like announcing that GST will be surely applicable from 1
st
April,
2016, Corporate Tax rates will be brought down by 5% over the next 4 years, no
retrospective amendments and various changes in taxation of REITs, VCCs and AIFs.
These along with other measures lays down the road map ahead although the proof of the
pudding will lie in the implementation of the policies laid down.
Strong measures to curb generation and concealment of black money has been initiated by
a comprehensive law which will also take care of black money parked abroad. Retaining
foreign assets would lead to action for seizure of equivalent assets in India, rigorous
imprisonment for 10 years and penalty upto 300% with no option to approach Settlement
Commission. Non-filing of return or filing of return with inadequate disclosures to be
punished with rigorous imprisonment upto 7 years, undisclosed income from foreign assets
to be taxed at maximum marginal rate, disclosure of foreign assets in the tax return even if
there is no taxable income are some of the measures to curb black money and an indicator
of the will of the Government to bring about a Swachh Bharat not only in the environment but
also in the fiscal environment.
The upward revision in Excise Duty and Service Tax are clearly a move to align the tax rates
as a forerunner to the implementation of GST. Deferment of GAAR for 2 years, scrapping
DTC, abolition of Wealth Tax are welcome features of this Budget.
The Economic Survey places India in a sweet spot since the domestic demand is picking up,
inflation is brought under control, crude oil prices have tapered down and the Rupee has
also stabilized. The fiscal deficit is expected to be 3.9% in 2015-16 and drop to 3.6% in
2016-17 and 3% in 2017-18. With the projected GDP for the current year between 8 to 8.5%,
the stage is set for a double-digit growth rate.
A Gold monetisation scheme, to be introduced this year, will allow depositors to earn interest
on their gold investments while keeping their holding in Gold intact and the issue of
Sovereign Gold Bonds will provide a good option for those who want to invest in Gold. An
indigenous gold coin carrying the Ashok Chakra will be developed to reduce the demand for
coins minted outside India thereby providing the ability to recycle gold available in India.
For the individual tax payer the threshold limit and the tax slabs and rates remain unchanged
with an increase in deduction towards health insurance policy from Rs. 15,000 to Rs. 25,000,
contribution to National Pension Scheme upto Rs. 50,000 for individuals, increase in
deduction of transport allowance from Rs. 9,600 to Rs. 19,200.
On the indirect tax front, Service Tax and Excise Duty have been increased to 14% and
12.50% respectively. The tax base in Service Tax has been further widened by realigning
mega exemption, tweaking a few definitions and pruning the negative list.
It is proposed to issue tax free bonds for infrastructure projects in rail, road and irrigation
projects.
We look forward to a Swachh Economy,
THE BACKSPACE
ii
The Uni on Budget 2015-16
DISCLAIMER
This document is not for public distribution and has been circulated solely for your information and
must not be reproduced, redistributed or transmitted in any form or by any means without permission
in writing from our firm. Person in possession of this document is required to observe these restrictions.
This material is for the personal information of the authorized recipient and we are not soliciting
any action based upon it. It is for the general information and does not constitute a personal
recommendation or take into account the particular objectives, financial situation, or needs of individual
clients and should not be considered as professional advice. We are not responsible for any error or
omission but the same is regretted and would be appreciated if brought to our notice.
The budget proposals are liable to amendment during the passage of the Finance Bill through Parliament.
The information given in the Document provides a bird’s eye view on the changes proposed and should
not be relied for the purpose of economic decisions. Each economic decision would call for specific
reference of the relevant status. In consistency with our policy of not recognizing any liability on matters
not covered where specific advice is given, we do not accept any responsibility for any decision taken
based on information contained herein.
iii
The Uni on Budget 2015-16
CONTENTS
Chapter Topic Page No.
1. Highlights From Finance Bill ............................................................... 1
2. Key Policy Proposals ............................................................................ 3
3. Direct Tax Proposals ............................................................................. 5
4. Service Tax .......................................................................................... 13
5. Rate of Tax For A.Y. 2016-17 ............................................................. 16
6. TDS & TCS Chart ............................................................................... 19
7. TDS & TCS Chart ............................................................................... 22
8. Highlights of Companies Act, 2013 .................................................. 23
The Uni on Budget 2015-16
1 Chapter I–Highlights From Finance Bill
Chapter I
HIGHLIGHTS FROM FINANCE BILL
DIRECT TAXES
• No change proposed in the tax rates for income earned during financial year 2015-
16 i.e. A.Y. 2016-17.
• Announcement to reduce corporate rate of tax from 30% to 25% over the next 4
years commencing from the next financial year.
• Surcharge to be increased by 2% for individuals and domestic companies.
• Transport allowance (exempt from tax) to be increased from Rs. 800 p.m. to Rs.
1,600 p.m.
• Deduction u/s 80 C was already available for Sukanya Samridhi Scheme. Now all
the withdrawals and interest accrued on such scheme will also be available with
retrospective effect w.e.f. 1.4.2015.
• Deduction in respect of contribution to certain pension funds increased from Rs.
1 lakh to Rs. 1.50 lakhs u/s 80 CCC Payment to notified pension scheme will be
available upto Rs. 50,000 u/s 80 CCD(1B).
• Deduction under section 80D for health insurance to be increased by Rs. 10,000
for various category of assesses.
• Contribution for Swachh Bharat Kosh and Clean Ganga Fund (other than CSR)
eligible for 100% deduction u/s 80 G without 10% overall cap.
• Contribution to National Fund for control of Drug Abuse eligible for 100%
deduction u/s 80 G.
• Wealth Tax abolished from next year i.e. A.Y. 2016-17. However details of assets
held by a person to be declared in the income tax return.
• Applicable limit for Domestic transfer pricing increased from 5 crores to 20 crores.
• Tax on royalty paid to foreign companies has been reduced from 25% to 10% u/s
115A.
• Incentive for employment of new workmen @ 30% of additional salary cost u/s
80JJAA relaxed as the limit for employing regular workmen reduced from 100 to
50 workmen.
• MAT provision rationalized to provide that FIIs would not suffer MAT on capital
gains except where such income qualifies as short term capital gains on which STT
is not paid.
• Permanent Establishment (PE) norm to be tweaked to woo fund managers to
relocate to India.
• Scope of Section 269 SS & 269 T currently prohibits acceptance and repayment of
loans and deposits exceeding Rs. 20,000 in cash. The scope is now proposed to be
enlarged to include acceptance or repayment of advances for immovable property
in cash exceeding Rs. 20,000.
The Uni on Budget 2015-16
2 Chapter I–Highlights From Finance Bill
• Individuals or HUFs required to deduct Tax at Source on acquisition of immovable
property from Non-residents need not apply for TAN for this purpose.
• No changes proposed in respect of deductions for computing business or
professional income.
• Clarification made to the effect that concealment penalty u/s 271(1)(c) applicable
to provisions of MAT and AMT.
• General Anti Avoidance Rule to be deferred for 2 years and thereafter to apply
prospectively.
• Remittances to non-residents to be certified and data made available even if TDS
is not required u/s 195.
• Concept of residential status of a Company introduced in line with the DTC. A
company incorporated outside India to be a resident in India if its place of effective
management at any time during the year is situated in India. This will have a
huge impact on Companies having outbound investments in corporate entities from
India.
INDIRECT TAXES
• Service Tax rate is being increased from 12.36% to 14% with an enabling provision
to increase it by a further 2% as Swachh Bharat Cess.
• Negative list pruned by amending the definition of entertainment and excluding
amusement facilities such as rides, bowling alleys, amusement arcades, water parks,
theme parks, etc. thereby making the access fees to such places liable to service
tax.
• Similarly service tax to be levied on admission tickets to concerts, non-recognized
sporting events, pageants, music concerts and award functions, if the amount
charged for admission is more than Rs. 500.
• Currently Service Tax is applicable on “Support Services” provided by Government.
It is proposed to exclude all such services from the Negative list thereby making it
taxable.
• Any bill, invoice, challan can be authenticated by a digital signature.
• Registration number can be obtained online within 2 days of application.
The Uni on Budget 2015-16
3 Chapter II–Key Policy Proposals
Chapter II
KEY POLICY PROPOSALS
BATTLE AGAINST BLACK MONEY - MEASURES
Equipped with an agreement between India and Swiss authorities to get information
where required, confirm genuineness of bank accounts in a time bound manner and
automatic exchange of data, the Finance Minister has decided to come down very
heavily on black money stacked in India as well as outside India. He has decided to
take strict measures giving a deafening alarm for all black money hoarders to come out
clean before being caught. The popular expectation is that before any harsh measures
are implemented one last opportunity will be given to come out clean but contrary
to expectations, no such announcement has been made so far. The FM proposes to
reduce the circulation of cash and take steps towards a cashless society. The measures
proposed by the FM are as under:
• The Foreign Exchange Management Act, 1999 (FEMA) is being amended to the
effect that if any foreign exchange, foreign security or any immovable property
situated outside India is held in contravention of the provisions of this Act, then
action may be taken for seizure and eventual confiscation of assets of equivalent
value situated in India. These contraventions are also being made liable for levy
of penalty and prosecution with punishment of imprisonment up to five years.
• Tax evasion by holding foreign assets to be dealt with sternly including rigorous
imprisonment upto 10 years, penalty of 300%, non-compoundable and cannot be
taken before the Settlement Commission.
• Non-filing of return or filing of return with inadequate disclosures would be
punishable with rigorous imprisonment upto 7 years.
• Beneficial owner or beneficiary of foreign assets will be mandatorily required to
file return even if there is no taxable income.
• Any undisclosed income from a foreign asset will be taxed at the maximum
marginal rate.
• Anybody including banks, financial institutions or any other individuals helping
him will be considered as an abettor and will be liable for prosecution and penalty.
• Date of Opening of foreign account would be mandatorily required to be specified
by the assessee in the return of income.
• Concealment of income or evasion of income in relation to a foreign asset to be
made a predicate offence under Prevention of Money Laundering Act, 2002.
• Bill for a comprehensive new law to deal with black money parked abroad to be
introduced in the current session.
• Benami Transactions (Prohibition) Bill to curb black money to be introduced in the
current session.
• Acceptance or repayment of an advance of Rs. 20,000 or more in cash for purchase
of immovable property to be prohibited.
• PAN made mandatory for any purchase or sale exceeding Rs. 1 lakh.
The Uni on Budget 2015-16
4 Chapter II–Key Policy Proposals
• Third party reporting entities would be required to furnish information about
foreign currency sales and cross border transactions.
• Leverage of technology by CBDT & CBEC to access information from either’s
databases.
• New structure of electronic filing of statements by reporting entities to ensure
seamless integration of data for more effective enforcement.
MONETIZING GOLD
India being a large consumer of gold every year almost 800 to 1000 tons of gold is
imported. Although stocks of gold in India are estimated to be over 20,000 tonnes,
this gold is neither traded nor available in circulation. The FM therefore proposes to
introduce a Gold Monetization Scheme whereby depositors will be allowed to deposit
or withdraw gold, earn interest on gold lying in the metal account and the Government
will be able to give gold loans in their metal account.
An alternate financial asset will also be developed by way of a Sovereign Gold Bond
as an alternative to purchasing gold. The Bond will carry a fixed rate of interest and
will also be redeemable in cash in terms of the face value of the gold at the time of
redemption.
To reduce the demand for imported coins minted outside India, an Indian Gold Coin
with Ashok Chakra on its face will be developed. This will help recycle the gold
available in India and reduce gold smuggling.
BANKRUPTCY CODE
A comprehensive bankruptcy code of global standards to be introduced
The Uni on Budget 2015-16
5 Chapter III–Direct Tax Proposals
Chapter III
DIRECT TAX PROPOSALS
Rate of Tax
• No change in personal and corporate tax rates.
• No change in tax slabs.
• Rate of corporate tax proposed to be reduced from 30% to 25% over next 4 years
by correspondingly reducing exemptions. However, in the current year, the rate
remains the same.
• The rate of surcharge has been increased by 2% and the revised rates are as under:
— For Individuals: In case the income is in excess of INR 10 million, the
surcharge on tax payable will be levied at 12%.
— For Domestic Companies: In case the income is in excess of INR 10 million,
the surcharge on tax payable will be levied at 7% and 12% if the income is
in excess of INR 100 million.
— For Foreign Companies: The rate of surcharge continues to remain the same.
— Dividend distribution tax increased to 20.358% and Buy back tax to 23.072%.
Wealth Tax Abolished
• Currently, wealth tax is payable @1% on taxable assets in excess of INR 30 lakhs.
• It is proposed to completely abolish wealth tax (in exchange of which higher rate
of surcharge has been introduced).
• Detailed information of an assessee’s wealth to be disclosed in the income-tax
return to track the wealth of an individual.
Deductions
• Exemption of transport allowance from salary income increased to INR 1,600 per
month.
• Medical premium deduction increased from INR 15,000 to INR 25,000 for
individuals and from INR 20,000 to INR 30,000 for senior citizens.
• For very senior citizens (over 80 years age), deduction for medical expenditure upto
INR 30,000 shall be allowed provided there is no health insurance in force.
• Deduction upto INR 1,50,000 to be allowed under section 80C for deposits made
in the Sukanya Samriddhi Account Scheme for the welfare of a girl child. Interest
rate @ 9.1% will be paid in this account and interest as well as withdrawals will
be exempt from tax.
• Contribution to National Pension Scheme and notified pension schemes to be
increased from INR 100,000 per annum to INR 150,000 per annum, subject to
conditions and overall limits towards specified investments.
The Uni on Budget 2015-16
6
Chapter III–Direct Tax Proposals
• Additional deduction of INR 50,000 per annum to be available in respect of the
individual’s contribution to National Pension Scheme.
• Deduction for expenditure on medical treatment for persons with disability and
severe disability increased to INR 75,000 and INR 125,000 respectively.
• Limit for deduction for any annuity plan of LIC of India raised from INR 100,000
to INR 150,000.
• No TDS to be withheld on certain life insurance policies chargeable to tax if the
insured furnishes Form 15G/15H.
• Donations / Contributions eligible for 100% deduction under section 80G will now
include Swachchh Bharat Kosh and Clear Ganga Fund without the limit of 10% of
GTI.
• Donation to the National Fund for Control of Drug Abuse eligible for 100%
deduction under section 80G.
• Deduction in respect of additional wages (section 80JJAA): Benefit extended to
all assesses having manufacturing units rather than restricting it to corporate
assesses only. Further, in order to enable the smaller units to claim this incentive,
it is proposed to extend the benefit under the section to units employing even 50
instead of 100 regular workmen.
Residency status in respect of Companies – Place of effective management
(POEM)
• The concept of PEOM is an internationally recognized concept and was also a part
of the Direct Taxes Code.
• A Company shall be a resident in India if:
— It is an Indian Company, or
— Its place of effective management, at any time in that year, is in India
• Further, POEM is defined to mean a place where key management and commercial
decisions that are necessary for the conduct of business of an entity as a whole
are, in substance made.
• Shell companies, SPVs or operating companies can be treated as an Indian
Company if its PEOM is in India. Accordingly, all the provisions of Income-tax Act
will apply to such companies.
• In determining the POEM various circumstances ought to be taken into account
like:
— where key management and commercial decisions that are necessary for the
conduct of the entity’s business are made
— where board of directors makes its decisions on important policies essential
for the management of the company
— where the actions to be taken by the entity are determined
— Board meeting currently held via video conferencing, etc could fall in the net.
— Email correspondence, telephone calls, shareholder agreements, etc can
determine POEM.
The Uni on Budget 2015-16
7 Chapter III–Direct Tax Proposals
• A few Dont’s under POEM: Board meetings in India, decisions in India, preparation
of accounts in India, Memorandum / Articles / SHAs to be carefully drafted,
Pass though status for Alternate Investment Funds (AIF)
• The existing provisions provide that income of a Venture Capital Company or a
Venture Capital Fund from investment in a Venture Capital Undertaking shall be
exempt from taxation in the hands of the fund and taxable in the hands of the
investors.
• It is proposed to facilitate taxation in case of pooled investment vehicles i.e.
Alternative Investment Funds (AIF) as under:
— Income from profits and gains of business shall be taxable in the hands of the
AIF.
— Income, other than income from profits and gains of business, shall be taxed
in the hands of the unit holders and not in the hands of the AIF.
— Withholding tax in case of distribution of component of income (other than
income which is taxable in the hands of the AIF) at 10 per cent to unit
holders.
— If in any year there is a loss (either current loss or the loss which remained to
be set off) at the AIF level, it shall not be allowed to be passed through to the
unit holders but would be carried forward at fund level to be set off against
income of the next year in accordance with the provisions of Chapter VI of
the Act.
— The total income of the investment fund shall be charged to tax;
o at the rate or rates as specified in the Finance Act of the relevant year,
where such fund is a company or a firm; or
o at maximum marginal rate in any other case
— The provisions of Chapter XII-D (Dividend Distribution Tax) or Chapter
XII-E (Tax on distributed income) shall not apply to the income paid by an
investment fund to its unit holders.
— The AIF is required to furnish its return of income.
— The AIF shall also provide the details of various components of income, etc.
to the prescribed income-tax authority and the unit holders.
Fund managers’ presence in India not to constitute business connection of
offshore funds
• To facilitate location of fund managers of off-shore funds in India, it is proposed
that incase of eligible investment funds, the fund management carried out through
an eligible fund manager acting on behalf of such fund should not constitute
business connection in India of the said fund and such fund should also not be
regarded as a resident in India.
• This is a positive move by the government. However, with the stringent conditions
prescribed for eligible investment funds and managers, it could be difficult for any
funds to take benefit of this provision.
The Uni on Budget 2015-16
8
Chapter III–Direct Tax Proposals
Indirect Transfers
• The existing provisions of section 9 deal with cases of income which are deemed
to accrue or arise in India. Explanation 5 to section 9 (1) (i) inserted by Finance
Act, 2012 with retrospective effect from 1.04.1962 clarified that an asset or capital
asset, being any share or interest in a company or entity registered or incorporated
outside India shall be deemed to be situated in India if the share or interest
derives, directly or indirectly, its value substantially from the assets located in
India.
• The following amendments are proposed in the provisions of section 9 relating to
indirect transfer:
— the share or interest of a foreign company or entity shall be deemed to derive
its value substantially from the assets (whether tangible or intangible) located
in India, if on the specified date, the value of Indian assets,-
a. exceeds the amount of ten crore rupees; and
b. represents at least fifty per cent of the value of all the assets owned by
the company or entity.
— any income on transfer of a share or interest deriving, directly or indirectly, its
value substantially from assets located in India will be on proportionate basis,
when all of the underlying assets of such company or entity are not located
in India.
• However, the aforesaid provision will not apply and no income shall be deemed
to accrue or arise to the non-resident if the transferor neither holds the right to
management or control in relation to such company or entity, nor holds voting
power or share capital or interest exceeding 5 percent of the total voting power or
total share capital or total interest of such company or entity, directly or indirectly.
• Any capital gain arising from a transfer of share of a foreign company in a scheme
of amalgamation or demerger, subject to compliance of certain conditions, shall also
not be deemed to accrue or arise in India under the said Explanation.
Tax rate on income from Royalty and Fees for Technical Services
• It is proposed to reduce the rate of tax on Income by way of Royalty and Fees for
technical services in case of non-residents from the current 25% to 10%.
• The rate of tax was increased from 10% to 25% vide the Finance Act, 2013 and the
reversion of tax rates to 10% is a welcome move and will help promote the ‘Make
in India’ initiative, as also curtail treaty shopping exercises.
Special tax regime for Real Estate Investment Trust (REITs) and
Infrastructure Investment Trust (Invit)
• Background:
— This concept was introduced in the Budget 2014. It is a security that sells
like a stock and invests in real estate directly, either through properties
or mortgages. REITs receive special tax considerations and typically offer
investors high yields, as well as a highly liquid method of investing in real
estate and with smaller ticket sizes. It also spreads the risk on investment
in one real estate property by an individual as compared to investments in
multiple projects. The hassle of paper work, stamp duty, etc. of the investor
The Uni on Budget 2015-16
9 Chapter III–Direct Tax Proposals
will be reduced which could be an added advantage. REITs were given a “Pass
through” status for the purpose of taxation i.e. no tax is levied on interest
income earned by the trust from the SPV.
• Capital Gains on Sponsors:
— Earlier, the sponsors were subject to tax on sale of the units and no
preferential capital gains tax regime (even where STT was payable) was made
available to sponsors in respect of units of Business Trust.
— It is proposed that sale of units of Business Trust by the sponsor would be
eligible for beneficial capital gains tax regime (where STT has been paid).
Accordingly, long term gains (held for more than 36 months) will be exempt,
short term gains will be taxable at 15%
• Rental Income
— The rental income arising to REIT from the real estate property directly held
by the REIT eligible for pass through status. Accordingly, such income will
be exempt for the REIT and chargeable to tax in the hands of the REIT unit
holders on distribution. The tenant or lessee is not required to withhold tax
on payment of rent to the REIT, but the REIT in turn would withhold tax at
10 per cent on distribution of such income to the resident unit holders and at
applicable rates on the distribution to the non-resident unit holders.
Incentives for Andhra Pradesh and Telangana
For promoting industrialization and economic growth in the aforesaid states, it is
proposed to provide incentives (as detailed below) for manufacturing undertaking or
enterprise set up in notified backward areas in these states:
• Additional depreciation
— It is proposed to provide for additional depreciation at the rate of 35% (instead
of 20%) on new plant and machinery acquired and installed in the notified
backward area between the period 01 April 2015 and 31 March 2020.
• Additional Investment allowance
— A new section 32AD is proposed to be introduced to provide for additional
investment allowance of 15% on new asset acquired and installed in the
notified backward area.
— This deduction will be in addition to the investment allowance at the rate of
15% currently available under section 32AC of the Act.
— Safeguards are proposed to be introduced in relation to transfer of assets to
ensure that undertakings actually contribute to economic growth by carrying
on manufacturing activities for a substantial period.
Amendment to the definition of charitable purpose
• It is proposed to include Yoga in the definition of charitable purpose on the same
lines as education, medical, relief, etc.
• Is further proposed to be 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,
The Uni on Budget 2015-16
10
Chapter III–Direct Tax Proposals
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:
— such activity is undertaken in the course of actual carrying out of such
advancement of any other object of general public utility; and
— the aggregate receipts from such activity or activities during the previous year,
do not exceed twenty per cent of the total receipts, of the trust or institution
undertaking such activity or activities, of that previous year.
• Income of charitable trust/organisation in excess of fifteen per cent can be
accumulated for exemption only if the prescribed Form is filed by it on or before
the due date of income tax return. Further, even the return of income would need
to be filed by such charitable trust/organisation within the relevant due date.
Minimum Alternate Tax (MAT)
• The share of a member of an AOP, in the income of the AOP, on which no income-
tax is payable in accordance with the provisions of section 86 of the Act, should
be excluded while computing the MAT liability of the member under 115JB of the
Act.
• Income from transaction in securities (other than STCG arising on which STT is
not chargeable) arising to FII excluded from the ambit of MAT by excluding both,
the income and corresponding expenses, in the computation.
Settlement Commission (SC)
• Where notice under Section 148 has been issued for any assessment year, an
assessee can approach the SC for any other year which is currently not permitted.
• SC permitted to rectify any mistake apparent on record within 6 months in certain
cases.
Revision of Order under Section 263 which is prejudicial to the interest of
revenue
• The Principal Commissioner / Commissioner can revise the assessment order in the
following cases which are deemed to ‘erroneous and prejudicial to the interests of
the revenue’, where the order:
— is passed without making inquiries or verification;
— is passed allowing any relief without inquiring into the claim;
— has not been made in accordance with any order, direction or instruction
issued by CBDT; or
— has not been passed in accordance with any decision, prejudicial to the
taxpayer, rendered by the jurisdictional High Court or Supreme Court in the
case of the taxpayer or any other person.
• The amendment tends to widen the power of revision, which may be contrary to
settled position of law. The insertion of the words ‘in the opinion of’ would also
be debatable, as the question can arise whether the opinion of the AO can be
substituted at a later date.
The Uni on Budget 2015-16
11 Chapter III–Direct Tax Proposals
Other Provisions
• In order to curb generation of black money in immovable property transactions,
section 269SS and 269T have been amended to prohibit persons to accept or
repay an amount in excess of INR 20,000 for transactions in immovable property
otherwise than an account payee cheque or draft.
• Concessional rate of 5% TDS on interest payment incase of interest payable to FIIs
and QFIs on their investments in Government Securities.
• Additional depreciation: As a form of rationalization, 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.
• Domestic Transfer Pricing: Currently, domestic TP is applicable specified domestic
transactions where the total of such transactions exceed INR 5 crores in a year. It
is proposed to increase this limit to INR 20 crores. This move will bring small and
medium enterprises out of the domestic transfer pricing.
• Requirement of Tax Account Number (TAN) relaxed in certain cases like
individuals not having tax audit and undertaking one time transactions where tax
would be withheld. In such cases, the PAN needs to be quoted instead of the TAN.
• Filing return of income made mandatory for educational institutions and hospitals
wholly or substantially financed by the government.
• Notice for reopening of assessment under Section 148 to be initiated within 4 years
only on obtaining approval of Joint Commissioner and within 6 years on obtaining
approval from the Chief Commissioner of income-tax.
• Benefit of no deduction of tax on payments to transporters (in the business of
pying, hiring or leasing goods carriage) who submit PAN now limited to only those
transporters who own not more than 10 carriages at any time during the pervious
year).
Withholding tax (TDS):
— Interest earned on recurring deposits now liable for TDS
— Threshold limits for TDS on interest payable to depositors to be applied at an
entity level for banking company/co-operative society/ public company where
core banking solutions have been adopted instead of branch level.
— TDS applicable in respect of any payment of interest on time deposits by the
co-operative bank to its member.
• Restrictions on Chartered Accountants (CA):
— CAs who disqualify to be auditors as per section 141(3) of the Companies
Act, 2013 being relatives of directors, indebted to the Company or having
business relations, in full time employment, etc would now disqualify to be a
tax auditor or issue any certificates.
• Penalty for concealment
— Section 271 (1) (c) of the IT Act provides for levy of penalty on the amount of
‘tax sought to be evaded’ where there is concealment of income or furnishing
inaccurate particulars of income.
The Uni on Budget 2015-16
12
Chapter III–Direct Tax Proposals
— The aforesaid provision is proposed to be amended to extend its applicability
to cases where tax has been computed under Section 115JB/ Section 115JC
(MAT).
The Uni on Budget 2015-16
13 Chapter IV–Service Tax
Chapter IV
SERVICE TAX
General
• The rates of service tax revised from 12.36% to 14%.
• A new cess in the name of Swachh Bharat Cess @2% of value of taxable service is
proposed to be levied on the value of services from such date as may be notified.
• GST proposed to be introduced from 1st April, 2016.
New Item added for Taxation through Service Tax Rules
• Services Rendered By Aggregator Of Services:
Taxable, if by using the brand name of the aggregator (without physical presence
of aggregator in India). The tax will be payable by the provider i.e. aggregator. The
aggregators, illustratively, would be providers of marketing of services e.g.: Amazon,
Flipkart, Snapdeal, Uber, OlaCabs, Quikr, Zomato, FoodPanda, OLX, Housing,
Mydala, Cashkaro, Stayzilla etc. who apparently provide services of aggregator.
Typically such insertion is made in Rule 2 (1) (d) of Service Tax Rules, which
normally puts the liability on recipient as against, in this case, it is a liability of
provider, thus adding complexity.
The Service Tax Rules further provides that if the aggregator does not have physical
presence in the taxable territory, he shall appoint a person in taxable territory for
paying service tax. This would also include a seller of foreign services and availing
services of aggregator in India.”
Exemption withdrawn by amending Negative list & Mega Exemption List
• Services provided by way of access to amusement facility providing fun or
recreation by means of rides, gaming devices or bowling alleys in amusement
parks, amusement arcades, water parks and theme parks
• Services by way of admission to entertainment event of concerts, pageants, musical
performances, concerts, award functions and sporting events other than the
recognized sporting events, if the amount charged is more than INR 500 for right
to admission to such an event.
• Services provided by performing artist in folk or classical art form will be taxable
if the consideration charged is more than INR 1,00,000
• However, Services by way of admission to entertainment event, namely, exhibition
of cinematographic film, circus, recognized sporting events, dance, theatrical
performance including drama and ballet shall be continued, through the exemption
route
• Services of manufacture / production of alcoholic liquor.
• Any service provided by Government or local authority to a business entity will
be liable to service tax unless forming a part or negative or mage exemption list.
The Uni on Budget 2015-16
14
Chapter IV–Service Tax
• Transportation by rail or vessel or goods carriage within India for tea, coffee,
jaggery, sugar, milk products and edible oil will no longer be exempt.
• Services of mutual fund agent, distributer to a mutual fund / asset management
company and selling of lottery tickets brought under the net of reverse charge
mechanism.
• Services in relation to making telephone calls.
• Present exemption in respect of construction, erection, commissioning by
government, of Airports or Ports withdrawn.
New exemptions
• Exhibition of movie by exhibitor (theatre owner) to distributor or AoP consisting
of such exhibitor as one of its members.
• Service by way of right to admission to
— Exhibition of cinematographic film, circus, dance or theatrical performance
including drama or ballet
— Recognized sporting events
— Concerts, pageants, award functions, musical performances, sporting events
other than a recognized sporting event, where consideration for admission is
less than INR 500 per person
• Services of effluent treatment by an operator of Common Effluent Treatment Plant.
• Services by way of transportation of a patient in an ambulance.
• Pre-conditioning, pre-cooling, ripening, waxing, retail packing, labelling services of
fruits and vegetables.
• Transport of export goods by road from the place of removal to a land customs
station.
• Services by way of admission to a museum, national park, wildlife sanctuary, tiger
reserve or zoo.
• Services of life insurance business provided under the Varishtha Pension Bima
Yojana.
Abatement of Service Tax
Sr.
No.
Taxable Service Tax Base
1 Air transport of passenger (other than economy) 60
2 Transport by rail, road, vessel 30
3 Service provided in relation to chit fund 100
The Uni on Budget 2015-16
15 Chapter IV–Service Tax
Summary of old and new composite rates
Sr.
No.
Taxable Service New rate Existing Rate
1 Life Insurance services
— For 1st year
— Subsequent years
3.5% of premium
1.75% of premium
3% of premium
1.5% of premium
2 Air tickets by travel agent
— Domestic bookings
— I n t e r n a t i o n a l
bookings
0.7% of basic fare
1.4% of basic fare
0.6% of the basic fare
1.2% of basic fare
3 Forex currency
Upto INR 1 lakh
1 lakh to 10 lakhs
Above 10 lakhs
0.14% (min Rs. 35)
Rs. 140 + 0.07%
Rs. 770 + 0.014%
0.12% (min Rs. 30)
Rs. 120 + 0.06%
Rs. 660 + 0.012%
Other key amendments
• Reverse Charge Mechanism: Manpower supply services provided by individual,
HUF or a partnership firm to a body corporate are being brought under full reverse
charge mechanism.
• Cenvat credit to be allowed under partial reverse charge by the service receiver
withour linking it to the payment to the service provider.
• Any bill, invoice, challan can be authenticated by a digital signature.
• Registration number can be obtained online within 2 days of application.
• Service tax to be levied on all reimbursable expenditure or cost incurred and
charged by service provider (subject to rules as may be prescribed). Some courts
had taken a contrary view in the past and this now clearly brings out the intent of
the law.
The Uni on Budget 2015-16
16
Chapter V–Rate of Tax For A.Y. 2016-17
Chapter V
RATE OF TAX FOR A.Y. 2016-17
TABLE 1
Particulars Threshold
limit for
Surcharge
(Rs.)
Tax Rates
Without
Surcharge
With
Surcharge
Every Individual, HUF, AOP & BOI
Up to Rs. 2,50,000 Nil N.A.
Rs. 2,50,001 to Rs. 5,00,000 10.30% N.A.
Rs. 5,00,001 to Rs. 10,00,000 20.60% N.A.
Rs. 10,00,001 onwards 1,00,00,000 30.90% 34.608%
Every Resident Individual (60 yrs or more but
less than 80 yrs)
Up to Rs. 3,00,000 Nil N.A.
Rs. 3,00,001 to Rs. 5,00,000 10.30% N.A.
Rs. 5,00,001 to Rs. 10,00,000 20.60% N.A.
Rs. 10,00,001 onwards 1,00,00,000 30.90% 34.608%
Every Resident Individual (more than 80 yrs)
Up to Rs. 5,00,000 Nil N.A.
Rs. 5,00,001 to Rs. 10,00,000 20.60% N.A.
Rs. 10,00,001 onwards 1,00,00,000 30.90% 34.608%
Co-operative Society
Up to Rs. 10,000 10.30% N.A.
Rs. 10,001 to Rs. 20,000 20.60% N.A.
Rs. 20,001 onwards 1,00,00,000 30.90% 34.608%
Partnership Firm 1,00,00,000 30.90% 34.608%
Local Authority 1,00,00,000 30.90% 34.608%
Domestic Company
Up to Rs. 10,00,00,000 1,00,00,000 30.90% 33.063%
Rs. 10,00,00,001 onwards 10,00,00,000 30.90% 34.608%
Company other than Domestic Company
Up to Rs. 10,00,00,000 1,00,00,000 41.20% 42.024%
Rs. 10,00,00,001 onwards 10,00,00,000 41.20% 43.260%
The Uni on Budget 2015-16
17 Chapter V–Rate of Tax For A.Y. 2016-17
Particulars Threshold
limit for
Surcharge
(Rs.)
Tax Rates
Without
Surcharge
With
Surcharge
Minimum Alternate Tax
Domestic Company
Up to Rs. 10,00,00,000 1,00,00,000 19.055% 20.3889%
Rs. 10,00,00,001 onwards 10,00,00,000 19.055% 21.3416%
Company other than Domestic Company
Up to Rs. 10,00,00,000 1,00,00,000 19.055% 19.4361%
Rs. 10,00,00,001 onwards 10,00,00,000 19.055% 20.008%
Alternate Minimum Tax
LLP, Firms 1,00,00,000 19.055% 21.3416%
Individual, HUF, AOP & BOI having income
more than Rs. 20,00,000
1,00,00,000 19.055% 21.3416%
STCG on assets other than listed securities
Individual, HUF, AOP & BOI 1,00,00,000 As per
slab
As per
slab
Partnership Firm 1,00,00,000 30.90% 34.608%
Domestic Company
Up to Rs. 10,00,00,000 1,00,00,000 30.90% 33.063%
Rs. 10,00,00,001 onwards 10,00,00,000 30.90% 34.608%
Company other than Domestic Company
Up to Rs. 10,00,00,000 1,00,00,000 41.20% 42.024%
Rs. 10,00,00,001 onwards 10,00,00,000 41.20% 43.260%
LTCG on assets other than Listed
Securities
Individual, HUF, AOP & BOl 1,00,00,000 20.60% 23.072%.
Partnership Firm 1,00,00,000 20.60% 23.072%
Domestic Company
Up to Rs. 10,00,00,000 1,00,00,000 20.60% 22.042%
Rs. 10,00,00,001 onwards 10,00,00,000 20.60% 23.072%
Company other than Domestic Company
Up to Rs. 10,00,00,000 1,00,00,000 20.60% 21.012%
Rs. 10,00,00,001 onwards 10,00,00,000 20.60% 21.630%
The Uni on Budget 2015-16
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Chapter V–Rate of Tax For A.Y. 2016-17
TABLE 2
Particulars Tax Rates
Dividend Distribution Tax 20.36%
Buy Back Tax 23.07%
Securities Transaction Tax
Delivery based purchase of an Equity Share in a Company 0.100%
Delivery based purchase of an units of an Equity Oriented Fund NIL
Delivery based Sale of an Equity Share in a Company on Stock
Exchange
0.100%
Delivery based Sale of an units of an Equity Oriented Fund on Stock
Exchange
0.001%
Sale of a Futures in securities 0.01%
Sale of unit of an Equity Oriented Fund to the Mutual Fund 0.001%
Sale of unlisted equity shares under an offer for sale to public 0.20%
Commodity Transaction Tax
Sale of a Commodity Derivative 0.01%
The Uni on Budget 2015-16
19 Chapter VI–TDS & TCS Chart
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20
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21 Chapter VI–TDS & TCS Chart
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The Uni on Budget 2015-16
22
Chapter VI–TDS & TCS Chart
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The Uni on Budget 2015-16
23 Chapter VII–Highlights of Companies Act, 2013
Chapter VII
HIGHLIGHTS OF COMPANIES ACT, 2013
The Companies Act, 2013 is progressive legislation conforming to current economic,
commercial and social realities. The Act is also quite outward looking and in several
areas attempts to harmonize with international standards and practices. The Ministry
of Corporate Affairs has so far notified and made effective 283 sections, out of total
470 sections and introduced rules for 19 Chapters that are mostly relating to such
notified sections. The Act confers power onto the Central Government to make and
amend the said rules that has an overpowering effect on the provisions of the Act
leading to perplexity of interpretation and applicability of law. Companies should not
under estimate the impact of the new act, as the implementation of the 2013 Act is
not hassle free. Implications and consequences can be severe if the Company fails to
take immediate steps for implementation of the 2013 Act. Further, the Companies Act
(Amendment) Bill, 2014 has been passed in Lok Sabha which proposes further changes
if it gets Rajya Sabha consent.
Important Concepts:
1. The Act introduces the concept of “Dormant Company” which has a legal identity
and minimal compliance requirement.
2. The Act defines and introduces the concept of “officer in default” which levy’s
huge personal responsibility and penalty in case of default on the part of the
Company. The definition broadly covers all the personals who control, influence
and manage the affairs of the company.
3. Provision for obtaining a Compliance Certificate which was issued by a practising
Company Secretary has been removed. Now on, the Companies having capital
above 5 crore have to mandatorily appoint a whole time Company Secretary, which
includes private companies.
4. Restriction has been imposed on the Auditors not to render list of other services. A
mechanism has been formed under the Act, which facilitates the Auditor to report
a fraud to the Central Government.
5. Directors’ Report explicitly requires detailed information and reporting regarding
the management and affairs of the Company. Such information includes the
remuneration and appointment criteria of Key Management Personal (KMP) and
Directors, the details of the loans, guarantees or investments, risk management
policy of the Company, etc.
6. Director and KMP are personally and severally liable for the affairs of the Company
in which he is/was a Director/KMP during that particular event.
7. Directors are liable for the actions taken by the board in his absence, if he has
adopted the minutes of that particular meeting in which he was absent.
8. The Act provides for certain disqualifications for directors. Further, the roles and
responsibilities and liability of the directors have increased substantially. Code of
Conduct for the Independent Directors has been introduced.
The Uni on Budget 2015-16
24
Chapter VII–Highlights of Companies Act, 2013
9. Private companies do not require a certificate of commencement to start its
business operations.
10. Penalty for delay in Annual filing and other statutory filings with the ROC has been
remarkably increased.
11. Penalty for failure to file the Financial Statements of the Company within the
stipulated time frame will lead to heavy penalty on the company as well as officers
in default. The said penalty may be extended upto Rs. 10 lac for the Company and
imprisonment and/or fine for each officer in default.
12. Quorum for the Annual General Meeting of the public companies has been raised
under the new act.
13. Act provides for a specific method for calculating the Depreciation on the assets.
Life of the assets has been stipulated and depreciation has to be provided
accordingly, which requires for the creation of fixed asset register.
14. Class of Companies have an obligation to comply with the Indian Accounting
Standards from 1st April, 2015.
15. Auditor shall report about the existence of adequate Internal Financial Control
System and its operative effectiveness for the financial years on and after 1st April,
2015.
16. Private Companies need to take Shareholders approval in order to accept borrowing
exceeding its paid-up share capital and free reserves.
17. Restrictions and prohibitions are imposed regarding political contribution made by
the Companies.
18. Granting of loan or guarantee to the director or parties in which the Director is
interested has been prohibited.
19. Act explicitly prohibits the Insider Trading in the Company which includes private
Companies.
20. Stringent provisions have been imposed on creation, modification and satisfaction
of charges within or outside India.
21. Subsidiary company can hold shares in the holding company as trustee, even if the
holding or Subsidiary is beneficiary of the same, which was not allowed under the
old Act.
22. Provisions related to appointment of Managing Director/Whole Time Director/
Manager shall be applicable to private companies also.
doc_846151337.pdf