Jul 172014
 

TOP 5 BUDGET DIRECT TAX PROPOSALS FOR INDIVIDUAL AND CORPORATES

(A) PERSONAL TAX

1. Increase in Exemption Limit

a. No Change in Tax Rates: There is no change in Tax Rates, Surcharge, Education Cess, hence existing education cess of 3% and surcharge of 10% for annual income of Rs. 1 crore and more continue.

b. The basic exemption limit is increased by Rs. 50,000 for all taxpayers below 80 years of age as per the table specified below. The change in exemption limit means that irrespective of whether you are in 10%, 20% or 30% income tax slab, you save Rs. 5,150 in taxes. For those aged 80 or more, the change in the exemption limit is irrelevant, since they are anyway eligible for a limit of Rs. 5 lakh.

 

Person Old Exemption Limit Proposed Exemption Limit
Male/ Female(below 60 years) 2,00,000 2,50,000
Senior Citizen (60 years to
79 year)
2,50,000 3,00,000
Super Senior Citizen (80 years
and above)
5,00,000 5,00,000 (No Change)

2. Section 80 C : Increase in Investment Limit from Rs. 1 lakh to 1.5 lakh:

a. The maximum deduction under section 80 C, which covers investment options like provident fund, public provident fund (PPF), insurance policies and equity linked saving schemes, is to increase from Rs. 1 lakh to Rs. 1.5 lakh. This means it can result into extra saving as high as Rs. 16,995 depending upon your tax slab.

3. The maximum deduction for payment of Interest on Loan in respect of Self Occupied House Property is increased from Rs. 1.5 lakhs to Rs. 2 lakhs.

4. Unlisted Securities and Units of Mutual fund than equity oriented funds

a. Unlisted securities and mutual funds (other than equity oriented) shall qualify as long term capital asset if held for more than 36 months (increased from earlier period of 12 months).

b. Long term capital on sale of listed mutual funds (other than equity oriented funds) will be taxed at the rate of 20% with indexation. Earlier such gains were taxable at the rate of 10% without indexation or 20% with indexation, whichever is lower.

5. Exemption from tax on Long term capital gain on sale of residential property or any other asset is proposed on re-investment in only one residential house in India.

(B) CORPORATE TAX

1. Income and Dividend Distribution Tax is to be levied on gross amount instead of amount paid net of taxes
[Sec. 115 O].

Tax on Foreign Dividend @ 15% [Section 115BBD]

The section continues to apply to foreign dividends received during the financial year 2014-15 and subsequent years

2. Disallowance of expenditure on non-deduction of appropriate taxes now extended to cover salary payments and directors fees

In case of Non deduction or Non payment of TDS, 30% of such payment is disallowed instead of existing 100% [Sec. 40(a)(1a)]

3. Expenditure incurred on Corporate Social Responsibility (CSR) is proposed as not an allowable business expenditure. However specific expenditure covered under section 30 to 36 of the Act will be allowed. Such specific expenses include repairs, depreciation or expenditure towards specific notified projects. Disallowing as a business expenditure could result into additional burden of tax for corporates.

4. a. Investment Allowance @ 15% [Sec. 32 AC]:
Benefit extended to manufacturing company that investsmore than Rs. 25 crorein any year in new plant and machinery. The Benefit is available upto 3 years i.e. for investment upto 31.03.2017.

b. Tax Holiday of 10 Years to Power sector(undertaking which begin generation, distribution and transmission of power by 31.03.17).

5. Advance Ruling and Transfer Pricing:

a. Earlier, an advance ruling could be availed by a resident only in respect of transactions with non-residents. Now resident taxpayers can seek clarity on taxability with regard to domestic transactions as well.

b. Keeping in line with international tax practice, effective from October 1, 2014, roll Back provisions are being proposed in advance pricing agreement (APA), wherein APA could also cover the four previous years immediately preceding the first year covered under the APA.

c. Determination of arm’s length price in transfer pricing

- Introduction of range pricing concept

- To allow use of multiple year data for comparability analysis instead of only single year data.

Courtesy: CA Chintan Patel
Email: chintan@nareshco.com Website: www.nareshco.com

 

Feb 252014
 

THE INTERIM BUDGET 2014

Given below are some highlights of the Interim Budget 2014-15.

Change in tax rates

Considering the demands of the economic situation, the minister of finance announced some changes in the indirect taxes.

A cut down in the excise duty from 12 percent to 10 percent on all goods covered under Schedule to the Central Excise Tariff Act (Chapter 84 & 85 of the act for the period up to 30.6.2014).

Automobile industry which is suffering negative growth will be allowed a decrease in the excise duty.

Indirect taxes on cars and mobile phones cut in order to recover growth.

Exemptions will be withdrawn from the CVD on similar imported machinery.

The customs duty structure on non-edible grade industrial oils and its fractions, fatty acids and fatty alcohols will rationalise at 7.5 percent.

Growth

The annual growth for the year is expected at 4.9percent, estimating the GDP expansion in the third and fourth quarters as 5.2 percent.

Current Account Deficit

Considering the last year’s fiscal deficit $88 billion , the current account deficit for 2013-14 estimated at $45 billion.

 The end of 2013-14 will see Forex reserves to be rising by $15 billion.

Agriculture

2012-13 saw a Food grain production of 255.36 million tonnes and the honourable minister praised the steady performance of the agriculture sector. The estimate for the current year is 263 million tonnes.  Agricultural GDP growth is estimated at 4.6 percent in the current year.

Exports

The global trade recovered its growth decline from 6.1 in 2011 to 2.7 percent in 2013 thus indicating an overall recovery in the context of global trade growth.

In spite of 2013-14 beginning on a low note, the merchandise exports were observed to be USD 326 billion bringing along a growth rate of 6.3percent.

However, the imports run a downhill which calls for a need of augmenting growth in both exports and imports.

Defence

Spending ascended up to 10 percent to Rs.224,000 crore in 2014/15 from Rs.203,672 crore in BE 2013-14 .

SC Sub-Plan and Tribal Sub-Plan, Gender Budget and Child Budget

The minister proposed to allocate Rs.48,638 crore to the scheduled caste sub plan and Rs.30,726 crore to the tribal sub plan.

Also, the child budget plan will be of Rs.81024 crore and the gender budget upto Rs.97,533 crore.

Railways

The railway budget being was presented a few days before. The railways will receive an increased budgetary support of Rs.29000 crore in 2014-15 as against the Rs26,000 crore in 2013-14.

Banking
For the purpose of capital infusion in public sector banks, the budget will aid the financial sector by providing 11,200 crore.

Spending

The plan expenditure is estimated at Rs.5.5 trillion for 2014-15 same as that of the fiscal year. Non-plan expenditure is estimated at Rs.12.08 trillion in 2014-15.

Subsidies

The budget for total spending on food, fertilisers and fuel is Rs.2.5 trillion in 2014-15.

1.15 trillion rupees for food subsidy, fertiliser subsidy at Rs.679.71 billion.

Petroleum subsidy estimated at Rs.634.27 billion as against the revised figure of Rs.854.8 billion in 2013-14.

Budget Estimates

Fiscal Deficit

The fiscal deficit of 2014-15 is projected at 4.1 percent of GDP while the revenue deficit is seen at 3.0 percent. Fiscal deficit is anticipated at 4.6% of GDP in 2013-14 below the targeted 4.8%.

Borrowing/debt servicing

Gross market borrowing for 2014/15 estimated at Rs. 5.97 trillion while the net market borrowing seen at Rs. 4.57 trillion.

In 2014-15 the government plans to buy back/ switch bonds worth Rs.500 billion.

Rs.100 billion estimated for the Ways and Means advances for year 2014-15.

Repayment of debt is estimated at Rs. 1.397 trillion.

Interest payments expected to see a rise in 2014-15 at Rs. 4.27 trillion. The current fiscal year’s was at Rs.3.8 trillion.

Conclusion

Finance Minister recommends that regarding the limited sources and claims on these, the most vital ones be chosen and given only to the rightly deserving ones.

India’s economy has secured a place as the eleventh largest economy in the world. And with the going progress India’s nominal GDP will reach to the third largest economy in the world said the minister. The budget was concluded by the note that India will occupy a more significant position in the world as an economy and have an impact on other economies in the near future. Hence a need to keep the economy stable is seen.