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.
||Old Exemption Limit
||Proposed Exemption Limit
|Male/ Female(below 60 years)
|Senior Citizen (60 years to
|Super Senior Citizen (80 years
||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
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