Monday, March 2, 2015

Budget 2015: Highlights

The Finance Minister, Mr. Arun Jaitley, presented the Union Budget for 2015-16 on 28th February, 2015. We hereby present the highlights of the same for your quick perusal.

1. Income Tax

1.1 Individuals

1.1.1 No change in Income Tax Slab Rates. The old tax slabs continue, as reproduced hereunder.

Total Income (Rs.)
Tax Rate (AY 2016-17)
0 – 2,50,000
2,50,000 – 5,00,000
5,00,000 – 10,00,000
Above 10,00,000

Basic Exemption Limit for Senior Citizens between the age of 60 to 80 years is Rs. 3,00,000, and that for Super Senior Citizens above the age of 80 years is Rs. 5,00,000.
Surcharge of 10% of Income Tax if Net Income exceeds Rs. 1 crore subject to Marginal Relief.
E. Cess of 2% and S.H.E. Cess of 1% on Income Tax and Surcharge continue.
Rebate u/s 87A for a resident individual whose income does not exceed Rs. 5,00,000 = 100% of Income Tax calculated before E.Cess or Rs. 2,000 whichever is less.

1.1.2 Additional Surcharge of 2% of the Income Tax has been levied on the Super Rich having Total Income exceeding Rs. 1 crore.
1.1.3 Section 80D: The deduction limit for spending on medical insurance premium has been raised from Rs. 15,000 to Rs. 25,000 for individuals and HUF, and from Rs. 20,000 to Rs. 30,000 for senior citizens.
1.1.4 Medical expenditure up to Rs. 30,000 to be allowed for super senior citizens (over 80 years) under Section 80D.
1.1.5 Section 80DDB: Limit of deduction raised to Rs. 80,000 for expenditure incurred on medical treatment of certain chronic and protracted diseases for super senior citizen (over 80 years). A prescription from a specialist doctor must be obtained for claiming this deduction.
1.1.6 Section 80DD and 80U: Limit of deduction on account of medical treatment of a dependent suffering from disability raised from Rs. 50,000 to Rs. 75,000. In case of severe disability, the limit has been raised from Rs. 1,00,000 to Rs. 1,25,000.
1.1.7 Section 80CCD: Additional deduction of Rs. 50,000 for contribution made towards National Pension Scheme, raising the limit to Rs. 1,50,000.
1.1.8 Sukanya Samriddhi Account Scheme: It is a small savings instrument for the welfare of a girl child, investment in which will be eligible for deduction under Section 80C. The interest accruing on the deposit and withdrawal as per the specified Rules will be exempt from tax.
1.1.9 Section 80G: 100% deduction in respect of donations made to the Swachh Bharat Kosh, the Clean Ganga Fund and the National Fund for Control of Drug Abuse.
1.1.10 Exemption limit of Transport Allowance doubled from Rs. 800 per month to Rs. 1600 per month. 

1.2 Corporate Assessees and Partnership Firms

1.2.1 Corporate Tax Rate proposed to be reduced from 30% to 25% over the next 4 years in a phased manner.

1.2.2 Certain exemptions may be withdrawn for corporate assessees, details of which will be announced in due time.

1.2.3 No change in tax rates for Partnership Firms.

1.2.4 The definition of “company resident in India” has been amended to provide that any company incorporated outside India shall be regarded as a resident in India in a previous year if its place of effective management, at any time during the year, is in India. Further, it is proposed to define the place of effective management to mean a place where key management and commercial decisions that are necessary for the conduct of the business of an entity as a whole are made.

1.3 Other Important Points 

1.3.1 Wealth Tax abolished.

1.3.2 Withholding Tax Rates on payments for Royalties and Fees for Technical Services have been reduced from 25% to 10%.

1.3.3 Threshold limit for applicability of Domestic Transfer Pricing provisions increased from Rs. 5 crores to Rs. 20 crores.

1.3.4 Quoting of PAN mandatory for all transactions above Rs. 1,00,000.

1.3.5 Cash acceptance of more than Rs 20,000 for purchase of immovable property to be prohibited.

1.3.6 Penalty of Rs. 1,00,000 to be imposed for incorrect particulars furnished in Form 15CA, 15CB for foreign remittances.

1.3.7 Advancement of “yoga” has been added in the definition of charitable activities allowed to be carried out by charitable trusts.

1.3.8 Activities carried out by Fund Managers of offshore funds in India shall not constitute a business connection of such offshore funds in India subject to the fulfillment of prescribed conditions. (This change has been proposed as many Fund Managers are carrying out their operations from outside India as till now, the presence of Fund Manager in India leads to the Fund being taxed as “resident in India” on the basis of control and management being in India.)

1.3.9 Implementation of GAAR postponed by 2 years and GST postponed by 1 year.

2.  Service Tax 

2.1 Rate of Service Tax on the value of all services is proposed to increase from existing 12.36% (including Education Cess and SHE Cess) to flat rate of 14% w.e.f. date of enactment of Finance Bill, 2015.

2.2 The definition of “consideration” has been amended to include “any reimbursable expenditure or cost incurred by the service provider and charged.”

2.3 It has been proposed that all services other than services specified in Section 66D(i) to (ii) when provided by Government, or a local authority to a business entity be charged to Service Tax. Thus making all services provided by the Government to a Business Entity taxable (effective date to be notified).

2.4 Further w.e.f. 1st April, 2015, services of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of certain specified building of Government, a local authority or a governmental authority have been made taxable in relation to following buildings: 
  • a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession;
  • a structure meant predominantly for use as (i) an educational, (ii) a clinical, or (iii) an art or cultural establishment;
  • a residential complex predominantly meant for self-use or the use of their employees or other persons specified in the Explanation 1 to clause 44 of section 65 B of the said Act.

2.4 For Travel Agents paying Service Tax as per Rule 6 of the Service Tax Rules, 2014, booking tickets for passenger travel by air, the rate of Service Tax has been increased from 0.6% to 0.7% of the Basic Fare in the case of domestic travel, and from 1.2% to 1.4% of the Basic Fare in the case of international bookings.

2.5 Exemption to folk artistes has been restricted and shall be available only when the consideration charged for such performance is not more than Rs. 1,00,000 and such service is not provided as a brand ambassador.

2.6 Services of transportation of foodstuff by rail or a vessel or a GTA has been restricted and shall now be available in relation to milk, salt and food grain including flours, pulses and rice. Accordingly, transportation of all other foodstuff including tea, coffee, jaggery, sugar, milk products, edible oil, etc. shall be taxable.

2.7 Services of transportation of goods of exporters by Goods Transport Agency (GTA) in a goods carriage from any container freight station or inland container depot or directly from the place of removal to a land customs station has been made exempt.

2.8 Manpower supply and security services when provided by an individual, HUF, or partnership firm to a body corporate are being brought to full reverse charge from partial reverse charge mechanism.

2.9 The Central Government has been empowered to impose a Swachh Bharat Cess on all or any of the taxable services at a rate of 2% on the value of such taxable services.

2.10 Service Tax to be levied on the service provided by way of access to amusement facility providing fun or recreation in amusement parks and other such places. Further, service provided by way of admission to a museum, zoo, national park, wild life sanctuary and a tiger reserve is being exempted.

2.11 Services provided by mutual fund agents, mutual fund distributors and agents of lottery distributor are being brought under reverse charge consequent to withdrawal of the exemption on such services.

3.  Other Important Points 

3.1 Central Excise duty raised to 12.5%.

3.2 Custom Duty to be reduced on 22 items.

3.3 The limit for availment of CENVAT credit extended to 1 year from the date of invoice.

3.4 In order to encourage digitization, the Government has allowed assesses to maintain records in electronic form subject to authentication through digital signatures.

3.5 Import tax on iron and steel increased to 15 percent from 10 percent.