Friday, 11 July 2014

Quick glance on Indian Union Budget 2014

Quick Glance over Budget 2014-15

Direct Tax

§     No change in the surcharge or education cess either for the corporates or the individuals, HUFs, firms etc.

§     Personal Income-tax Exemption limit raised by ` 50,000/- that is, from ` 2 lakh to ` 2.5 lakh in the case of individual taxpayers, below the age of 60 years. Exemption limit raised from ` 2.5 lakh to ` 3 lakh in the case of senior citizens.

§     Investment limit under section 80C of the Income-tax Act raised from ` 1 lakh to ` 1.5 lakh.

§     Deduction limit on account of interest on loan in respect of self occupied house property raised from `.1.5 lakh to `.2 lakh.

§     Investment allowance for Medium Size Company : at the rate of 15 percent to a manufacturing company that invests more than ` 25 crore in any year in new plant and machinery. The benefit to be available for three years i.e. for investments upto 31.03.2017.

§      In case of non deduction of tax on payments, 30% of such payments will be disallowed instead of 100 percent.
§     10 year tax holiday extended to the undertakings which begin generation, distribution and transmission of power by 31.03.2017.

§     Concessional rate of 15 percent on foreign dividends without any sunset date to be continued.

§     The eligible date of borrowing in foreign currency extended from 30.06.2015 to 30.06.2017 for a concessional tax rate of 5 percent on interest payments.

§     Tax incentive extended to all types of bonds instead of only infrastructure bonds.

§     Introduction of a “Roll Back” provision in the Advanced Pricing Agreement (APA) scheme so that an APA entered into for future transactions is also applicable to international transactions undertaken in previous four years in specified circumstances.

§     Introduction of range concept for determination of arm’s length price in transfer pricing regulations.To allow use of multiple year data for comparability analysis under transfer pricing regulations.

Higher Tax Payment or Reduction in Benefits

·                     To remove tax arbitrage, rate of tax on long term capital gains increased from 10 percent to 20 percent on transfer of units of Mutual Funds, other than equity oriented funds.

·                     Income and dividend distribution tax to be levied on gross amount instead of amount paid net of taxes.

Service Tax

Increase in Coverage

§     Sale of space or time for advertisements in broadcast media, extended to cover such sales on other segments like online and mobile advertising. Sale of space for advertisements in print media however would remain excluded from service tax.

§     Service provided by radio-taxis brought under service tax.

§     Services by air-conditioned contract carriages and technical testing of newly developed drugs on human participants brought under service tax.

Exemption or Relaxation

§     Provision of services rules to be amended and tax incidence to be reduced on transport of goods through coastal vessels to promote Indian Shipping industry.

§     Services provided by Indian tour operators to foreign tourists in relation to a tour wholly conducted outside India to be taken out of the tax net and

§     Cenvat credit for services of rent-a-cab and tour operators to be allowed to promote tourism.

§     Service tax exempted on loading, unloading, storage, warehousing and transportation of cotton, whether ginned or baled.

§     Services provided by the Employees’ State Insurance Corporation for the period prior to 1st July 2012 exempted, from service tax.


§     Sovereign right of the Government to undertake retrospective legislation to be exercised with extreme caution and judiciousness keeping in mind the impact of each such measure on the economy and the overall investment climate.

§     Resident tax payers enabled to obtain on advance ruling in respect of their income-tax liability above a defined threshold.

§     Convergance with International Financial Reporting Standard (IFRS) by Adoption of the new Indian Accounting Standards (2nd AS) by Indian Companies.

§     Income-tax Settlement Commission scope to be enlarged.

§     Introduction of GST to be given thrust.

§     Committee to examine the financial architecture for MSME Sector, remove bottlenecks and create new rules and structures to be set up and give concrete suggestions in three months.

§     Definition of MSME to be reviewed to provide for a higher capital ceiling

§     In the PPF Scheme, annual ceiling will be enhanced to `.1.5 lakh p.a. from `.1 lakh at present.

§     A National Savings Certificate with insurance cover to provide additional benefits for the small saver.

§     Kissan Vikas Patra (KVP) to be reintroduced

§     A special small savings instrument to cater to the requirements of educating and marriage of the Girl Child to be introduced.

CA Brindesh Sarda

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