India Budget 2014-Highlights

INDIA
BUDGET 2014
- HIGHLIGHTS
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i
INDIA BUDGET 2014 - Highlights
July 2014
INDIA
BUDGET 2014
- HIGHLIGHTS
Includes
G-20 Countries - Comparative Corporate and Personal Tax Rates
Tax Incentives for Businesses
DTAA Rates
Direct Tax and Service Tax Compliance Calendar
RSM Astute Consulting
CONTENTS
CHAPTER 1 : INTRODUCTION
CHAPTER 2 : INDIAN ECONOMY - AN OVERVIEW
CHAPTER 3 : TAX RATES
CHAPTER 5 : TAX INCENTIVES FOR BUSINESSES
CHAPTER 6 : DIRECT TAXES - SIGNIFICANT CHANGES
6.1 Business Entities
6.2 Personal
6.3 Non Residents
CHAPTER 7
:
INDIRECT TAXES - SIGNIFICANT CHANGES
7.1 Service Tax
7.2 Customs Duty
7.3 Central Excise

7.4 Goods and Services Tax
CHAPTER 8
:
6.4 Transfer Pricing
OTHER SIGNIFICANT PROPOSALS
INDIA
BUDGET 2014
- HIGHLIGHTS
8
11
14
22
39
57
70
39
49
50
51
57
62
65
68
EXECUTIVE SUMMARY
CHAPTER 9
:
74
CHAPTER 10
:
81
CHAPTER 11
:
TDS RATES
DTAA RATES
89
ABBREVIATIONS 94
1
IMPACT ON SELECT INDUSTRIES
6.5 General 52
ii
CHAPTER 12
:
DIRECT TAX AND
COMPLIANCE CALENDAR
SERVICE TAX 91
CHAPTER 4 : G-20 COUNTRIES - COMPARATIVE
CORPORATE AND PERSONAL TAX RATES
21
INDIA BUDGET 2014 - Highlights RSM Astute Consulting
EXECUTIVE SUMMARY
1. DIRECTTAXES
1.1 Effective Tax Rates
1.1.1 Personal taxation

The Bill proposes certain modifications to the tax
structure for individuals
# In case of a resident individual of the age of 60 years or more (senior
citizen) at any time during the previous year, the basic exemption
income slab of Rs.2,50,000 is enhanced to Rs. 3,00,000. For a
resident individual of the age of 80 years or more (very senior
citizens) at any time during the previous year the basic exemption
1
Income Slabs
(Rs.)
Income Slabs
(Rs.)
Proposed
Tax Rates
Tax Rates
FY 2014-15 FY 2013-14
Nil
*10.30% [tax rate
10% plus
education cess
3% thereon] of
income exceeding
Rs. 2,00,000
Rs. 30,900 plus
20.60% [tax rate
20% plus
education cess
3% thereon]
of income
exceeding
Rs. 5,00,000
Rs. 1,33,900
plus 30.90% [tax
rate 30% plus
education cess
3% thereon] of
income exceeding
Rs. 10,00,000
0 - 2,00,000#
2,00,001# - 5,00,000
5,00,001 - 10,00,000
10,00,001 - 1,00,00,000
Nil
10.30% [tax rate
10% plus
education cess 3%
thereon] of income
exceeding
Rs. 2,50,000
Rs. 25,750 plus
20.60% [tax rate
20% plus
education cess 3%
thereon] of income
exceeding
Rs. 5,00,000
Rs. 1,28,750 plus
30.90% [tax
rate 30% plus
education cess 3%
thereon] of income
exceeding
Rs. 10,00,000
0 - 2,50,000#
2,50,001# - 5,00,000*
5,00,001 - 10,00,000
10,00,001 - 1,00,00,000
Rs. 32,06,390 plus
33.99% [(tax rate
30% plus surcharge
10% thereon) plus
education cess
3% thereon] of
income exceeding
Rs.1,00,00,000
1,00,00,001^ and above Rs. 32,00,725 plus
33.99% [(tax rate
30% plus surcharge
10% thereon) plus
education cess
3% thereon] of
income exceeding
Rs.1,00,00,000
1,00,00,001^ and above
income slab of Rs. 5,00,000 continues to remain the same. The tax
for other slabs will change accordingly.
* Aresident individual having income upto Rs. 5,00,000 will be entitled
to a rebate of tax payable [excluding education cess] or Rs. 2,000,
whichever is less.
^ Marginal relief is available to ensure that the additional income tax
payable, including surcharge of 10% on the excess of income over
Rs. 1,00,00,000, is limited to the amount by which the income is more
than Rs. 1,00,00,000. However, no marginal relief shall be available
in respect of the education cess.
Investment limits for claiming deduction under section 80C of the IT Act
enhanced from Rs. 1,00,000 to Rs. 1,50,000.
Increase in deduction limit on account of interest on loan in respect of self-
occupied house property from Rs. 1,50,000 to Rs. 2,00,000.
Benefit of exemption under section 54 and 54Fof the ITAct to be available if
the investment is made in 1 residential house only, which is to be situated in
India.
1.1.2 Corporate taxation
No change in the tax rates for domestic and foreign companies.
No change in MATrate.
DDT to be levied on gross amount of dividends as against the existing
provisions of computing DDT on net dividends resulting in increased
effective DDTrate.
Expenditure on CSR as referred in section 135 of the CompaniesAct, 2013
not to be allowed as deduction under section 37 of the ITAct. However, the
CSR expenditure which is in the nature as prescribed under section 30 to
36 of the IT Act shall be allowed as deduction subject to fulfillment of
conditions as specified in such sections.
Concessional rate of 15% on foreign dividends to be continued without
specifying any sunset date.
The benefit of concessional withholding tax rate of 5%on interest payments
in respect of borrowing in foreign currency is extended to all types of bonds
instead of only infrastructure bonds. Further, the benefit to be extended for
the bonds issued upto 30 June 2017 as against 30 June 2015.
Disallowance of expenses under section 40 (a) (ia) of the ITAct for failure to
deduct and pay tax on specified payments to residents restricted to 30%of
such payments instead of 100% disallowance. Further, the scope of
2
disallowance has been extended to all expenditure on which tax is
deductible.
1.1.3 Partnershipfirms / LLP
No change in the existing tax rate for partnership firms/LLPs.
No change in AMTrate.
The scope of applicability of AMT extended to Partnership Firms and LLP
claiming investment linked deductions.
It is proposed to rationalize the AMTprovisions to enable assessee to claim
AMTcredit subject to fulfillment of prescribed conditions.
1.2 Tax Incentives andProposals for Businesses
Manufacturing companies investing more than Rs. 25 crore in any year in
new assets (plant and machinery) to be entitled to an investment allowance
@15% of actual cost of the assets. This allowance is in addition to
depreciation claimed on such new assets. This benefit will be available for 3
years i.e. for investments upto 31 March 2017. The investment allowance
announced last year will continue to operate in parallel till 31 March 2015
even if the investment in new assets is less than Rs. 25 crore.
The sunset date for setting up power sector undertakings (in order to claim
100%deduction of profits for 10 years) to be extended upto 31 March 2017.
Investment linked deduction extended to 2 new sectors, viz., slurry
pipelines for the transportation of iron ore and semiconductor wafer
fabrication manufacturing units as notified by CBDT.
Conducive tax regime prescribed for Infrastructure Investment Trusts and
Real Estate Investment Trusts to be set up in accordance with regulations
of the Securities and Exchange Board of India.
1.3 Proposals for Transfer Pricing
Introduction of a roll-back provision in the APA scheme so that an APA
entered into for future transactions is also applicable to international
transactions undertaken in the previous 4 years in the specified
circumstances.
Definition of International transactions under section 92B(2) of the IT Act
rationalized to treat a transaction entered into by an enterprise with a
person other than the AE, such transaction be deemed to be a transaction
between AE, whether or not such other person is a non-resident.
Range concept for determination of ALP is proposed to be introduced.
However, the arithmetic mean concept will continue to apply where number
3
of comparable is inadequate. The appropriate rules in this regard will be
prescribed.
It is also proposed to allow use of multiple year data for comparability
analysis under the transfer pricing regulations.
1.4 Proposals for Non-residents
Income arising to FIIs from transactions in securities to be treated as capital
gains.
Transfer of government security by one non-resident to another non-
resident, not to be regarded as transfer.
1.5 Other Proposals
Increase in the rate of tax on long term capital gains from 10% to 20% on
transfer of units of mutual funds other than equity oriented funds.
It is proposed to provide that unlisted security and units of mutual funds
(other than equity oriented funds) be treated as short term capital assets if it
is held for not more than 36 months as against existing holding period of 12
months.
Deduction shall be allowed for payments made to non-residents in the year
of such payments itself, if the tax is deducted during the said previous year
and the same is paid on or before the due date specified for filing of return
under section 139(1) of the ITAct.
Explanation to section 73 of the ITAct, so as to provide that the provision of
the Explanation shall not be applicable to a company as its principal
business which is the business of trading in shares.
Transaction in commodity derivatives chargeable to CTT is not a
speculative transaction.
It is proposed to amend the provisions of sections 269SS and 269Tso as to
provide that any acceptance or repayment of any loan or deposit by use of
electronic clearing system through a bank account shall not be prohibited
under the said sections if the other conditions regarding the quantum etc.
are satisfied.
New provisions introduced to treat money received as an advance or
otherwise in the course of negotiations for transfer of a capital asset as
income chargeable to tax if such sum is forfeited and the negotiations do
not result in transfer of capital asset.
AARs scope to be expanded with resident taxpayers being allowed to
approach AAR with some threshold. More AAR benches proposed. Also, it
4
is proposed to expand scope of settlement commission.
The powers of survey are extended to verify the TDS or TCS aspects also.
2.0 INDIRECTTAXES
2.1 Excise Duty
No change in the overall rate structure with the general effective rate
continuing at 12.36%.
Unbranded articles of precious metals are being exempted from excise
duty for the period 1 March 2011 to 16 March 2012.
Mandatory pre-deposit of 7.5%of the duty demanded or penalty imposed
or both for filing appeal with the Commissioner (Appeals) or the Tribunal at
the 1st stage and 10%of the duty demanded or penalty imposed or both for
filing 2nd stage appeal before the Tribunal. The amount of pre-deposit
payable would be subject to a ceiling of Rs. 10 crore.
Education Cess and Secondary and Higher Education Cess (customs
component) is being exempted on goods cleared by an EOU into the DTA.
2.2 Service Tax
Effective service tax rate to remain unchanged at 12.36%.
Interest rates for delay in payment of Service Tax beyond 6 months
increased from 18% p.a. to 24% p.a. For further delay of 6 months, the
interest rate to be 30%p.a.
Point of Taxation in respect of reverse charge mechanism to be the
payment date or the first date that occurs immediately after a period of 3
months from the date of invoice, whichever is earlier.
The composition rate for all Works Contract other than original works is
rationalized at 8.652%(70%of 12.36%).
Sale of space or time for advertisements in all media other than print media
to be liable to Service Tax.
Transport of passenger services by an air-conditioned contract carriage to
be liable to Service Tax.
Transport of passenger services by radio taxis is proposed to be liable to
Service Tax.
Technical testing of newly developed drugs on human participants even in
case of approval from Drug Controller General of India, to be liable to
Service Tax.
5
Loading/unloading, packing, storage or warehousing and transportation of

cotton, ginned or baled are exempted from Service Tax.
Service provided by a tour operator to foreign tourist for tour outside India
exempted from Service Tax.
2.3 Customs
No change in peak rate of Basic Custom Duty (BCD).
BCD on half-cut or broken diamonds increased from NIL to 2.5%. BCD on
cut and polished diamonds and coloured gemstones increased from 2%to
2.5%. However rough diamonds continue to be levied at NILrate of duty.
Pre-forms of precious and semi-precious stones exempted from BCD.
The variance level and the parameter of measurement in respect of re-
import of cut and polished diamonds has been changed from height and
circumference ( 0.01 mm) to diameter for round shape diamonds (
0.05mm) and length and breadth for diamonds of other shapes (
0.07mm). The allowable variance in weight ( 1 cent) remains unchanged.
Baggage allowance increased for passengers from Rs. 35,000 to Rs.
45,000.
3.0 OTHER ASPECTS
All cases of indirect transfers arising out of retrospective amendments will
be scrutinized by a high level committee of CBDT before initiating any
action. Further, the Government will not bring in any retrospective
amendments ordinarily.
High level committee to interact with trade and industry where CBDT /
CBEC to issue appropriate clarification within 2 months wherever required.
Introduction of GST to be given a thrust. Aims at finding solution in the
course of this year and approve the legislative scheme which enables
introduction of GST
The Government shall consider the comments received from the
stakeholders on the revised DTC. The Government will also review the
DTC in its present shape and take a view in the whole matter.
Legislative and administrative changes to sort out pending tax demand for
more than Rs. 4,00,000 crore under dispute and litigation.
Convergence with International Financial Reporting Standards by adoption
of the new Indian Accounting Standards by the Indian Companies
voluntarily for FY2015-16 and mandatorily from FY2016-17.
6
The composite cap of foreign investments to be raised to 49% with full

Indian management and control in Defence and Insurance sector through
FIPB route.
Requirement of built-up area and capital conditions for FDI to be reduced
from 50,000 square meters to 20,000 square meters and US$ 10 million to
US$ 5 million respectively for development of smart cities.
Slum development to be included in the list of CSR activity to encourage the
private sector to contribute more.
Introduction of uniform KYC norms and inter-usability of the KYC records
across the entire financial sector.
Introduction of one single operating demat account so the Indian financial
sector consumers can access and transact all financial assets through this
one account.
Uniform tax treatment for pension fund and mutual fund linked retirement
plans.
To review revival of SEZs and make them effective instruments of industrial
production, economic growth, export promotion and employment
generation.
Complete the ongoing process of consultations with all the stakeholders on
the enactment of the Indian Financial Code and reports of the Financial
Sector Legislative Reforms Commission.
7
8 RSM Astute Consulting INDIA BUDGET 2014 - Highlights
1.1 Background
In FY 2014-15, the Indian economy is
expected to grow in the range of 5.4%to
5.9%p.a., which is an improvement over
t he bel ow sub-5% perf ormance
witnessed in the preceding year. There
has been marked improvement in the
balance-of-payments position in FY
2013-14 with Current Account Deficit at
US$ 32 billion as against US$ 88 billion in
FY 2012-13. The fiscal deficit for FY
2014-15 is expected to be contained at 4.1%of GDP.
The Union Budget 2014 is primarily driven by the objective of reviving
economic growth. Manufacturing companies investing more than Rs. 25
crores in any year in new plant and machinery would be entitled to a
deduction of an investment allowance @15%of actual cost of the assets for
investments up to 31 March 2017. The sunset date for setting up power
sector undertakings (in order to claim tax holiday for 10 years) is proposed
to be extended up to 31 March 2017. Conducive tax regime has been
proposed for Infrastructure Investment Trusts and Real Estate Investment
Trusts to be set up in accordance with regulations of the Securities and
Exchange Board of India, which will propel investment in these sectors. It is
proposed to re-energise the SEZs and make them effective instruments of
industrial production, economic growth, export promotion and employment
generation.
The FIIs who have pumped in US$ 130 billion would welcome the tax
characterization of income as capital gains, which shall put an end to
unwarranted litigation due to such income being classified as business
income. The composite cap of foreign investments in Defence and
Insurance sector through FIPB route is proposed to be raised to 49%with
full Indian management and control. The benefit of concessional
withholding tax rate of 5%on interest payments in respect of borrowing in
foreign currency has been extended to all types of bonds instead of only
infrastructure bonds, which will lower the cost of capital. Further, this benefit
has been extended for bonds which are issued up to 30 June 2017 as
CHAPTER 1: INTRODUCTION
against 30 June 2015. The extension of concessional tax rate on foreign
dividends of 15% (where the shareholding of the Indian company is more
than 26%) without any sunset clause shall encourage repatriation of foreign
dividends into India, which can be invested in India. Introduction of uniform
KYC norms and inter-usability of the KYC records across the entire
financial sector would make it easier for investors to make investments
across the entire spectrum of financial instruments with lesser
administrative effort. It is proposed to enact a new Indian Financial Code
based on reports of the Financial Sector Legislative Reforms
Commissions.
To channelize personal savings for economic growth, the investment limit
for claiming deduction under section 80C of the IT Act is proposed to be
increased from Rs. 1,00,000 to Rs. 1,50,000. Personal income tax
exemption limit is proposed to be increased by Rs. 50,000 i.e. from Rs.
2,00,000 to Rs. 2,50,000 in the case of individual / HUF taxpayers.
Similarly, the exemption limit in case of senior citizens is proposed to be
increased from Rs. 2,50,000 to Rs. 3,00,000. Further, the limit for deduction
of interest on loan in respect of self-occupied house property is being
increased from Rs. 1,50,000 to Rs. 2,00,000.
The recognition of need for a multi-pronged strategy to reduce existing and
potential litigation is one major highlight of this Budget. The intent to use
Settlement Commission for this purpose has been spelt out which can be
very effective although the Bill does not contain any specific changes in this
respect. Extending benefit of Advance Rulings to residents and allowing
rollback of APAs for past 4 years is a step in this direction. The introduction
of range concept and use of multiple year data would align the Indian
Transfer Pricing rules with globally followed best practices. All cases of
indirect transfers arising out of retrospective amendments will be
scrutinized by a high level committee of CBDT before initiating any action.
Further, the Government will not bring in any retrospective amendments
ordinarily. A high level committee would interact with trade and industry
where CBDT / CBEC would issue appropriate clarification within 2 months,
wherever required.
There are certain unfulfilled expectations on the front of incentives to export
sector, pruning domestic transfer pricing coverage, deferment of GAAR
and absence of Big Bang Breakthrough Ideas. DDTis proposed to be levied
on gross amount of dividends as against the existing provisions of
computing DDT on net dividends resulting in increase in effective DDT rate
from present 16.995% to 20.47%. However, the announcements on the
front of commitment to introduce GST and revive SEZs can accelerate
growth significantly. The Budget is a serious Policy Statement for putting
India back on the path of long term sustained economic growth.
In this booklet compiled by us, we intend to offer a broad outline of the
highlights of the Union Budget 2014 presented on 10 July 2014. We have
discussed the significant proposals of general interest in respect of direct
taxes. In respect of indirect taxes and other policy initiatives, only the
highlights have been briefly enumerated. Preceding the budget proposals
are the macro indicators of Indian economy which provide a backdrop to the
legal and financial proposals.
This booklet is not an offer, invitation or solicitation of any kind and it does
not purport to be comprehensive, or to render legal, economic or financial
advice. This booklet should not be relied upon for taking actions or
decisions without appropriate professional advice as the facts of each case
have to be studied and the legal position analysed properly before taking
any action or decision in the matter. Further, this booklet contains only the
proposals and amendments as given in the Finance (No. 2) Bill, 2014,
which may be modified before it receives the approval and assent of the
Parliament and the President. The proposals regarding direct taxes would
become effective from AY 2015-16 (FY 2014-15), unless otherwise
specified. In this booklet, the terms 'ITAct', 'the Rules' and 'the Bill' are used
for the "Income-tax Act, 1961", ''Income-tax Rules, 1962'' and "Finance
(No. 2) Bill, 2014" respectively.
While all reasonable care has been taken in preparation of this booklet, we
accept no responsibility for any errors it may contain or for any omissions or
otherwise or for any loss, howsoever caused or sustained, by the person
who relies on it.
1.2 Scope andLimitations
The reduced growth in the past 2 years was primarily attributable to weak
industry, persistent uncertainty in the global outlook caused by the crisis in the
Eurozone and the general slowdown in the global economy, high interest
rates as well as the policy constraints adversely impacting investments.
Subsequent to the Union
elections and the positive
steps which are expected to
be taken by the new
government, the sentiment
towards India as one of the
fastest growing economies
has been reinforced and the
out l ook of t he I ndi an
economy for FY 2014-15
has substantially improved.
As per the provisional estimates, the share of service sector in Indias GDPat
factor cost was 59.9% in FY 2013-14. In this context, although Agriculture
(including allied activities) accounted for only 13.9%of the GDP in FY 2013-
14, its role in the country's economy is much bigger with its share in total
employment continuing to be as high as 48.9%in FY2011-12. The increase
in the share of the service sector in the country's GDPis in alignment with the
growth trajectory of any developing economy.
In FY 2014-15, the Indian economy is
poised to overcome the sub-5% growth of
GDP witnessed over the last 2 years and
expected to grow in the range of 5.4% to
5.9% p.a. This is particularly in view of
improvement in the external economic
situation along with the Current Account
Deficit declining to manageable levels and
fiscal deficit as a proportion of GDP also
declining.
CHAPTER 2 : INDIAN ECONOMY - AN OVERVIEW
2.1 General Review
11
GDP growth and point contribution of different sectors
2
0
0
8
-
0
9
2
0
0
9
-
1
0
2
0
1
1
-
1
2
2
0
1
0
-
1
1
2
0
1
2
-
1
3
2
0
1
3
-
1
4
10.0
8.0
6.0
4.0
2.0
0.0
9.0
7.0
5.0
3.0
1.0
P
e
r

c
e
n
t
Agriculture & Allied Industry Services GDP at Factor Cost
On the Balance of Payments and external sector position, India witnessed a
remarkable turnaround with the Current Account Deficit of 1.7%of GDP(US$
32.4 billion) for FY2013-14 as against 4.7%in FY2012-13 (US$ 88.2 billion).
The sharp fall in trade deficit is largely attributable to the decline in imports,
wherein there was a decline of 8.3%in imports in FY2013-14 as compared to
increase of 0.3%in FY2012-13.
Foreign exchange reserves increased by nearly US$ 40 billion from US$ 275
billion in early September 2013 to US$ 314.9 billion as on 20 June 2014.
After plunging to Rs.
68.36 to a US$ on 28
A u g u s t 2 0 1 3 ,
tri ggered by the
expected taper of
quantitative easing
in the United States,
the Indian Rupee
g r a d u a l l y
strengthened and
the year ended with the exchange rate a v e r a g i n gRs. 61 per US dollar
in March 2014. Thereafter, the Indian Rupee has strengthened further to
Rs. 59.87 as on 10 July 2014.
WPI inflation has been coming down in recent months, wherein it moderated
to a 4 -year low of around 6%in FY2013-14 as compared to average of 8.6%
in the previous 3 years. Given the higher weightage to food in CPI, CPI
inflation has remained close to double digits on the back of high prices of
domestic food items.
The performance of the Indian
equity markets also witnessed
a consolidation in the later part
of FY 2013-14, wherein the
BSE Sensex reached a year
high of 22,467 on 31 March
2014 from the level of 17,448
as on 28 August 2013.
Subsequently, the Sensex
reached an all-time high of
26,100 on 7 July 2014 and as
of 10 July 2014, it stood at a high of 25,373.
12
65
Rupees/US $ rate
2
8
F
u
ry
2
0
9

e
b
r
a

0
60
55
50
45
40
51.00
2
8
F
e
ru
ry
2
1
0

b
a

0
2
8
u
ry
2
1
1
F
e
b
r
a

0
u
r
1
2
8
F
e
b
r
a
y
2
0
2
u
1
2
8
F
e
b
r
a
ry
2
0
3
2
8
F
e
b
ru
ry
2
1
4

a
0
0
J
u
y
2
1
4
1
l

0
46.07
45.07
49.37
53.82
62.07
59.87
R
u
p
e
e
s
BSE Sensex
0
2000
4000
6000
8000
10000
12000
14000
16000
22000
24000
26000
18000
20000
27/02/09 26/02/10 25/02/11 29/02/12 28/02/13 28/02/14 10/07/14
8,892
16,430
17,753
18,861
21,120
25,373
17,701
2.2 India - Key Economic Indicators
2R nd
2 Revised Estimates
1R st
1 Revised Estimates
PE
Provisional Estimates
a
Calculated based on available figures
b
Third advance estimates
Absolute values % change over previous period
Items
2013-14 2012-13 2010-11 2011-12 2012-13 2010-11 2011-12
GrossDomesticProduct
(Rs. thousandcrore)
-At current market prices
-At factor cost (2004-05 prices)
Indexof industrial
production
c
Electricitygenerated
(Utilities only) (billionKWH)
WholesalePriceIndex
(Average)
a
exchangerate)
(US$billion- Annual Average
-At current market prices
Foodgrainsproduction
(milliontones)
10,113
1R
11,355
PE
167.7 177.7
172.2
171.9
7,784
165.5
143.3
2R
9,010
156.1
170.3
15.7
8.9
2.9
20.2
9.6
8.2
12.3
6.0
-0.1
12.2
1R
5,482 5,742
PE
4,919
2R
5,248 6.7 8.9 4.7 4.5
257.1
b
264.4 244.5 259.3 6.1 12.1 2.8 -0.8
912 967.6 810.5 877 8.2 5.5 6.1 4.0
7.4
1,859
1R
1,877
PE
1,709 1,880
2R
10.0 25.1 1.0 -1.1
1.1
2013-14
c
The Index of Industrial Production has been revised since 2005-
06 on base (2004-05=100)
d
Average exchange rate (RBI's reference rate)
f
Fiscal indicators for 2013-14 are based on the provisional
actuals
e
At end March
Imports
(US$million)
Exports
490,649 449,925 369,769 489,181 32.3 28.2 -8.3 0.3
Foreignexchangereserves
e
(US$ million)
300,378 312,693 251,136 305,884 21.8 40.5 4.1 -1.8
(in US$ billion)
292 304.2 304.8 294.4 -3.4 9.2 4.2 -0.8
Averageexchange rate
d
(Rs. / US$)
54.41 60.5
4.5
f
45.56 47.92 5.2 -4.0 11.2 13.5
Grossfiscal deficit 4.9 4.8 5.7
(%of GDP)
(Base: 2004-05=100)
13
CHAPTER 3 : TAX RATES
3.1 Individuals, HUFs, AOPs andBOIs
3.1.1 Tax Rates
The Bi l l pr opos es c er t ai n
modifications to the tax structure for
individuals, HUFs, AOPs and BOIs.
Consequent l y, t he ef f ect i ve
proposed and present tax rates for
the FY 2014-15 and FY 2013-14, in
case of individuals, HUFs, AOPs and
BOIs are as follows:
Income Slabs
(Rs.)
Income Slabs
(Rs.)
Proposed
Tax Rates
Tax Rates
FY 2014-15 FY 2013-14
Nil
10.30% [tax rate
10% plus
education cess
3% thereon] of
income exceeding
Rs. 2,00,000
Rs. 30,900 plus
20.60% [tax rate
20% plus
education cess
3% thereon]
of income
exceeding
Rs. 5,00,000
Rs. 1,33,900
plus 30.90% [tax
rate 30% plus
education cess
3% thereon] of
income exceeding
Rs. 10,00,000
0 - 2,00,000#
2,00,001# - 5,00,000*
5,00,001 - 10,00,000
10,00,001 -1,00,00,000
Nil
10.30% [tax rate
10% plus
education cess 3%
thereon] of income
exceeding
Rs. 2,50,000
Rs. 25,750 plus
20.60% [tax rate
20% plus
education cess 3%
thereon] of income
exceeding
Rs. 5,00,000
Rs. 1,28,750 plus
30.90% [tax
rate 30% plus
education cess 3%
thereon] of income
exceeding
Rs. 10,00,000
0 - 2,50,000#
2,50,001# - 5,00,000*
5,00,001 - 10,00,000
10,00,001- 1,00,00,000
Rs. 32,06,390 plus
33.99% [(tax rate
30% plus surcharge
10% thereon) plus
education cess
3% thereon] of
income exceeding
Rs. 1,00,00,000
1,00,00,001 and above
Rs 32,00,725 plus
33.99% [(tax rate
30% plus surcharge
10% thereon) plus
education cess
3% thereon] of
income exceeding
Rs.1,00,00,000
1,00,00,001^ and above
# In case of a resident individual of the age of 60 years or more (senior citizen)
at any time during the previous year, the basic exemption income slab of
Rs. 2,50,000 is enhanced to Rs.3,00,000. For a resident individual of the
age of 80 years or more (very senior citizens) at any time during the previous
year, the basic exemption income slab of Rs. 5,00,000 continues to remain
the same. The tax for other slabs will change accordingly.
* A resident individual having income upto Rs. 5,00,000 will be entitled to a
rebate of tax payable (excluding education cess) or Rs. 2,000, whichever is
lower.

^ Marginal relief is available to ensure that the additional income-tax payable,
including surcharge of 10%on the excess of income over Rs. 1,00,00,000,
is limited to the amount by which the income is more than Rs. 1,00,00,000.
However, no marginal relief shall be available in respect of the education
cess.

The incidence of income-tax for FY 2014-15 on individuals, senior citizens
and very senior citizens, having different income levels can be exemplified
as follows:
* The tax incidence for HUFs, AOPs and BOIs will be same as that of
individuals.
3.1.2 Proposedtax incidence
Annual
Income (Rs.)
Individuals
(including women)*
Tax Liability (Rs.)
Very Senior Citizens Senior Citizens
2,50,000
3,00,000
4,00,000
5,00,000
8,00,000
10,00,000
25,00,000
50,00,000
1,00,00,000
1,50,00,000
-
5,150
15,450
25,750
87,550
1,28,750
5,92,250
13,64,750
29,09,750
49,00,225
-
-
-
-
61,800
1,03,000
5,66,500
13,39,000
28,84,000
48,71,900
-
-
10,300
20,600
82,400
1,23,600
587,100
13,59,600
29,04,600
48,94,560
3.2 Companies
3.2.1 Domestic companies
No changes are proposed in the tax rate and surcharge. As such, the
effective tax rates and MAT rates for domestic companies for FY 2014-15
and FY2013-14 are as follows:
Marginal relief is available to ensure that the additional income tax payable,
including surcharge of 5%on the excess of income over Rs. 1,00,00,000, is
limited to the amount by which the income is more than Rs. 1,00,00,000.
Similarly, marginal relief is available to ensure that the additional income-tax
Rs.10,00,00,000, is limited to the amount by which the income is more than
Rs.10,00,00,000. However, no marginal relief shall be available in respect of
the education cess.
No changes are proposed in the tax rate and surcharge. As such, the
effective tax rates for foreign companies for FY2014-15 and FY2013-14 are
as follows:
3.2.2 Foreigncompanies
Domestic
Company
FY 2014-15
Effective Tax Rates
Having total
income exceeding
Rs. 10,00,00,000
33.99% [(tax rate 30% plus
surcharge 10% thereon) plus
education cess 3% thereon]
20.9605 %[(tax rate 18.5%
plus surcharge 10% thereon)
plus education cess 3%
thereon]
32.445% [(tax rate 30% plus
surcharge 5% thereon) plus
FY 2013-14 FY 2014-15 FY 2013-14
Effective MAT Rates
19.055% (tax rate 18.5% plus
education cess 3% thereon)
20.008 %[(tax rate 18.5%
plus surcharge 5% thereon)
plus education cess 3%
thereon]
Having total
income
exceeding Rs.
1,00,00,000 but
not exceeding
Rs. 10,00,00,000
Having total
income upto
Rs. 1,00,00,000
30.90% [tax rate 30% plus
Marginal relief is available to ensure that the additional income-tax payable,
including surcharge of 2%on the excess of income over Rs. 1,00,00,000, is
Similarly, marginal relief is available to ensure that the additional income-tax
Rs.10,00,00,000, is limited to the amount by which the income is more than
Rs. 10,00,00,000. However, no marginal relief shall be available in respect
of the education cess.
Due to no change in surcharge, the rate of tax for dividend to be distributed
by domestic companies for FY 2014-15 continues to remain the same
@16.995% [(tax rate 15% plus surcharge 10% thereon) plus education
cess 3%thereon] for dividend to be distributed by domestic companies for
FY2014-15 and FY2013-14.
Under the existing provisions, the DDT was computed with reference to the
net amount of dividend.
It is proposed to amend the methodology to calculate the tax on distributable
income and the dividends which are actually received by the shareholder /
unitholder of the domestic company / mutual fund, is to be grossed up for the
purpose of computing additional tax resulting into increase in effective tax
rates.
This amendment will take effect from 1 October 2014.
3.2.3 Tax ondividend/ income distributedby domestic companies
Foreign Company
FY 2014-15
Effective Tax Rates
Having total income
exceeding
Rs.10,00,00,000
43.26% [(tax rate 40% plus surcharge 5% thereon)
plus education cess 3% thereon]
FY 2013-14
41.20% (tax rate 40% plus education cess 3% thereon)
Having total income
exceeding
Rs.1,00,00,000 but not
exceeding
Rs.10,00,00,000
Having total income
upto Rs. 1,00,00,000
42.024% [(tax rate 40% plus surcharge 2% thereon)
3.3 PartnershipFirms/LLPs
No changes are proposed in the tax rate and surcharge. As such, the tax
rates for partnership firms/LLPs for FY 2014-15 and FY 2013-14 are as
follows:
cess.
AMTcontinues on non-corporate assessees such as partnership firms, LLP,
sole proprietorships, AOPs, HUFs, BOIs, etc. AMT is to be calculated on
adjusted total income if the regular income tax payable by such person is
less than AMT. No change has been proposed in the AMT rate and
surcharge. As such, the effective tax rates for FY2014-15 and FY 2013-14
are as follows:
3.4 AMTonall Business Organizations other thanCompanies
Business Organisations
FY 2014-15
Effective AMT Rates
Having total income
exceeding
Rs.1,00,00,000
20.9605% [(tax rate 18.50% plus surcharge 10% thereon)
FY 2013-14
Having total income
upto Rs.1,00,00,000
19.055% [(tax rate 18.50% plus education cess 3% thereon]
Partnership
Firms/LLPs
FY 2014-15
Effective Tax Rates
Having total income
exceeding
Rs.1,00,00,000
33.99% [(tax rate 30% plus surcharge 10% thereon) plus
FY 2013-14
Having total income
upto Rs.1,00,00,000
30.90% [(tax rate 30% plus education cess 3% thereon]
cess.
The effective rate of tax on income distributed by mutual funds for FY2014-
15 and FY2013-14 are as follows:
3.5 Tax onIncome Distributedby Mutual Funds
Type of Income
28.325%*
33.99%*
28.325%*
33.99%
5.665%*
Income distributed by a money market mutual fund
or a liquid mutual fund to
- an Individual or an HUF
- others
Income distributed by a mutual fund (including debt
fund) other than a money market mutual fund or a
liquid mutual fund to
- an Individual or an HUF
- others
Income distributed by a mutual fund to non-
residents (not being company) under infrastructure
debt scheme
Effective Tax Rate
FY 2014-15 FY 2013-14
* The tax rates are inclusive of surcharge of 10%for FY 2014-15 and FY
2013-14 and education cess of 3% thereon. However, w.e.f. 1 October
2014, the amount of distributable income and the dividends which are
actually received by the unit holder of mutual fund of the domestic company
are to be grossed up for the purpose of computing the additional tax.
No changes are proposed in the tax rate and surcharge. The effective taxes
rates for FY2014-15 remain the same and are as follows :
3.6 Other Entities
3.6.1 Co-operative societies
Income Slabs (Rs.)
Tax Rates
0 to 10,000 10.30%
10,001 to 20,000 Rs. 1,030 plus 20.60% of income exceeding Rs. 10,000
20,001 and above Rs. 3,090 plus 30.90% of income exceeding Rs. 20,000
However, in case total income exceeds Rs. 1,00,00,000, the amount of
income-tax computed shall be increased by surcharge of 10% of such
income-tax. Marginal relief is available to ensure that the additional income-
tax payable, including surcharge of 10%on the excess of income over Rs.
1,00,00,000 is limited to the amount by which the income is more than Rs.
1,00,00,000. However, no marginal relief shall be available in respect of the
education cess.
No changes are proposed in the tax rate and surcharge. As such, the tax
rates for local authorities for FY 2014-15 and FY2013-14 are as follows:
including surcharge of 10%on the excess of income over Rs. 1,00,00,000 is
cess.
3.6.2 Local authorities
Local authorities
FY 2014-15
Effective tax Rates
Having total income
exceeding
Rs.1,00,00,000
33.99% [(tax rate 30% plus surcharge 10% thereon) plus
FY 2013-14
Having total income
upto Rs.1,00,00,000
30.90% [(tax rate 30% plus education cess 3% thereon]
CHAPTER 4 : G-20 COUNTRIES - COMPARATIVE
CORPORATE AND PERSONAL TAX RATES
Notes:
1. The above rates are MMR and inclusive of provincial or local taxes as may be applicable to domestic
companies / resident individuals in respective countries.
2. The taxation regime for personal taxes is progressive for all the G-20 economies, except Russia and
Saudi Arabia.
3. Corporate tax @20%is payable on the pro-rata income to the extent of non-resident shareholding.
4. The rates are inclusive of state and city taxes generally resulting in a net effective tax of approximately
40%.
5. The above rates are general rates to provide a comparative matrix and detailed regulations in the
relevant country need to be referred to.
Sr. No. Country Corporate Tax Rate Personal Tax Rate
[Note 1] [Notes 1 and 2]
2. Australia 30% 45%
3. Brazil 34% 27.50%
4. Canada 32.50% 50%
5. China 25% 45%
6. France 34.43% 45%
7. Germany 29.58% 47.50%
8. India 33.99% 33.99%
9. Indonesia 25% 30%
10. Italy 31.40% 45.93%
11. Japan 38.37% 50.84%
12. Mexico 30% 30%
13. Russia 20% 13%
14. Saudi Arabia [Note 3] 0% 0%
15. South Africa 28% 40%
16. South Korea 24.20% 41.80%
17. Turkey 20% 35%
18. United Kingdom 21% 45%
19. United States [Note 4] 40% 39.60%
1. Argentina 35% 35%
The G-20 economies comprising of 19 countries and the
EU, account for almost 90%of the global GDP, 80%of world
trade (including EU intra-trade) and two-third of the world
population. Considering the significance of these
economies and in order to provide an indicative overview of
the prevailing tax rates in these key economies, a brief
comparative matrix is tabulated below:
21
CHAPTER 5 : TAX INCENTIVES FOR BUSINESSES
(As updated upto the Finance (No. 2) Bill, 2014)
Period Details of Exemption / Deduction
Section
Quantum
of Deduction
10AA
First 5 years
Next 5 years
+
Next 5 years
100%
50%
50%
New eligible unit set up in SEZ on or after 1 April
2005
referred to in Section (2j) of SEZ Act, 2005 for

profits derived from export of articles or things
or services, manufactured, or produced or
provided by an eligible unit.
There is no restriction on realization of the
export proceeds within a particular time frame
for the purpose of claiming the deduction.
The profits and gains derived from on-site
development of computer software (including
services for development of software) outside
India shall be deemed to be the profits and
gains derived from the export of computer
software outside India.
The benefit is also available to units engaged in
cutting and polishing of precious and semi-
precious stones.
The deduction under this section is to be
computed in the same proportion, which the
export turnover of the eligible unit bears with
the total turnover of the said unit.
The benefit under this section will be available
if:
The unit is not formed by splitting up or
reconstruction of a business already in
existence subject to certain exceptions.
The unit is not formed by transfer of
machinery and plant previously used for
any purpose to the new business subject
to certain exceptions.
Exemption is available to the entrepreneur as
l
l
The IT Act provides for far reaching
tax holidays and other tax incentives
for businesses. We have briefly
enumerated below, the significant tax
holidays and incentives available to
businesses along with the nature of
deducti ons, el i gi bi l i ty cri teri a,
quantum of deduction and period for
which the deductions are available.
The tax holidays and incentives are
subject to fulfillment of specified conditions. The changes proposed by the Finance
(No. 2) Bill, 2014 are highlighted in bold font.
22
Details of Exemption / Deduction
Section
(which are domestic companies) availing these

deductions will be subject to MAT@20.9605%
[(tax rate 18.50% plus surcharge 10%) plus
education cess 3%thereon] (having book profit
exceeding Rs. 10,00,00,000) or 20.008%[(tax
rate 18.50% plus surcharge 5%) plus
education cess 3%thereon] (having book profit
exceeding Rs. 1,00,00,000 but not exceeding
Rs. 10,00,00,000) or 19.055%
(in
other cases).
From FY 2013-14, a person other than
Company shall be required to pay AMT
@20.9605%[(tax rate 18.50%plus surcharge
10%) plus education cess 3%thereon] (having
adjusted total income exceeding Rs.
1,00,00,000) or 19.055%(tax rate 18.50%plus
education cess 3%there on) (in other cases).
The units and the SEZ developers availing
these deductions will be subject to DDT
@ 16.995% [(tax rate 15% plus surcharge
10%) plus education cess 3%thereon].
In case, any deduction has been claimed
under section 10AA for the specified
business mentioned in section 35AD(8)(c),
no deduction under section 35AD shall be
available in the same or any other AY in
respect of suchspecifiedbusiness.
+ The deduction is allowed only on creation of a
specified reserve, which is required to be
utilized for specified purposes.
The eligible units and the SEZ developers
(tax rate
18.50% plus education cess 3% there on)
23
Tea / Rubber development allowance
Deduction is available to assessee engaged in
the business of growing and manufacturing
tea, coffee or rubber in India.
For claiming the deduction, the amount has to
be deposited in a special account with
NABARD or any Deposit Account opened by
the assessee and approved by the Tea Board
or Coffee Board or Rubber Board within 6
months from the end of the FYor before the due
date of furnishing the return of income,
whichever is earlier.
The amount has to be utilized by the assessee
for specified purposes.
/ Coffee
33AB Available for

every AY
Upto 40% of
profits or amount
deposited,
whichever is
less.
Site Restoration Fund Petroleum or Natural Gas
Deduction is available to assessee engaged in
the business of prospecting for, or extraction or
production of petroleum or natural gas or both
in India and in relation to which the Central
Government has entered into an agreement
with such assessee.
33ABA Available for

every AY
Upto 20% of
profits or amount
deposited,
whichever is
less.
Period
Quantum
of Deduction
Details of Exemption / Deduction
Section
Transfer to Special Reserve Specified Financial
Institutions
The deduction is available to specified
Financial Corporation, Banking Company and
Housing Finance Company engaged in the
business of providing long term finance.
be transferred to special reserve account
created for the purpose of the said section
before the end of the FY.
36(1)
(viii)
Upto 20% of the
profits or
amount deposit
or 200% of paid
up share capital
and general
reserve minus
special reserve,
whichever is
less.
24
Additional Depreciation
specified types of plant and machinery).

An assessee engaged in the business of manufacture or production of any article or
thing or in the business of generation or generation and distribution of power can claim
the additional depreciation of 20%on the cost of new plant and machinery (other than
ships and aircraft) which are acquired and installed after 31 March 2005. Additional
depreciation shall be allowed only to the extent of 50%(i.e. 10%) if the machinery is put
to use for a period less than 180 days.
Investment Allowance for manufacturing business
Where a company is engaged in the business of manufacture of an article or thing and
invests a sum of more than Rs. 100 Crores in new assets (plant or machinery) during
the period beginning from 1 April 2013 and ending on 31 March 2015, then the
company shall be allowed -
i. For FY 2013-14, a deduction of 15% of aggregate amount of actual cost of new
assets, acquired and installed during FY 2013-14, if the cost of such assets
exceeds Rs. 100 Crores;
General rate of depreciation for plant and machinery is 15% (other than certain
32(1)
(iia)
32AC
(1)
Eligibility Criteria, Quantum and Period of Deduction Section
be deposited in a special account with SBI
opened by the assessee and approved by the
Ministry of Petroleum and Natural Gas before
the end of the FY.
The amount has to be utilized by the assessee
for specified purposes.
Amortization of expenditure on prospecting etc. of

certain minerals
The amortization of expenditure is available
subject to fulfillment of certain conditions to the
assessee engaged in the operation of
prospecting for, or extraction or production of
specified minerals.
The expenditure incurred wholly and
exclusively on any operation relating to
prospecting for the minerals or development of
a mine or other natural deposit qualifies for
amortization.
35E Equal
installments
over 10 years
1/10th of the
expenditure or
income,
whichever is
less.
Period
Quantum
of Deduction
Available for
every AY
ii. For FY 2014-15, a deduction of 15% of aggregate amount of actual cost of new
assets, acquired and installed during the period beginning on 1 April 2013 and
ending on 31 March 2015, as reduced by the deduction allowed, if any, for
FY2013-14.
tomake mediumsize investments inplant andmachinery eligible for deduction,

it is proposed that the deduction under section 32AC of the IT Act shall be
allowed if the company on or after 1 April 2014 invests more than Rs. 25 Crores
innewplant andmachinery ina FY.
It is also proposed that the company which is eligible to claimdeduction under
the existing combined threshold limit of Rs. 100 Crores for investment made in
FY 2013-14 andFY 2014-15 shall continue tobe eligible toclaimdeductionunder
the existing provisions contained in Section 32AC(1) even if the investment in
the FY 2014-15 is belowthe proposednewthresholdlimit of investment of Rs. 25
Crores. The proposed deduction is available for investment made in new plant
andmachinery upto31 March2017.
In case any new asset acquired and installed by the company is sold or
otherwise transferred within a period of 5 years, the amount of deduction
allowed above shall be deemed to be the income of the company chargeable
under the head Profits and Gains of business or profession of the FY in which
suchnewasset is soldor otherwise transferred(Inadditiontotaxability of gains
ontransfer of suchnewasset).
Inorder tosimplify the existingprovisions of section32AC of the ITAct andalso
25
Expenditure on eligible projects or scheme
welfare.
Any assessee can claim deduction as under:
Deduction is available for expenditure incurred for promoting social and economic
35AC
A company can al so
directly incur expenditure in
respect of eligible project
and scheme
Not permitted
Assessee To whom payment should be made Direct expenditure
Company
Others
Public Sector Company, or a local authority or
to an association or institution approved by
the National Committee for carrying out any
eligible project or scheme
Same as above
Deduction in respect of expenditure on specified businesses
acquisition of any land or goodwill or financial instrument, wholly and exclusively,

during the year for specified business shall be allowed as deduction subject to the
specified provisions.
Specified business and the year (in which the operations to be commenced) for
availing deduction under this section are tabulated as under:
Any expenditure of capital nature incurred other than expenditure incurred on the
35AD
32AC
(1A)

From 1 April 2009 onwards*
From 1 April 2007 onwards

From 1 April 2010 onwards**



From1 April 2014 onwards
From1 April 2014 onwards
From 1 April 2009 onwards* 1 Setting up and operating a cold chain facility
2 Setting up and operating a warehousing facility for
storing agricultural produce
3 Laying and operating a cross-country natural gas or
crude or petroleum oil pipeline network for
distribution, including storage facilities being an
integral part of such network
4 Building and operating a hotel of 2 star or above
category as classified by the Central Government
anywhere in India
5 Building and operating a hospital with at least 100
beds for patients anywhere in India
6 Developing and building a housing project under a
scheme for slum redevelopment or rehabilitation
framed by the Central or State Government, as the
case may be, and which is notified by the Board in
this behalf in accordance with the guidelines as may
be prescribed
7 The business of developing and building a housing
project under a scheme for affordable housing
framed by the Central Government or a State
Government, as the case may be, and notified by the
Board in this behalf in accordance with the
guidelines as may be prescribed
8 Production of fertilizers in India through a new plant
or a newly installed capacity in an existing plant
9 Setting up and operating an inland container depot
or a container freight station notified or approved
under the CustomsAct, 1962
10 Bee-keeping and production of honey and beeswax
11 Setting up and operating a warehousing facility for
storage of sugar
12 Laying and operating a slurry pipeline for
transportationof ironore
13 Setting up and operating a semiconductor wafer
fabrication manufacturing unit, if such unit is
notified by the Board in accordance with the
prescribedguidelines
Sr.
No.
Specified Business Specified Year of
Commencement
26
* Specified business referred at Sr. No. 1, 2, 5, 7 and 8 in the above table commencing
operations on or after 1 April 2012 shall be eligible for deduction of 150% of capital
expenditure incurred.
** Where the assessee builds a hotel of 2 star or above category as classified by the
Central Government and subsequently, while continuing to own the hotel, transfers the
operation thereof to another person, the said assessee shall be deemed to be carrying on
the specified business of building and operating hotel as referred at Sr. No. 4 in the above
table, with retrospective effect from AY2011-12 and subsequent AYs.
27
allowed under this section, shall be used only for the specified business for a
period of 8 years beginning with the FY in which such asset is acquired or
constructed.
Accordingly, it is also proposed that if such asset is used for any purpose other
than the specified business, then, the total amount of deduction so claimed and
allowed in any FY in respect of such asset (after reducing the depreciation
allowable under section 32 on deduction allowed under section 35AD of the IT
Act), shall be deemed to be income of the assessee chargeable under the head
Profits and gains of business or profession. However, the said provision shall
not apply to a Company which has become a sick industrial company under
Section 17(1) of the Sick Industrial Companies (Special Provisions) Act, 1985
withinthe time periodof 8 years as specifiedabove.
It is further proposed that while computing AMT, adjusted total income shall be
increasedby the deductionclaimedunder section35AD as reduced
by the amount of depreciation allowable under section 32 of the IT Act on such
deductionunder section35AD .
In case, any deduction has been availed under section 35AD on account of
capital expenditure incurred for the purposes of specified business in any AY,
no deduction under section 10AA or under the provisions of
Chapter VI-A or under any other provisions of the IT Act shall be available in the
same or any other AY inrespect of suchspecifiedbusiness.
It is proposed that any asset in respect of which a deduction is claimed and
of the ITAct
of the ITAct
of the IT Act
Deduction for payment towards rural development programmes
Deduction is allowed subject to fulfillment of certain conditions for any sums paid to:
i. An association or institution for carrying out any programme of rural
development.
ii. An association or institution for training of persons for implementation of rural
development programme.
iii. National Fund for Rural Development.
iv. National Urban Poverty Eradication Fund.
35CCA
Weighted deduction of expenditure incurred on agriculture extension project
This section provides for weighted deduction of 150% of the expenditure incurred on
agricultural extension project. The agricultural extension project eligible for this purpose
shall be notified by the CBDTin accordance with the prescribed guidelines.
Further, where a deduction under this section is claimed and allowed for any AY, in respect
of any expenditure on agricultural extension project, no deduction shall be allowed in
respect of such expenditure under any other provisions of the IT Act for the same or any
other AY.
35CCC
Weighted deduction of expenditure incurred on skill development project
Any expenditure (not being expenditure in the nature of cost of any land or building)
incurred on skill development project shall be eligible for weighted deduction of 150%in the
hands of a company. The skill development project eligible for this purpose shall be notified
by the CBDTin accordance with the prescribed guidelines.
Further, where a deduction under this section is claimed and allowed for any AY in respect
of any expenditure on skill development project, no deduction shall be allowed in respect of
such expenditure under any other provisions of the ITAct for the same or any other AY.
35CCD
28
Details of Deduction Section Quantum of
deduction of
sum paid/
expenditure
incurred
Weighted deduction on various expenditure incurred on Scientific
Research
35(1)(i) Any expenditure (not being in nature of capital expenditure) laid or
expended on scientific research related to business carried on by the
assessee.
35(1)(ii) Any sum paid to an approved research association, (which has its object of
undertaking scientific research) or to a university, college or other
institution to be used for scientific research.
35(1)(iia) Any sum paid to an approved company to be used by it for scientific
research. Such approved company will not be entitled to claim weighted
deduction under section 35(2AB) of the ITAct. However, deduction to the
extent of 100% of the sum spent as revenue expenditure on scientific
research, which is available under section 35(1)(i) of the IT Act will
continue to be allowed.
35(1)(iii) Any sum paid to approved research association (which has its object of
undertaking research) or university, college or other institution to be used
for research in social science or statistical research.
35(1)(iv) Any capital expenditure (other than expenditure on land and building)
incurred on scientific research related to the business carried on by the
assessee.
35(2AA) Any sum paid to a National Laboratory or a University or an Indian Institute
of Technology or a specified person with a specific direction that the said
sum shall be used for scientific research undertaken under a programme
approved by the prescribed authority.

100%

175%
125%
125%
100%
200%
Amortization of preliminary expenses
Certain preliminary expenses incurred by the resident assessee before the
commencement of business or after commencement of business in case of extension
of an industrial undertaking or setting up a new industrial unit.
The deduction is allowed in 5 equal annual installments for amount of preliminary
expenditure incurred or 5%of cost of project, whichever is less.
Amortization of amalgamation or demerger expenses

Any expenditure incurred by the Indian company for the purposes of amalgamation or
demerger of an undertaking shall be eligible for amortization over 5 years beginning from
the FYin which the amalgamation or demerger takes place.
35D
35DD
Amortization of expenditure incurred by way of voluntary retirement scheme
Any expenditure incurred by way of payment of any sum to an employee in connection with
his voluntary retirement is eligible for amortization over 5 years, subject to specified
conditions.
In case of conversion of private company or unlisted public company into a LLP,
unabsorbed expenditure incurred under voluntary retirement scheme by the private
company or unlisted public company will be amortized for the remaining period by the LLP.
35DDA
29
Details of Deduction Section Quantum of
deduction of
sum paid/
expenditure
incurred
35(2AB)
cost of land and building), on in-house research and development facility,
as approved by the prescribed authority, incurred by the company,
engaged in the business of bio-technology or manufacture or production of
article or thing (except those specified in the Eleventh Schedule).
Any expenditure incurred up to 31 March 2017(other than expenditure on
200%
Capital gains arising on transfer of plant, machinery, land, building or any rights in land /
building effected in course of or in consequence of the shifting of an industrial undertaking
situated in an urban area to any area (other than an urban area) shall be eligible for
exemption. This exemption shall be least of the following:
l
Amount of capital gains;
l
Amount of capital gains utilized within a period of 1 year before or 3 years after the date
of transfer of the above assets, for purchase of new plant and machinery, land and
building and for shifting expenses, subject to specified conditions.
54G
Capital gains arising on transfer of plant, machinery, land, building or any rights in land /
building effected in course of or in consequence of the shifting of an industrial undertaking
situated in an urban area to any SEZ shall be eligible for exemption. This exemption shall
be least of the following:
l
Amount of capital gains;
l
Amount of capital gains utilized within a period of 1 year before or 3 years after the date
of transfer of the above assets, for purchase of new plant and machinery, land and
building and for shifting expenses, subject to specified conditions.
54GA
Exemptions from Capital Gains in certain cases
Long term capital gains shall be exempt in the hands of an individual or an HUFon sale
of a residential property (house or plot of land) in case of re-investment of the net
consideration in the equity of a newly started-up SME company in the manufacturing
sector and the SME company utilizes the said funds for purchase of new plant and
machinery, subject to the certain conditions.
The said relief would be available in case of any transfer of residential property made
on or before 31 March 2017.
54GB
Capital gain on transfer of a long term capital asset shall be exempt from tax, if an assessee
invests, within a period of 6 months from the date of transfer of a long-term capital asset, the
capital gains in the specified assets. The specified asset must be held for a period of 3 years
from the date of its acquisition. This exemption shall be least of the following:
l
Investment in specified assets viz. bonds issued by NHAI and the RECL. The
investment is restricted up to Rs. 50,00,000 per assessee per FY.
l
Amount of capital gains.
It is clarified that the exemption in respect of capital gains upon aforesaid
investments made duringthe FY inwhichthe original asset or assets are transferred
andinthe subsequent FY shall not exceedRs. 50,00,000.
54EC
Any income arising to an assessee, being a shareholder on account of buy back of shares
as referred in section 115QA (not being listed on a recognized stock exchange) by the
company shall not be included in the total income of assessee.
10
(34A)
Capital gains arising from transfer of long term capital asset being an equity share in a
company or a unit of an equity oriented fund or unit of a business trust, on which
securities transaction tax is charged, is exempt from tax. However, this exemption is not
available for computation of MAT.
10(38)
30
Any dividend declared, distributed or paid by the specified foreign company to Indian
Company shall be taxable at a concessional tax rate of 15%.
It is proposed to extend the above concessional tax rate to AY 2015-16 and all the
subsequent AYs without any sunset clause.
115
BBD
In computing DDT liability, dividend declared by the domestic holding company to its
shareholders shall be reduced to the extent of:
i. Dividend received from the domestic subsidiary company during the year on which
DDThas already been paid by subsidiary under this section.
ii. Dividend received from the specified foreign subsidiary during the year on
which tax shall be payable by the holding company under section 115BBD of
the ITAct.
115-O
All 100% Any 10
consecutive
years out of first
15 years
Deductions of Profits derived by Newly Established Industrial
Undertakings / Infrastructure Projects / Facilities / Developers of SEZs /
Bankingunits, etc.
80-IA / 80-IB /
80-IC / 80-IAB
/ 80-ID / 80-IE /
80JJAA / 80LA
Nature of Activity and Location
Type of
Organization
Quantum of
Exemption
Number of
Years
Sr.
No.
1.(a) Power Undertakings [Section 80-IA(4)(iv)]
Undertaking set up in any part of India
for the generation or generation and
distribution, of power, which has
commenced operations during 1 April
1993 to 31 March 2014*.
Undertaking which starts transmission
or distribution by laying a network of
new transmission or distribution lines
between 1 April 1999 and 31 March
2014*.
Undert aki ng whi ch undert akes
s u b s t a n t i a l r e n o v a t i o n a n d
modernization of the existing network
of transmission or distribution lines
between 1 April 2004 and 31 March
2014*.
*It is proposed to extend the terminal
date for a further period of 3 years i.e. up
to31 March2017.
Deduction shall not be available to a person
executing the above referred activities as a
works contract.
10(34)/
10(35)
Dividend referred to in section 115-O and income received in respect of units of mutual
fund or shares shall not be included in the total income of assessee.
31
Undertakings for revival of Power
Generating Units [Section 80-IA(4)(v)]
Undertaking owned by Indian Company
(formed before 30 November 2005 and
notified before 31 December 2005) set up
for reconstruction or revival of a power
generating unit, which has commenced
operations in power before 31 March 2011.
Deduction shall not be available to person
executing the above referred activities as a
works contract.
1.(b) Indian
Company
100% Any 10
consecutive
years out of first
15 years
Specified Infrastructure Projects
[Section 80-IA(4)(i)]
Enterprise being company or consortium of
companies registered in India or any
authority or board or a corporation or any
other body established or constituted under
any Central or State Act, for carrying on
business of (i) developing or (ii) operating
and maintaining or (iii) developing,
operati ng and mai ntai ni ng of any
infrastructure facility (such as road
including toll road, bridge, rail system,
highway project, water supply project, water
treatment system, irrigation project,
sanitation and sewage system or solid
waste management system, airport, port,
inland waterways and inland ports or
navi gat i onal channel i n t he sea)
commencing its operations on or after 1
April 1995. Widening of an existing road by
constructing additional lanes as a part of
highway project is also regarded as a new
infrastructure facility eligible for deduction
as per Circular No. 4/2010 dated 18 May
2010.
executing above referred activities as a
works contract.
2. Company /
Any other
body
established
or constituted
under any
Central or
State Act
100%

For 10
consecutive
years out of first
15 years
(20 years for
road, bridge, rail
system, highway
project, water
supply project,
water treatment
system, irrigation
project,
sanitation and
sewerage
system or solid
waste
management
system).
Type of
Organization
Quantum of
Exemption
Number of
Years
Sr.
No.
Scientific and Industrial Research Company
[Section 80-IB(8A)]
Any company registered in India with its
main object being scientific and industrial
research and development which is for the
time being approved by the DSIR at any time
after 31 March 2000 but before 1 April 2007.
3. Company 100%

For first 10 years
Type of
Organization
Quantum of
Exemption
Number of
Years
Sr.
No.
32
Telecommunication Service Providers
[Section 80-IA(4)(ii)]
Any undertaking which starts providing tele
communication services, whether basic or
cellular, including radio paging, domestic
satellite service or network of trunking,
broadband network and internet services
on or after 1 April 1995 but before 31 March
2005.
executing the above referred services as a
works contract.
4. All 100%
30%

First 5 years
Next 5 years
The above 10
years shall be
consecutive AYs
out of first 15
years.
Development of Industrial Park
[Section 80-IA(4)(iii)]
Any undertaking which begins to develop
or develops and operates or maintains and
operates an industrial park which has
commenced operations during 1 April 1997
to 31 March 2011.
Deduction shall not be available to person
executing the above referred services as a
works contract.
5. All 100%

10 years out of
first 15 years.
Production of mineral oil and natural gas
[Section 80-IB(9)]
Any undertaking which is engaged in
refining of mineral oil on or after 1
October 1998 but not later than 31
March 2012 subject to specified
conditions.
Any undertaking located in any part of
India and has begun or begins
commercial production of mineral oil
on or after 1 April 1997 is eligible for tax
holiday. However, the deduction will
not be available for blocks licensed
under a contract awarded after 31
March 2011 under the New Exploration
Licensing Policy announced by
Government of India.
The tax holiday is also available in
respect of profits arising from
commercial production of natural gas
7. All 100%

First 7 years
Developer of SEZ[Section 80-IAB]
Any assessee being developer of a SEZ
notified by the Central Government after 1
April 2005 can claim deduction under
section 80-IAB.
6. All 100%

10 years out of
first 15 years.
Approved Housing Projects
[Section 80-IB(10)]
Any under t aki ng engaged i n
developing and building housing
projects approved by a local authority
before 31 March 2008.
In case of projects approved before 1
April 2004, it should be completed
before 31 March 2008.
In case of projects approved during FY
2004-05, it should be completed within
4 years from the end of the FYin which
it is approved.
In case of projects approved on or after
1 April 2005, it should be completed
within 5 years from the end of the FYin
which it is approved.
The deduction is allowed subject to
fulfillment of various other conditions
like minimum area of the land,
maximum built-up area of residential
and commercial units, etc.
In case of multiple approvals from the
local authority, the date of first
approval will be considered for the
calculation of time limit of completion.
Deduction shall not be available to a
person executing the housing project
as a works contract.
8. All 100%

Not applicable
Sr.
No.
Type of
Organization
Quantum of
Exemption
Number of
Years
from blocks which are licensed under
the VIII Round of bidding for award of
exploration contracts under the New
Expl or at i on Li censi ng Pol i cy
announced by the Government of
India and IV Round for the Coal Bed
Methane and begins commercial
production of natural gas on or after 1
April 2009.
Undertaking engaged in specified food
products [Section 80-IB(11A)]
An undertaking deriving profit from the
integrated business of handling,
storage and transportation of food
grains subject to such business
beginning its operations on or after 1
April 2001.
9. Company 100%
30%
First 5 years
Next 5 years
Others 100%
25%
First 5 years
Next 5 years
RSM Astute Consulting 33
Operating and Maintaining Hospital
[Section 80-IB(11B)]
Any undertaking engaged in the
business of operating and maintaining
a hospital in a rural area.
The undertaking shall be eligible for
the deduction if such hospital is
constructed in accordance with the
local regulations in force and has at
least 100 beds for patients.
The hospital should be constructed
during the period beginning on 1
October 2004 and ending on 31 March
2008.
The deduction is also available to
hospitals located anywhere in India
other than specified excluded areas.
The said tax benefit is available to a
hospital which is constructed and has
started or starts functioning at any time
during the period beginning 1 April
2008 and ending on 31 March 2013.
Sr.
No.
Type of
Organization
Quantum of
Exemption
Number of
Years
34
10. All 100%

First 5 years
The benef i t i s ext ended t o

undertakings engaged in the business
of processing, preservation and
packaging of fruits and vegetables.
Further, the benefit is extended to the
undertakings engaged in the business
of meat and meat products or poultry
or marine or dairy products which
begin to operate such business on or
after 1 April 2009.
Undertakings in special category states
[Section 80-IC]
Undertakings and enterprises, which
begins to manufacture or produce any
article or thing which is not specified in
Thirteenth Schedule or undertakings
and enterprises, which manufactures
or produces any article or thing which
is not specified in Thirteenth Schedule
and undertake substantial expansion
of existing undertakings.
Undertakings and enterprises, which
begin to manufacture or produce any
article or thing which is specified in
Fourteenth Schedule or commences
11.
Sr.
No.
Type of
Organization
Quantum of
Exemption
Number of
Years
any operation specified in that
Schedul e or undertaki ngs and
enterprises, which manufactures or
produces any article or thing which is
specified in Fourteenth Schedule or
commences any operation specified
in that Schedule and undertake
substantial expansion.
i. If located in Sikkim, from 23 December
2002 to 31 March 2007
ii. If located in North Eastern States*,
from 24 December 1997 to 31 March
2007
iii. If located in Himachal Pradesh and
Uttaranchal, from 7 January 2003 to 31
March 2012
* States of Assam, Tripura, Meghalaya,
Mizoram, Nagaland, Manipur and
Arunachal Pradesh
Others 100%
25%
First 5 years
Next 5 years
All 100%

First 10 years
Company 100%
30%
First 5 years
Next 5 years
35
}
Undertakings in North Eastern States
[Section 80-IE]
New undertakings and enterprises,
which begin to manufacture or
produce any eligible article or thing or
provide any services or undertake
substantial expansion or carry on any
eligible business in any of the North
Eastern states beginning from 1 April
2007 to 31 March 2017.
The eligible businesses for this
purpose are hotel (not below 2 star
category), adventure and leisure
sports including ropeways, providing
medical and health services in the
nature of nursing home with a
minimum capacity of 25 beds; running
an old-age home; operating vocational
t r a i n i n g i n s t i t u t e f o r h o t e l
management, catering and food craft,
ent repreneurshi p devel opment ,
nursing and para-medical, civil
aviation related training, fashion
designing and industrial training;
runni ng i nformati on technol ogy
related training centre; manufacturing
of information technology hardware
and bio-technology.
12. All 100% First 10 years
Offshore banking unit in SEZ and
International Financial Services Centre
[Section 80LA]
Income from:
Offshore banking unit in SEZor
The business referred to in section
6(1) of the Banking Regulation Act,
1949 or
Any unit of the International Financial
Services Center from its approved
business.
13. Scheduled
Bank or any
bank
incorporated
by or under
the law of a
country
outside India
or a unit of an
International
Financial
Services
Center.
100% First 5 years
(beginning with
the year in which
prescribed
permissions are
obtained).
50% Next 5 years
Sr.
No.
Type of
Organization
Quantum of
Exemption
Number of
Years
36
Convention Centre and Hotels in notified
areas
[Section 80-ID]
Any undertaking engaged in business
of convention centers or hotels in
specified area of the National Capital
Territory subject to fulfillment of certain
conditions:
a. Engaged in the business of hotel
located in specified area; or
b. Engaged in the business of
building, owning and operating a
convention centre located in
specified area, which has started
its operations from 1 April 2007 to
31 July 2010.
The aforesaid deduction has been
extended to any undertaking engaged
in the business of hotel located in
specified districts having 'World
Heritage Sites' if such hotel is
const r uct ed and has st ar t ed
functioning during the period beginning
1 April 2008 and ending on 31 March
2013.
The benefit is available to 2 star, 3 star
or 4 star hotels.
14. All 100% First 5 years
Deduction of Additional Wages
[Section 80JJAA]
Deduction of an amount equal to 30% of
additional wages paid to the new regular
workmen shall be available to an Indian
Company deriving profits from manufacture
of goods in its factory.
It is also provided that the deduction under
this section shall not be available if the
factory is hived off or transferred from
another existing entity or acquired by the
assessee company as a resul t of
amalgamation with another company.
15. Indian
Company
30 % of
additional
wages paid
to the new
regular
workmen
3 AYs including
the AY relevant
to the FY in
which such
employment is
provided
37
Significant conditions for eligibility for deduction under sections mentioned
above:
For the purpose of sections 80-IA, 80-IB and 80-IC, an eligible industrial
undertaking is one, which fulfils all of the following conditions:
l
It manufactures or produces any article or thing (other than any non-priority
article or thing as specified in the Eleventh Schedule) or operates one or
more cold storage plant or plants in any part of India. However, restriction
regarding manufacture of non-priority article specified in Eleventh schedule
is not applicable to small-scale industrial undertakings and industrial
undertakings located in backward states (applicable in case of section 80-
IB);
l
It employs (a) 10 or more workers in a manufacturing process carried on with
the aid of power or (b) 20 or more workers in a manufacturing process
carried on without the aid of power (applicable in case of section 80-IB);
l
It is not formed by splitting up, or reconstruction, of a business already in
existence or by transfer to a new business of machinery previously used for
any purpose (except under certain circumstances);
l
The benefit of section 80-IA shall not be available to an amalgamated or
demerged entity after 1 April 2007.
The profits and gains of an eligible business for the purpose of determining the
quantum of deduction is to be computed as if such eligible business were the only
source of income of the assessee during the FY relevant to the AY for which the
deduction is to be made.
An eligible enterprise engaged in development, operation and maintenance of any
infrastructure facility should have entered into an agreement with the Central
Government / State Government / local authority / other statutory body for
developing or operating and maintaining or developing, operating and maintaining
a new infrastructure facility.
For the enterprise where, housing or other activities are an integral part of the
highway project, then the exemption is available to profits and gains derived from
such project subject to condition that the profit has been transferred to a special
reserve account and the same is actually utilized for the highway project excluding
housing and other activities before the expiry of 3 years following the year in which
such amount was transferred to the reserve account and the amount remaining
unutilized shall be chargeable to tax as income of the year in which transfer to
reserve account took place.
Where any amount of profits and gains of an industrial undertaking or of a hotel in
the case of an assessee is claimed and allowed under this section for any AY,
deduction to the extent of such profits and gains shall not be allowed under any
other provision of the ITAct and shall in no case exceed the profits and gains of the
undertaking or hotel as the case may be.
Any undertaking claiming deduction under this section must furnish a report of
audit in the prescribed form duly signed and verified by an accountant.
No deduction under 80-IA, 80-IB, 80-IAB, 80-IC, 80-ID, 80-IE will be allowed
unless the assessee files return of income within the due date specified under
section 139(1) of the ITAct.
With retrospective effect from FY2002-03,
If deduction in respect of profits and gains is claimed and allowed under the
various provisions of section 10AA of the IT Act or under any provisions of
Chapter VI-A under the heading C-Deductions in respect of certain
incomes in any AY, no deduction in respect of same shall be allowed under
any other provisions of the ITAct for such AY;
The aggregate of the deductions under the various provisions referred
above, shall not exceed the profits and gains of the undertaking or unit or
enterprise or eligible business, as the case may be;
No deductions under the various provisions referred above, shall be allowed
if the deduction has not been claimed in the return of income.
The transfer price of goods and services between the undertaking or unit or
enterprise or eligible business and any other undertaking or unit or enterprise or
business of the assessee shall be determined at the market value of such goods or
services as on the date of transfer. The market value in relation to any goods or
services shall mean the price that such goods or services would ordinarily fetch in
the open market or the ALPcomputed as per the TPprovisions.
In case of a person other than company who has claimed deduction under any
section (other than section 80P of the IT Act) included in Chapter VI-A under the
heading C-Deductions in respect of certain incomes or under section 10AAof the
ITAct, shall be required to payAMT@20.9605%[(tax rate 18.50%plus surcharge
10%) plus education cess 3% thereon] (having adjusted total income exceeding
Rs. 1,00,00,000) or 19.055% (in other cases). However, the provisions of AMT
shall not apply to an Individual or HUFor an AOPor a BOI (whether incorporated or
not) or an artificial juridical person referred to in section 2(31)(vii) of the ITAct, if the
adjusted total income of such person does not exceed Rs. 20,00,000.
Where a deduction under section 10AA or any provisions of Chapter VI-A
under the heading C-Deductions in respect of certain incomes is claimed
and allowed in respect of profits and gains of any of the specified business
referred in section 35AD(8)(c) of the IT Act, no deduction of capital
expenditure shall be allowed under section 35AD of the IT Act in relation to
suchspecifiedbusiness for the same or any other AY.
38
6.1 Business Entities
6.1.1 Investment allowance for manufacturing
business
6.1.2 Dividends received from foreign companies taxable at concessional
rate
Under the existing provisions of section
32AC of the ITAct where an assessee, being
a company, is engaged in the business of
manufacture of an article or thing and invests
a sum of more than Rs.100 crore in new plant
and machinery during the period beginning
from 1 April 2013 and ending on 31 March
2015, then the assessee shall be allowed a deduction of 15%of cost of new
assets.
It is proposed to extend the provisions of section 32AC of the ITAct to make
medium size investments in plant and machinery eligible for deduction.
Accordingly, the deduction under section 32AC of the ITAct shall be allowed if
the company on or after 1 April 2014 invests more than Rs. 25 crore in plant
and machinery in a year.
This deduction shall be allowed during the period beginning from 1 April 2014
and ending on 31 March 2017 (ending date as per the Finance Bill is 31 March
2018 as against 31 March 2017 specified in Memorandum to Finance Bill) if
investments are more than Rs. 25 crore in plant and machinery in a year.
It is also proposed that the Company who is eligible to claim deduction under
the existing combined threshold limit of Rs.100 crore for investments made in
FY 2013-14 or FY 2014-15 shall continue to be eligible to claim deduction
under the existing provisions contained in section 32AC(1) of the ITAct.
Section 115BBD of the IT Act was introduced as an incentive for attracting
repatriation of income earned by Indian companies from investments made
abroad. It provides for taxation of gross dividends received by an Indian
company from a specified foreign company at concessional rate of 15%from
AY2012-13 to AY2014-15.
It is proposed to amend the IT Act to extend the benefits of lower rate of
taxation without limiting it to particular AYs. Thus, such foreign dividends
CHAPTER 6 : DIRECT TAXES - SIGNIFICANT CHANGES
received in AY 2015-16 and subsequent AYs shall continue to be taxed
@15%for AY2015-16 and subsequent AYs.
The existing provisions of section 115-Oof the ITAct, provides for levy of DDT
on the company at the time when company distributes, declares or pays any
dividend to its shareholders. Sub-section (1) of the said section provides that
any amount declared, distributed or paid by a domestic company by way of
dividends shall be charged to additional income-tax at the rate of 15%(plus
applicable surcharge and cess).
The existing provisions of section 115-R of the ITAct, provides for levy of DDT
on the company at the time when company distributes, declares or pays any
dividend to its unit holders. Sub-section (2) of the said section provides that
any amount of income distributed by the specified company or a mutual fund
to its unit holder shall be charged to additional income-tax at the rate of 25%
(plus applicable surcharge and cess).
It is proposed to provide that for the purposes of determining the tax on
distributed profits payable in accordance with section 115-Oand 115-R of the
ITAct, any amount by way of dividends referred to in sub-section (1) and sub-
section (2) respectively of the said sections, as reduced by the amount
referred to in sub-section (1A) [referred to as net distributed profits], shall be
increased to such amount as would after reduction of the tax on such
increased amount at the rate specified in sub-section (1) and (2), be equal to
the net distributed profits.
As such, the proposed amendment requires the amount of distributable
income and the dividends which are actually received by the unit holder of
mutual fund or shareholders of the domestic company to be grossed up for
the purpose of computing the additional tax resulting into increased effective
tax rates.
The existing provisions of section 80-IA(4)(iv) of the IT Act provides that a
deduction shall be allowed to an undertaking which-
(a) is set up for the generation and distribution of power if it begins to generate
power at any time during the period beginning on 1 April 1993 and ending on
31 March 2014;
6.1.3 Tax ondividends distributedby domestic company
6.1.4 Extension of the sunset date under section 80-IA of the IT Act for the
power sector
(b) starts transmission or distribution by laying a network of new transmission or
distribution lines at any time during the period beginning on 1 April 1999 and
ending on 31 March 2014;
(c) undertakes substantial renovation and modernization of existing network of
transmission or distribution lines at any time during the period beginning on 1
April 2004 and ending on 31 March 2014.
It is proposed to amend the above sub-clauses of the section so as to extend
the time limit from 31 March 2014 to 31 March 2017.
The existing provisions of section 35AD of the IT Act inter alia, provide a
deduction in respect of any expenditure of capital nature incurred, other than
expenditure incurred on acquisition of any land or goodwill or financial
instrument, wholly and exclusively for the purposes of any specified business
carried on by the assessee during the previous year in which such
expenditure is incurred. The said section also provides that deduction under
the provisions of Chapter VI-A under the heading Deductions in respect of
certain incomes shall not be available to any specified business which has
claimed deduction under the said section.
It is proposed to insert new clauses (ai) and (aj) in sub-section (5) of the
aforesaid section to specify that the date of commencement of operation shall
be on or after 1 April 2014 where the specified business is in the nature of
laying and operating a slurry pipeline for the transportation of iron ore or in the
nature of setting up and operating a semi-conductor wafer fabrication
manufacturing unit which is notified by the CBDT.
It is also proposed to insert a new sub-section (7A) in the aforesaid section so
as to provide that any asset in respect of which a deduction is claimed and
allowed under this section shall be used only for the specified business, for a
period of 8 years beginning with the previous year in which such asset is
acquired or constructed.
It is also proposed to insert a new sub-section (7B) in the aforesaid section so
as to provide that where any asset, in respect of which a deduction is claimed
and allowed under this section is used for a purpose other than the specified
business, the total amount of deduction claimed (net of depreciation), shall be
deemed to be business income of the previous year in which the asset is so
used. However, this provision shall not apply to a sick industrial company.
It is also proposed to insert a new sub-section (10) to provide that where
6.1.5 Deductioninrespect of capital expenditure onspecifiedbusiness
deduction under section 10AAof the ITAct has been availed by any specified
business for any AY, no deduction under section 35AD of the IT Act shall be
allowed in relation to such specified business for the same or any other AY.
The existing provision of section 115JC of the ITAct provides that where the
regular income-tax payable by a person, other than a company, for a FY is
less than the AMT for such FY, the person would be required to pay income-
tax @18.5% (plus applicable surcharge and cess) on its adjusted total
income. The section further provides that the total income shall be increased
by deductions claimed under Part C of Chapter VI-A and deduction claimed
under section 10AAof the ITAct to arrive at adjusted total income.
It is proposed to amend the section so as to provide that total income shall be
increased by the deduction claimed under section 35AD of the IT Act (as
reduced by depreciation allowable under section 32 of the ITAct) for purpose
of computation of adjusted total income.
It is proposed to introduce a new tax regime for REIT and Infrastructure
Investment Trust. In this context, business trust is defined as a trust
registered as an Infrastructure Investment Trust or a REIT, the units of which
are required to be listed on a recognised stock exchange, in accordance with
the regulations made under SEBI and notified by the Central Government in
this behalf.
The income-investment model of the business trusts has the following
distinctive elements:
(i) The trust would raise capital by way of issue of units (to be listed on a
recognised stock exchange) and can also raise debts directly from resident
as well as non-resident investors;
(ii) the income bearing assets would be held by the trust by acquiring controlling
or other specific interest in an Indian company (SPV) from the sponsor.
The proposal will put in place a specific taxation regime for providing the
manner in which the income of such trusts is to be taxed and the taxability of
the income distributed by such business trusts in the hands of the unit holders
of such trusts. The regime has the following main features:
(I) The listed units of a business trust, when traded on a recognised stock
6.1.6 Investment linked deductions claimed under section 35AD of the IT Act
subject toAMT
6.1.7 Taxation regime for Real Estate Investment Trust and Infrastructure
Investment Trust
exchange, would attract same levy of STT, and would be given the same tax
benefits in respect of taxability of capital gains as equity shares of a company
i.e. long term capital gains, would be exempt and short term capital gains
would be taxable at the rate of 15%(plus applicable surcharge and cess).
(ii) In case of capital gains arising to the sponsor at the time of exchange of
shares in SPVs with units of the business trust, the taxation of gains shall be
deferred and taxed at the time of disposal of units by the sponsor. However,
the preferential capital gains regime (consequential to levy of STT) available
in respect of units of business trust will not be available to the sponsor in
respect of these units at the time of disposal. Further, for the purpose of
computing capital gain, the cost of these units shall be considered as cost of
the shares to the sponsor. The holding period of shares shall also be included
in the holding period of such units.
(iii) The income by way of interest received by the business trust from SPV is
accorded pass through treatment i.e. there is no taxation of such interest
income in the hands of the trust and no withholding tax at the level of SPV.
However, withholding tax at the rate of 5% (plus applicable surcharge and
cess) in case of payment of interest component of income distributed to non-
resident unit holders, at the rate of 10% in respect of payment of interest
component of distributed income to a resident unit holder shall be effected by
the trust.
(iv) In case of ECB by the business trust, the benefit of reduced rate of 5%(plus
applicable surcharge and cess) tax on interest payments to non-resident
lenders shall be available on similar conditions, for such period as is provided
in section 194LC of the ITAct.
(v) The dividend received by the trust shall be subject to DDT at the level of SPV
but will be exempt in the hands of the trust and the dividend component of the
income distributed by the trust to unit holders will also be exempt.
(vi) The income by way of capital gains on disposal of assets by the trust shall be
taxable in the hands of the trust at the applicable rate. However, if such capital
gains are distributed, then the component of distributed income attributable
to capital gains would be exempt in the hands of the unit holder. Any other
income of the trust shall be taxable at the maximum marginal rate.
(vii) The business trust is required to furnish its ROI.
(viii) The necessary forms to be filed and other reporting requirements to be met
by the trust shall be prescribed to implement the above scheme.
6.1.8 Concessional rate of withholding tax on interest on overseas
borrowings
6.1.9 Transaction in commodity derivatives chargeable to CTT is not a
speculative transaction
6.1.10 Disallowance of payments to resident on account of non-deduction of
tax restricted to30%
6.1.11 Rationalisationof TDS provisions incase of payments tonon-residents
Section 194LC of the IT Act provides that if an Indian company borrows
money in foreign currency from a source outside India either under a loan
agreement or by way of issue of long-term infrastructure bonds at any time on
or after 1 July 2012 but before 1 July 2015, the interest payment to a non-
resident person would be subject to a concessional rate of withholding tax @
5%(plus applicable surcharge and cess).
It is proposed to amend the section to extend the benefit of this concessional
rate of withholding tax on interest on borrowing by way of issue of any long-
term bonds instead of limiting to long term infrastructure bonds.
It is further proposed to extend the concessional rate of withholding tax in
respect of borrowing made before 1 July 2017.
These amendments will take effect from 1 October 2014.
It is proposed to amend clause (e) of proviso to section 43(5) of the ITAct so
as to provide that eligible transaction in respect of trading in commodity
derivatives carried out in a recognized association and chargeable to CTT
shall not be considered to be a speculative transaction.
Section 40(a)(ia) of the IT Act provides for the disallowance of the entire
amount of expenditure on which tax was deductible but not deducted on
certain payments made to residents for the purposes of computing income
under the head Profits and gains of business or profession.
It is proposed that in case of non-deduction or non-payment of TDS on
payments made to residents as specified in section 40(a)(ia) of the ITAct, the
disallowance shall be restricted to 30%of the amount of expenditure claimed
in this regard.
The existing provisions of section 40(a)(i) of the IT Act provide that certain
payments made to a non-resident shall not be allowed as deduction for
computing business income if tax on such payments was not deducted, or
after deduction, was not paid during the FY or in subsequent FY within the
time prescribed under section 200(1) of the ITAct.
It has been proposed that the deductor shall be allowed to claim deduction for
payments made to non-residents in the year of such payments, if tax is
deducted during the said previous year and the same is paid on or before the
due date specified for filing of ROI.
It is proposed that the disallowance under section 40(a)(ia) of the ITAct shall
extend to all expenditure on which tax is deductible under Chapter XVII-B of
the ITAct.
Under the Companies Act, 2013, certain companies are required to spend
certain percentage of their profit on activities relating to CSR. Further, the
existing provisions of section 37(1) of the ITAct provide that deduction for any
expenditure, which is not mentioned specifically in section 30 to section 36 of
the ITAct, shall be allowed if the same is incurred wholly and exclusively for
the purposes of carrying on business or profession.
It is proposed to clarify that for the purposes of section 37(1) of the ITAct, any
CSR expenditure incurred by an assessee referred to in section 135 of the
Companies Act, 2013 shall not be allowed as deduction under section 37 of
the IT Act. However, the CSR expenditure having the nature described in
section 30 to section 36 of the ITAct shall be allowed as deduction, subject to
fulfillment of conditions specified in such sections of the ITAct.
Presently, explanation to section 73 of the IT Act provides that in case of a
company deriving its income mainly under the head Profits and gains of
business or profession (other than a company whose principal business is
business of banking or granting of loans and advances), and where any part
of its business consists of purchase or sale of shares, such business shall be
deemed to be speculation business for the purpose of this section.
It is proposed to amend the aforesaid explanation so as to provide that the
provision of the explanation shall not be applicable to a company, the
principal business of which is trading in shares.
6.1.12 Widening of scope for disallowance of payment to resident on account
of non-deductionof tax at source
6.1.13 Disallowance of expenditures related toCSR
6.1.14 Losses inspeculationbusiness
6.1.15 Rationalization of presumptive tax provisions in respect of business of
plying, hiringor leasinggoods carriages
6.1.16 Scope of power of survey extended
6.1.17Assessment of income of a person other than the person who has been
searched
The existing provisions of section 44AE of the ITAct provides for presumptive
taxation in the case of an assessee who is engaged in the business of plying,
hiring or leasing goods carriages and not owning more than 10 goods
carriages at any time during the previous year. The presumptive income per
heavy goods vehicle is Rs. 5,000 for every month (or part of a month) and Rs.
4,500 for every month (or part of a month) in other cases.
It is proposed to provide for a uniform amount of presumptive income of Rs.
7,500 for every month (or part of a month) for all types of goods carriage
without any distinction between heavy goods vehicle and vehicle other than
heavy goods vehicle.
It is proposed to amend section 133Aof the ITAct by which period of retaining
the custody of books of account or other documents is extended from 10 days
to 15 days (exclusive of holidays).
It is also proposed to amend section 133Aof the ITAct and extend the power
of survey to an income-tax authority for the purpose of verifying that tax has
been deducted or collected at source in accordance with the provisions of
Chapter XVII-B or Chapter XVII-BB. Further, such income-tax authority may
require the deductor or the collector or any other person who may at the time
and place of survey be attending to such work
(i) to afford him the necessary facility to inspect such books of account or
other documents as he may require and which may be available at such
place, and
(ii) to furnish such information as he may require in relation to such matter. It
is also proposed to provide that an income-tax authority may place marks
of identification on the books of account or other documents inspected by
him and take extracts and copies thereof. However, he shall not impound
and retain in his custody any books of account or documents inspected
by him or make an inventory of any cash, stock or other valuables.
It is proposed to amend section 153C of the IT Act to provide that AO shall
proceed against a person other than the person who has been searched and
issue such other person notice and assess or reassess income of such other
person in accordance with the provisions of section 153Aof the ITAct, if the
AO is satisfied that the books of account or documents or assets seized or
requisitioned have a bearing on the determination of the total income of such
other person for the relevant AYs referred to in section 153A(1) of the ITAct.
It is proposed to substitute section 142Aof the ITAct so as to provide that the
AO may, for the purpose of assessment or re-assessment, require the
assistance of a Valuation Officer to estimate the value, including fair market
value, of any asset, property or investment and submit the report to him. The
AO may make a reference whether or not he is satisfied about the
correctness or completeness of the accounts of the assessee. The Valuation
Officer, shall, for the purpose of estimating the value of the asset, property or
investment, have all the powers of section 38Aof the WTAct. The Valuation
Officer is required to estimate the value of the asset, property or investment
after taking into account the evidence produced by the assessee and any
other evidence in his possession gathered, after giving an opportunity of
being heard to the assessee.
If the assessee does not co-operate or comply with the directions of the
Valuation Officer, he may estimate the value of the asset, property or
investment to the best of his judgment. It is also proposed to provide that the
Valuation Officer shall send a copy of his estimate to the AO and assessee
within a period of 6 months from the end of the month in which the reference is
made. The AO on receipt of the report from the Valuation Officer may, after
giving the assessee an opportunity of being heard, take into account such
report in making the assessment or reassessment.
It is also proposed to amend sections 153 and 153B of the IT Act so as to
provide that the time period beginning with the date on which the reference is
made to the Valuation Officer and ending with the date on which his report is
received by the AO, shall be excluded from the time limit provided under the
aforesaid section for completion of assessment or reassessment.
The existing provisions relating to AMT, created difficulty in claim of credit of
AMT in an AYwhere the income is not more than Rs. 20,00,000 or there is no
6.1.18 Assistance of valuationofficer for assessment / reassessment
6.1.19 Rationalisationof credit of AMT
claim of any deduction under section 10AAof the ITAct or Chapter VI-A.
It is proposed to amend the provisions to enable an assessee who has paid
AMTin any earlier years, to claim credit of the same in any subsequent years,
subject to fulfillment of prescribed conditions.
The existing provisions of section 112 of the IT Act provides that the tax
payable in the case of income arising from the transfer of a long term capital
asset, being listed securities or unit or zero coupon bond exceeds 10%(plus
applicable surcharge and cess) of the amount of capital gains without
indexation adjustment, such excess shall be ignored.
It is proposed to amend the aforesaid provision so as to provide that where
the tax payable in respect of any income arising from transfer of a long-term
capital asset being listed securities (other than a unit) or zero coupon bond
exceeds 10%(plus applicable surcharge and cess) of the amount of capital
gains without indexation adjustment, such excess shall be ignored. As such,
there will be increase in the rate of tax on long term capital gains from 10%to
20%(plus applicable surcharge and cess) on transfer of units of mutual funds
other than equity oriented funds.
It is proposed to amend the provisions of sections 269SS and 269T of the IT
Act to provide that any acceptance or repayment of any loan or deposit by use
of electronic clearing system through a bank account shall not be prohibited
under the aforesaid sections if the other conditions are satisfied.
It is proposed to amend section 200 of the ITAct to allow the deductor to file
correction statements. Consequently, it is also proposed to amend provisions
of section 200Aof the ITAct for enabling processing of correction statement
filed.
It is also proposed to replace section 201(3) of the IT Act to provide that no
order under section 201(1) of the ITAct shall be passed at any time after the
expiry of 7 years from the end of the FYin which payment is made or credit is
given.
6.1.20 Tax onlong-termcapital gains onunits
6.1.21 Mode of acceptance or repayment of loans anddeposits
6.1.22 Rationalisationof TDS provisions
6.1.23 Rationalisation of computation mechanism under section 115BBC of
the ITAct
6.1.24 TDS onnon-exempt payment receivedunder life insurance policy
6.2 Personal
6.2.1 Increase in investment limit under section 80C of the IT Act from Rs.
1,00,000 toRs. 1,50,000
Under the existing provision of section 115BBC of the IT Act, tax @30% is
levied on the aggregate amount of anonymous donations exceeding 5% of
the total donations received by the assessee or Rs.1,00,000, whichever is
higher. Tax @ 30% is levied on the amount of anonymous donations
exceeding the threshold limit only and the remaining tax is chargeable on
total income after reducing the full amount of anonymous donations (instead
of reducing the income of anonymous donation which has been taxed @
30%) .
It is proposed to amend the section to provide that the income-tax payable
shall be the aggregate of the amount of income-tax calculated @30%on the
following:
anonymous donations received in excess of 5% of the total donations
received by the assessee or Rs. 1,00,000, whichever is higher, and
the amount of income-tax with which the assessee would have been
chargeable had his total income been reduced by the aggregate of the
anonymous donations which is in excess of 5% of the total donations
received by the assessee or Rs. 1,00,000.
It is proposed to insert a new section to provide for deduction of tax @2%on
sum paid under a life insurance policy, including the sum allocated by way of
bonus, which are not exempt under section 10(10D) of the ITAct.
Further, it has also been proposed that no tax under the aforesaid provision
shall be deducted if the aggregate sum paid in the FY to an assessee is less
than Rs. 1,00,000.
These amendments will take effect from 1 October 2014.
It is proposed to raise the limit of deduction allowed under section 80C of the
IT Act from existing Rs. 1,00,000 to Rs.1,50,000 and the consequential
amendments are proposed in sections 80CCE and 80CCD of the ITAct.
6.2.2 Increase indeductionof interest onhousingloaninrespect of SOP
6.2.3 Capital gains exemption in case of investment in one residential house
property
6.3 NonResidents
6.3.1 Characterisationof income incase of FII
Under the existing provisions, section 24 of the IT Act provides that, income
chargeable under the head Income from House Property shall be computed
after making certain deduction. In terms of section 24(b) of the ITAct, where
the property is acquired with borrowed capital, the amount of interest payable
on such capital shall be allowed as deduction in computing the income from
house property. In addition to that, second proviso to section 24(b) of the IT
Act, inter alia, provides that, in case of SOPwhere acquisition or construction
is completed within 3 years from end of FY in which the capital is borrowed,
the amount of deduction shall not exceeds Rs. 1,50,000.
It is proposed to amend the second proviso to section 24(b) of the ITAct, so as
to increase the limit of deduction on account of interest in respect of property
referred to in section 23(2) of the ITAct to Rs. 2,00,000.
The existing provisions contained in section 54(1) of the IT Act provides for
exemption from the capital gain arising on transfer of a residential house,
where the assessee purchases or constructs, a residential house within
stipulated timeframe, to the extent of amount of capital gains invested in such
new residential house.
The existing provisions contained in section 54F(1) of the ITAct provides that
the capital gains arising on transfer of a long-term capital asset, not being a
residential house, and the assessee purchases or constructs a residential
house within stipulated timeframe, then the portion of capital gains in the ratio
of cost of new asset to the net consideration shall be exempt.
It is proposed to amend the aforesaid section 54(1) and 54F(1) of the ITAct so
as to provide that the exemption under these sections is available if the
investment is made in one residential house situated in India.
The existing provision of section 2(14) of the ITAct defines the term Capital
Assets to include property of any kind held by an assessee, whether or not
connected with his business or profession, but does not include any stock in
trade or personal assets as provided in the definition. Foreign Portfolio
Investors (referred as FII in the IT Act) face a difficulty in characterisation of
their income arising from transaction in securities as to whether it is capital
gain or business income.
It is proposed to provide that any security held by FIIs which have invested in
such security in accordance with the regulations made under the SEBI Act,
1992, would be treated as capital assets only, so that, any income arising
from transfer of such security by FIIs would be in the nature of capital gains.
The existing provision contained in section 47 of the IT Act provides that
certain transactions shall not be considered as transfer for the purpose of
charging of capital gains.
It is proposed to insert clause (viib) in the said section so as to provide that
any transfer of a capital asset, being government securities carrying periodic
payment of interest, made outside India through an intermediary dealing in
settlement of securities, by a non-resident to another non-resident shall not
be considered as transfer for the purpose of charging capital gains.
Section 92CC of the IT Act empowers the CBDT, with the approval of the
Central Government, to enter into an APAwith any person for determining the
ALP or specifying the manner in which ALP is to be determined in relation to
an international transaction to be entered into by the person. The APAis valid
for a period, not exceeding 5 years.
It is now proposed to provide for roll back mechanism in the APA scheme.
The roll back provisions refer to the applicability of the methodology of
determination of ALP, or the ALP, to be applied to the international
transactions which had already been entered into in a period prior to the
period covered under an APA.
The APAis subject to such prescribed conditions, procedure and manner for
determining the ALP or for specifying the manner in which ALP is to be
determined, in relation to an international transaction entered into by a
person, during any period not exceeding 4 previous years preceding the first
of the previous year for which the APA applies in respect of the international
transaction to be undertaken in future.
6.3.2 Transfer of government security by one non-resident to another non-
resident not tobe regardedas transfer
6.4 Transfer Pricing
6.4.1 Introductionof Roll Back provisioninAPA scheme
6.4.2 Rationalisationof the definitionof international transaction
6.4.3 Levy of penalty under section271Gof the ITAct by TPO
6.4.4 Other announcements
6.5 General
6.5.1 Expandingthe scope of Short-termcapital asset
Under the existing provisions, section 92B(2) of the ITAct extends the scope
of international transaction to include deemed international transactions
provided that a transaction entered into with an unrelated person shall be
deemed to be a transaction with an AE, if there exists a prior agreement in
relation to the transaction between such other person and the AE, or the
terms of the relevant transaction are determined in substance between the
other person and the AE. Under the existing provisions, the sub-section as
presently worded has led to a doubt whether or not, for the transactions to be
treated as an international transaction, the unrelated person should also be a
non-resident.
It is now proposed to amend the section to provide that where in respect of a
transaction entered into by an enterprise with a person other than an AE, if
there exists a prior agreement in relation to the relevant transaction between
the other person and the AE or, where the terms of the relevant transaction
are determined in substance between such other person and the AE, and
either the enterprise or the AE or both of them are non-resident, then such
transaction shall be deemed to be an international transaction entered into
between two AEs, whether or not such other person is a non-resident.
It is proposed to amend Section 271G of the ITAct to include a TPO also, as
an authority competent to levy the penalty under this section in addition to the
AOand the Commissioner (Appeals).
This amendment will be effective from 1 October 2014.
Range concept for determination of ALP is proposed to be introduced.
However, the arithmetic mean concept will continue to apply where number of
comparable is inadequate. The appropriate rules in this regard will be
prescribed.
It is proposed to allow the use of multiple year data for comparability analysis.
Existing provisions of Section 2(42A) of the IT Act provides that short-term
capital asset means a capital asset held by an assessee for not more than 36
months immediately preceding the date of its transfer. However, in the case of
a share held in a company or any other security listed in a recognised stock
exchange in India or a unit of the Unit Trust of India or a unit of a Mutual Fund
or a zero coupon bond, the period of holding for qualifying it as short-term
capital asset is not more than 12 months.
It is proposed to provide that an unlisted security and unit of a mutual fund
(other than an equity oriented mutual fund) shall be a short-term capital asset
if it is held for not more than 36 months.
It is proposed to insert a new clause (ix) in section 56(2) of the IT Act to
provide for the taxability of any sum of money received as an advance or
otherwise in the course of negotiations for transfer of a capital asset. Such
sum shall be chargeable to income tax under the head Income from other
sources if such sum is forfeited and the negotiations do not result in transfer
of such capital asset.
Consequentially, it is proposed to amend section 51 of IT Act to provide that
the amount which has been included in the total income of the assessee for
any FY, in accordance with the aforesaid provisions of section 56(2)(ix) of the
ITAct, shall not be deducted while computing the cost of acquisition.
Section 45(5) of the ITAct provides for dealing with capital gains arising from
transfer by way of compulsory acquisition where the compensation is
enhanced or further enhanced by the court, tribunal or any other authority.
Clause (b) of the said section provides that where the amount of
compensation is enhanced by the court it shall be deemed to be the income
chargeable of the previous year in which such amount is received by the
assessee.
It is proposed to provide that the amount of compensation received in
pursuance of an interim order of the court, tribunal or other authority shall be
deemed to be income chargeable under the head Capital gains in the
previous year in which the final order of such court, tribunal or other authority
is made.
6.5.2 Taxability of forfeiture of advance received in course of negotiation for
transfer of capital assets
6.5.3 Capital gains arising from transfer of an asset by way of compulsory
acquisition
6.5.4 Clarification in respect of capital gains exemption on investment in
specifiedbonds
6.5.5 Failure toproduce accounts anddocuments
6.5.6 Power tonotify income computationanddisclosure standards
The existing provisions contained in section 54EC(1) of the IT Act provides
that where capital gain arises from the transfer of a long-term capital asset
and the assessee has, within a period of 6 months invested the whole or part
of capital gains in the long-term specified asset, the proportionate capital
gains so invested in the long-term specified asset, out of the whole of the
capital gain, shall not be charged to tax. Proviso to section 54EC(1) of the IT
Act provides that the investment made in the long-term specified asset during
any FYshall not exceed Rs. 50,00,000.
It is proposed to insert a proviso to section 54EC(1) of the IT Act so as to
provide that the investment made by an assessee in the long-term specified
asset, out of capital gains arising from transfer of one or more original asset,
during the FY in which the original asset or assets are transferred and in the
subsequent financial year does not exceed Rs. 50,00,000.
Existing provisions of section 276D of the IT Act provide that if a person
willfully fails to produce accounts and documents as required in any notice
issued under section 142(1) of the IT Act or willfully fails to comply with a
direction issued to him under section 142(2A) of the IT Act, he shall be
punishable with rigorous imprisonment for a term which may extend to 1 year
or with fine equal to a sum calculated at a rate which shall not be less than Rs.
4 or more than Rs. 10 for every day during which the default continues, or with
both.
It is proposed to amend the provisions of section 276D of the ITAct so as to
provide that person shall be punishable with rigorous imprisonment for a term
which may extend to 1 year and with fine.
It is proposed to provide that the Central Government may notify in the official
gazette from time to time income computation and disclosure standards to be
followed by any class of persons or in respect of any class of income. It is
further proposed to provide that the AO may make an assessment in the
manner provided in section 144 of the IT Act, if the income has not been
computed in accordance with the standards notified under section 145(2) of
the ITAct.
6.5.7 Notice of demand to be valid till the disposal of appeal by last appellate
authority or disposal of proceedings for the purpose of Interest payable
under section220 of the ITAct
6.5.8 Cancellationof registrationof the trust or institutionincertaincases
It is proposed to insert a new sub-section (1A) to section 220 of the ITAct so
as to provide that where any notice of demand has been served upon an
assessee and any appeal or other proceeding, as the case may be, is filed or
initiated in respect of the amount specified in the said notice of demand, then
such demand shall be deemed to be valid till the disposal of appeal by the last
appellate authority or disposal of proceedings, as the case may be.
It is further proposed to provide that where as a result of an order under
section specified in the first proviso, the amount on which interest was
payable under this section has been reduced and subsequently as a result of
an order under said sections or section 263 of the ITAct, the amount on which
interest was payable under section 220 of the IT Act is increased, the
assessee shall be liable to pay interest under sub-section (2) of the said
section on the amount payable as a result of such order, from the day
immediately following the end of the period mentioned in the first notice of
demand referred to in sub section (1) of the said section and ending with the
day on which the amount is paid.
It is proposed to amend section 12AAof the ITAct to provide that where a trust
or an institution has been granted registration, and subsequently it is noticed
that its activities are being carried out in such a manner that-
its income does not enure for the benefit of general public; or
it is for benefit of any particular religious community or caste (in case it is
established after commencement of the Act); or
any income or property of the trust is applied for benefit of specified persons
like author of trust, trustees etc.; or
its funds are invested in prohibited modes
then, the Principal Commissioner or the Commissioner may cancel the
registration, if such trust or institution does not prove that there was a
reasonable cause for the activities to be carried out in the above manner.
6.5.9 Rationalisation of taxation regime in the case of charitable trusts and
institutions
It is proposed to amend section 11 of the IT Act to provide specifically that
where a trust or an institution has been granted registration for the FY for
purposes of availing exemption, then such trust or institution cannot claim
any exemption under any provisions of section 10 of the ITAct [other than that
relating to exemption of agricultural income and income exempt under
section 10(23C) of the ITAct]. Similarly, entities which have been approved or
notified for claiming benefit of exemption under section 10(23C) of the ITAct
would not be entitled to claim any benefit of exemption under other provisions
of section 10 of the IT Act (except the exemption in respect of agricultural
income).
Further, it is proposed to amend section 11 and section 10(23C) of the ITAct
to provide that the income for the purposes of application shall be determined
without any deduction or allowance by way of depreciation or otherwise in
respect of any asset, the acquisition of which has been claimed as an
application of income under these sections in the same or any other FY.
The provisions applicable to Service Tax, Customs and Excise are given under:
W.e.f. 11 July 2014, resident private limited company has been notified as
class of persons eligible to apply for advance ruling.
Mandatory pre-deposit of 7.5%of the duty demanded or penalty imposed or
both, for filing appeal with the Commissioner (Appeals) or the Tribunal at the
1st stage and 10%of the duty demanded or penalty imposed or both, for filing
2nd stage appeal before the Tribunal is proposed. The amount of pre-deposit
payable would be subject to a ceiling of Rs. 10 crore.
It is proposed to increase the discretionary powers of the Tribunal to refuse
admission of appeal from the existing Rs. 50,000 to Rs. 2,00,000.
The effective rate of service tax has been kept unchanged at 12.36%[Tax @
12%, Education Cess @2%and Secondary and Higher Education Cess @
1%].
The services of transportation of passenger provided by radio taxis including
radio cab, by whatever name called, which is in two-way radio
communication with a central control office and is enabled for tracking using
Global Positioning System or General Packet Radio Service, whether air
conditioned or not, is proposed to be made liable to Service Tax. Further, the
abatement as applicable to rent-a-cab services would also be made
applicable to radio taxis.
7.1 Service Tax
7.1.1 General
7.1.2 Reductioninthe scope of Negative list of Services
The changes in rates effected in the
Customs and Central Excise regulations
shall be effective from 11 July 2014 and
legislative changes shall be effective
from the enactment of Finance Bill,
unl ess otherwi se speci fi ed. The
changes in Service Tax regulations shall
be effective from the date of enactment
of the Bill, unless otherwise specified.
CHAPTER 7 : INDIRECT TAXES - SIGNIFICANT CHANGES
Service Tax on sale of space or time for advertisements in broadcast media
namely radio or television has been proposed to be extended to cover all
segments other than advertisement in print media. Print media not to include
business directories, yellow pages and trade catalogues which are primarily
meant for commercial purposes.
The above proposed changes will be in force from the date to be notified.
Exemption has been provided in respect of services by common bio-medical
waste treatment facility operator to clinical establishment by way of treatment
or disposal of bio-medical waste or the processes incidental thereto.
Services by way of Technical testing or analysis of newly developed drugs
including vaccines and herbal remedies on human participants by a clinical
research organization approved by Drug Controller General of India, shall
henceforth not be an exempted service.
The existing exemption of auxiliary educational services has been
substituted by specific exemption such as transportation of student, faculty
and staff, catering (including mid day meals scheme), security or cleaning or
housekeeping services and admission or conduct of examination provided to
an education institution. Further, the services provided by an educational
institution to its students, faculty and staff are also exempted from Service
Tax.
Transport of organic manure and cotton (whether ginned or baled) by way of
rail or vessel or by a goods transport agency is exempted from Service Tax.
Further, loading/unloading, packing, storage or warehousing of cotton
(whether ginned or baled) are also exempted from Service Tax.
The Services of transport of passenger services by air-conditioned contract
carriages like buses shall henceforth be considered as taxable services.
Exemption in respect of services provided to Government or local authority or
Government authority will be limited to services by way of water supply, public
health, sanitation conservancy, solid waste management or slum
improvement and upgradation.
Exemption from Service Tax to life micro-insurance schemes for the poorer
sections as approved by IRDA where sum assured does not exceed Rs.
50,000.
7.1.3 Amendment inscope of ExemptedServices
Specialized financial services received from global financial institutions in the
course of management of foreign exchange reserves such as external asset
management, custodial services, securities lending services, etc. by RBI is
exempted from Service Tax.
Service provided by a tour operator to foreign tourist for tour conducted
wholly outside India has been exempted from Service Tax.
The above changes shall be in force w.e.f. 11 July 2014.
Atime limit of 15 days for issuance of Form A-2 by the Central Excise Officer
from the date of receipt of Form A-1 from Assessee has been prescribed.
Exemption would be available from the date when list of services on which
SEZ unit is entitled to upfront exemption is endorsed by the authorized officer
of SEZ in Form A-1, provided Form A-1 is furnished to the jurisdictional
Central Excise Officer within 15 days of its verification. If furnished later,
exemption would be available from the date on which Form A-1 is so
furnished.
Pending issuance of Form A-2, exemption will be available subject to
condition that authorization issued by the Central Excise Officer will be
furnished to service provider within a period of 3 months from provision of
service.
A service shall be treated as exclusively used for SEZ operations if the
service receiver is a SEZ unit or developer, invoice is in the name of such
unit/developer and the service is used exclusively for furtherance of
authorized operations in the SEZ.
Where service portion cannot be determined in case of works contract
service other than original works, the value to be adopted shall be 70%
(effective rate of Service Tax to be 8.652% i.e. 70%*12.36%) of the total
amount charged. Erstwhile, the value to be adopted was 60% or 70%
depending upon the nature of contract.
Following changes have been made in relation to renting of motor vehicle
designed to carry passengers:
7.1.4 Amendment inprocedure for exemptiontoSEZunits/developers
7.1.5 Amendment inabatement/compositionrates
* CENVAT credit of input service of renting of motorcab available in the following
manner::
(i) 100%CENVATcredit of such input service if service tax is paid on 40%of the
value of the service; or
(ii) Upto 40% CENVAT credit of such input service if service tax is paid on the
100%of value of the service.
Service Tax on transport of goods in a vessel agency shall be exempt to the
extent of 60% provided CENVAT credit on inputs, capital goods and input
service, used for providing the taxable service, has not been taken.
The above changes shall be in force w.e.f. 1 October 2014.
The Service provided by recovery agent to a banking or a financial institution
or a non-banking financial company has been covered under the scope of
reverse charge mechanism, where service receiver will be liable to pay 100%
of the Service Tax.
The services provided by a Director to a body corporate are being brought
under the reverse charge mechanism. Erstwhile, services provided by a
Director to a company were only covered under reverse charge mechanism.
The portion of Service Tax payable by service provider and service receiver in
case of renting of motor vehicle designed to carry passenger on non abated
value will be 50%each as against existing 60%by service provider and 40%
by service receiver.
7.1.6 Amendment inReverse Charge Mechanism
Renting of any motor vehicle
designed to carry passengers
Transport of passengers, with or
without accompanied belongings, by
a contract carriage other than
motorcab
Renting of motorcab
Transport of passengers, with or
without accompanied belongings, by:
(a) a contract carriage other than
motorcab
(b) a radio taxi
Effective Upto 30
September 2014
Effective up to 30
September 2014
W.e.f. 1 October
2014
From the day
transportation of
passenger provided
by radio taxis is
made liable to
Service Tax
No CENVAT credit on inputs,
capital goods and input services
capital goods and input
services
services*
services
Taxable
Portion(%)
9
9A
9
9A
Nature of Service Effective Date
Taxable
Portion (%)
Sr.
No.
40
40
40
40
The point of taxation in respect of reverse charge mechanism to be the
payment date or the first date that occurs immediately after a period of 3
months from the date of invoice, whichever is earlier. The provisions are laid
down for transition period.
The above changes shall be in force w.e.f. 1 October 2014.
In case of goods imported for repair and is exported after repair, without being
put to any use other than that which is required for such repair, the place of
provision of service would not be the place of performance. The place of
provision to be determined as per other rules, as applicable.
The definition of intermediary has been amended to include arranging or
facilitating supply of goods between two or more persons. Presently, only
arranging or facilitating provision of service between two or more persons are
covered under the definition of intermediary. The place of provision in case of
intermediary is the location of service provider i.e. intermediary.
The place of provision of service in case of Hiring of vessels (except yachts)
and aircraft to be determined as per rules other than Rule 9. As per the Rule 9,
the place of provision of service shall be the location of service provider.
The above change shall be effective from 1 October 2014.
The rate of interest applicable for delayed payment of Service Tax is under:
The above change shall be effective from 1 October 2014.
W.e.f. 1 October 2014, e-payment of Service Tax is being made mandatory.
The relaxation from e-payment may be allowed by the Deputy/Assistant
Commissioner on case to case basis. Presently, e-payment of Service Tax is
mandatory only in case of liability on or above Rs. 1,00,000 in a financial year.
7.1.7 Amendment inthe Place of Provisionof Services Rules
7.1.8 Change inrate of interest for delayedpayment of Service Tax
7.1.9 Other significant amendments
Rate of Simple Interest (p.a.)
18%
18% for first 6 months
24% for delay beyond 6 months up to 1 year
18% for first 6 months
24% for delay beyond 6 months up to 1 year
30% for delay beyond 1 year
Period of Delay
Upto 6 months
More than 6 months
upto 1 year
More than 1 year
It is proposed to delink the exchange rate as notified under Customs
Notification. The Government will prescribe rules for determination of rate of
exchange for calculation of Service Tax in respect of certain services.
It is proposed to prescribe a time limit of 6 months/1 year, as the case may be,
from the date of notice for adjudication of show cause notice.
Section 80 is proposed to be amended for excluding the waiver of 50%
penalty imposable under section 78.
Section 82(1) is proposed to be amended so that Joint or Additional
Commissioner or any other officer notified by the Board can authorize any
central excise officer to search and seize.
Section 87 is proposed to be amended to include the power of recovery of
dues of a predecessor from the assets of a successor purchased from the
predecessor.
Peak rate of BCD on non-agricultural goods remains unchanged at 10.3 %
(Tax @10%, Education Cess @2% and Secondary and Higher Education
Cess @1%).
Baggage Rules are being proposed to be amended as follows:-
Duty free baggage allowance for passengers increased from Rs. 35,000
to Rs. 45,000.
Duty free allowance in respect of cigarettes reduced from 200 to 100;
cigars from 50 to 25 and tobacco from 250 grams to 125 grams.
BCD on half-cut or broken diamonds increased from NILto 2.5%and on cut &
polished diamonds and coloured gemstones from 2%to 2.5%.
Full exemption from BCD is being granted to pre-forms of precious and semi-
precious stones.
The variance level and the parameter of measurement in respect of re-import
of cut and polished diamonds has been changed from height and
(+ (+
circumference 0.01 mm) to diameter for round shape diamonds 0.05
- -
+
(
mm) and length and breadth for diamonds of other shapes 0.07 mm). The
-
( allowable variance in weight + 1 cent) remains unchanged.
-
7.2 Customs Duty
7.2.1 General
7.2.2 Gems andJewellery
7.2.3 Electronics / Hardware
7.2.4 Capital Goods / Infrastructure
7.2.5 Textiles
BCD on specified telecommunication products not covered under the
Information TechnologyAgreement increased from NILto 10%.
The exemption from Education Cess and Secondary and Higher Education
Cess leviable on CVD is withdrawn on certain electronic goods.
BCD reduced in respect of -
LCD and LED TV panels of below 19 inches from 10%to NIL.
Colour picture tubes for manufacture of cathode rayTVs from 10%to NIL.
E-Book readers from 7.5%to NIL.
Battery waste and battery scrap from 10%to 5%.
BCD has been exempted on specified parts of LCD and LED panels for TVs.
Full exemption from SAD has been provided on specified inputs such as Poly
Vinyl Chloride and Ribbon used in the manufacture of smart cards.
CVD on portable X-ray machine/systems is withdrawn.
SAD on all inputs/components used in the manufacture of Personal
Computers (laptops/desktops) and tablet computers is exempted, subject to
actual user condition.
Requirement of certification by National HighwayAuthority of India or Ministry
of Road Transport for availing custom duty exemption on specified goods
required for construction of roads is no longer required.
Plants & Equipment imported prior to 2008 for use in projects financed by the
UN or an international organization, which hitherto could not be transferred /
sold / re-exported out of the project site, are now being allowed to be
transferred/sold/re-exported from the project site.
The duty free entitlement for import of trimmings and embellishments used by
the readymade textile garment sector for manufacture of garments for export
increased from 3%to 5%.
Non-fusible embroidery motifs or prints are being included in the list of items
eligible to be imported duty free for manufacture of garments for export.
Specified goods imported for use in the manufacture of textile garments for
export are fully exempt from BCD and CVD subject to the condition that the
manufacturer produces an entitlement certificate from the Apparel Export
Promotion Council. In addition, Indian Silk Export Promotion Council is
authorised to issue entitlement certificate.
BCD on raw materials for manufacture of spandex yarn viz.
Polytetramethylene ether glycol and Diphenylmethane 4,4 di-isocyanate
reduced from 5%to NIL.
The list of specified goods required by handicraft manufacturer-exporters is
expanded by including wire rolls so as to provide Customs Duty exemption on
import by handicraft manufacturer-exporters.
Fusible embroidery motifs or prints, anti-theft devices, pin bullets for packing,
plastic tag bullets, metal tabs, bows, ring and slider hand rings are being
included in the list of items eligible to be imported duty free for manufacture of
handloom made ups or cotton made ups or manmade made ups for export.
BCD at a concessional rate of 5%is provided on machinery, equipments, etc.
required for initial setting up of compressed biogas plant (Bio-CNG).
BCD and CVD on machinery, equipment, etc. required for initial setting up of
solar energy production projects reduced to 5%.
Full exemption from BCD in respect of
Specified raw materials used in the manufacture of solar backsheet and
Ethylene Vinyl Acetate sheet.
Flat copper wire used in the manufacture of Photovoltaic ribbons (tinned
copper interconnect) for solar PV cells/modules.
BCD reduced from 10%to 5%on forged steel rings used in the manufacture
of bearings of wind operated electricity generators.
Section 8B of the Customs Tariff Act, 1975 is being amended so as to provide
for levy of safeguard duty on inputs/raw materials imported by an EOU and
cleared into DTA as such or used in the manufacture of final products &
cleared into DTA. The change will be effected immediately.
Section 15(1) of the Customs Act, 1962 is proposed to be amended to
provide for determination of rate of duty and tariff valuation for imports
through a vehicle in cases where the Bill of Entry is filed prior to the filing of
Import Report (as the Manifest is called in case of imports by land).
7.2.6 Renewable Energy
7.2.7 Others
Section 25 of the Customs Act, 1962 is proposed to be amended to provide
that the customs duties on mineral oils including petroleum & natural gas
extracted or produced in the continental shelf of India or the exclusive
economic zone of India shall not be recovered for the period prior to 7
February 2002.
Section 46(3) of the Customs Act, 1962 is proposed to be amended to allow
the filing of a Bill of Entry prior to the filing of Import Report (as the Manifest is
called in case of imports by land) for imports through land route.
It is proposed that an application for settlement of cases can also be filed in
cases where a Bill of Export, Baggage Declaration, Label or Declaration
accompanying the goods effected through Post or Courier have been filed.
The Board has been vested with power to condone delay for a period of upto
30 days for review by the Committee of Chief Commissioners of the orders in
original passed by the Commissioner of Customs is proposed.
No change in the overall rate structure with the general effective rate
continuing at 12.36%(12%Basic Duty +2%Education Cess + 1%Secondary
and Higher Education Cess)
Duty on machinery for the preparation of meat, poultry, fruits, nuts or
vegetables, and on presses, crushers and similar machinery used in the
manufacture of wine, cider, fruit juices or similar beverages and on packaging
machinery being reduced from 10%to 6%.
Duty has been reduced from 12%to 6%on footwear of retail price exceeding
Rs. 500 per pair but not exceeding Rs.1,000 per pair. Footwear of retail price
up to Rs. 500 per pair will continue to remain exempted.
Duty @2%without CENVAT or 6%with CENVAT on hand operated sewing
machine being rationalized by levying concessional duty on sewing
machines other than those operated with electric motors (whether in-built or
attachable to the body).
Semi-mechanized units manufacturing safety matches, which attract
concessional duty of 6%, being allowed to carry out the processes of Pasting
of labels and Packing with the aid of power.
7.3 Central Excise
7.3.1 General
7.3.2 Agriculture/AgroProcessing/PlantationSector
7.3.3 Consumer Goods
Concessional duty of 2%without CENVAT credit and 6%with CENVAT credit
being extended to gloves specially designed for use in sports.
An additional duty of excise being levied at the rate of 5% ad valorem on
aerated waters containing added sugar.
It is proposed that unbranded articles of precious metals like gold, silver,
platinum, palladium, rhodium, iridium, osmium or ruthenium are exempted
from Excise Duty retrospectively for the period 1 March 2011 to 16 March
2012. W.e.f 17 March 2012, the said duty is withdrawn.
Duty on recorded smart cards being increased from 2%without CENVATand
6%with CENVATto a uniform rate of 12%.
Full exemption from duty being provided to Reverse Osmosis (RO)
membrane element used in water filtration or purification equipment (other
than household type filter). Duty on RO membrane element used in
household type filters has been reduced from 10%to 6%.
Duty on Metal Core Printed Circuit Board and Light Emitting Diode (LED)
driver for use in the manufacture of LED lights and fixtures and LED lamps,
has been reduced from 10%to 6%.
Duty has been reduced from 12% to Nil on forged steel rings used in the
manufacture of bearings of wind operated electricity generators.
Full exemption from Duty being provided for :
Solar tempered glass used in the manufacture of solar photovoltaic
cells/modules, solar power generating equipment/system, and flat plate
solar collectors.
Machinery, equipments, etc. required for setting up of solar energy
production projects.
Backsheet and Ethylene Vinyl Acetate sheet used in the manufacture of
photovoltaic cells/modules and specified raw materials used in their
manufacture.
Parts consumed within the factory of production for the manufacture of
non-conventional energy devices.
7.3.4 Gems andJewellery
7.3.5 Electronics/ Hardware
7.3.6 Renewable Energy
Flat copper wire used in the manufacture of Photovoltaic ribbons (tinned
copper interconnect) for use in the manufacture of solar cells/modules.
Machinery, equipments, etc. required for setting up of compressed biogas
plant.
Duty on Polyester Staple Fiber (PSF) and Polyester Filament Yarn (PFY)
manufactured from plastic waste or scrap or plastic waste including waste
Polyethylene Terephthalate bottles (which is already exempt w.e.f. 8 May
2012) being exempted retrospectively w.e.f. 29 June 2010 to 7 May 2012 and
intermediate product Tow arising during the course of manufacture of such
PSF/PFY being exempted retrospectively w.e.f. 29 June 2010 to 10 July
2014.
Duty @2%without CENVATor 6%with CENVATbeing imposed on PSF and
PFY manufactured from plastic waste or scrap or plastic waste including
waste Polyethylene Terephthalate bottles w.e.f. 11 July 2014.
Duty on cigarettes has been increased by
72%for cigarettes of length not exceeding 65 mm
11%to 21%for cigarettes of other lengths. Similar increases are proposed
on cigars, cheroots and cigarillos.
Duty on winding wires of copper has been increased from 10%to 12%.
Basic Duty being increased from 12% to 16% on pan masala, from 50% to
55% on unmanufactured tobacco and from 60% to 70% on jarda scented
tobacco, gutkha and chewing tobacco.
Full exemption from Duty being provided
Goods supplied to National Technical Research Organization.
Security threads and security fibre supplied to Security Paper Mill
Corporation of India Limited and Bank Note Paper Mill India Private
Limited.
Education Cess and Secondary and Higher Education Cess (customs
component) are being exempted on goods cleared by an EOU into the DTA.
The scope of duty exemption to all goods supplied against International
Competitive Bidding is being clarified to the effect that the said exemption is
also available to sub-contractors for manufacture and supply of goods to the
7.3.7 Textile
7.3.8 Others
main contractor (who has won the bid for the project through ICB) for
execution of the said project.
Rule 4(1) [for input credit] and Rule 4(7) [for input service credit] of CCR are
amended effectively from 1 September 2014 in order to fix a time limit of 6
months for availment of CENVATCredit.
Rule 7 of CCR provides for manner of distribution of common input service
credit by Input Service Distributor. Rule 7(d) of CCR was amended to provide
for distribution of common input service credit among all units in their turnover
ratio of the relevant period. However, some interpretational issues raised in
respect of the same have now been clarified that Rule 7 allows distribution of
input service credit to all units (which are operational in current year) in the
ratio of their turnover of the previous year /previous quarter as the case may
be.
Re-credit of CENVAT credit reversed on account of non-receipt of export
proceeds within the specified period or extended period, to be allowed, if
export proceeds are received within 1 year from the period so specified or
extended period. The same can be done on the basis of documents
evidencing receipt of export proceeds.
Electronic Payments of duty has been made mandatory for all assessees
subject to certain exceptions effective from 1 October 2014.
It is proposed to substitute sub rule (3A) of Rule 8 of Central Excise Rules,
2002 to provide in case of default in payment of duty, the assessee shall on
his own pay a penalty of 1%per month on the amount of duty not paid for each
month or part thereof.
It is proposed to provide that in cases where excisable goods are sold at a
price below the manufacturing cost and profit and there is no additional
consideration flowing from buyer to the assessee directly or from third person
on behalf of the buyer, value for assessment of duty shall deemed to be the
transaction value.
Finance Minister gave a push to the Goods and Services Tax and indicated its
7.3.9 Amendments inCCR
7.3.10 Amendments toCentral Excise Rules, 2002
7.3.11 Amendments to Central Excise Valuation (Determination of Price of
Excisable Goods) Rules, 2000
7.4 Goods andService Tax
implementation soon. During his Budget 2014 speech, the Finance Minister
said that it is time to end the confusion over GST.
The Government hopes to bring a conclusion on GST by the end of the year.
"GST will streamline tax administration and result in higher tax collection for
Centre and States. The long pending tax reform, GST, that would subsume
indirect levies such as excise, service and local taxes, has been highlighted
as an important agenda of the Government.
8.1 Investment Environment:
8.1.1 Defence Sector
F D I i n D e f e n c e
manufacturing is proposed
to be raised to 49%from the
present cap of 26% with full
Indian management and
control under FIPB approval
route in order to enhance
domesti c manufacturi ng
capacities.
8.1.2 Insurance Sector
FDI in Insurance sector is proposed to be raised to 49% from the present
cap of 26% with full Indian management and control under FIPB approval
route.
The pending insurance laws (amendment) Bill is proposed to be
immediately brought into effect.
8.1.3 Liberalizationincertainconditions for ConstructionDevelopment
At present, 100%FDI in townships, housing and construction-development
projects is permissible under Automatic Route, subject to fulfillment of
certain conditions. Such conditions are being liberalized to encourage
development of smart cities and facilitate habitation for the neo-middle
class as follows:
l
Minimum built-up area to be developed under each project in case of
construction-development projects is being reduced to 20,000 sq.
mts from 50,000 sq. mts.
l
Minimum capitalization for wholly owned subsidiaries is being
reduced to US$ 5 million from US$ 10 million with a lock-in period of
3 years.
70
CHAPTER 8: OTHER SIGNIFICANT PROPOSALS
Projects which commit at least 30% of the total project cost towards low
cost affordable housing will be exempted from minimum built up area and
capitalisation requirements, with the condition of 3 years lock-in.
Incentives for REITs (pass through for the purpose of taxation) and a
modified REITs type structure for infrastructure projects as Infrastructure
Investment Trusts to attract long term finance from foreign and domestic
sources including the NRIs.
8.1.4 E-commerce Sector
At present, 100% FDI is permissible for manufacturing sector under
automatic route. It is proposed to allow manufacturing sector to sell its
products through retail including E-commerce platforms, without any
additional approval.
8.1.5 Infrastructure Development - Railways
It is proposed to attract private investment in rail infrastructure through
domestic investment. Ministry of Railways would also seek cabinet
approval for allowing FDI in state-owned networks but passenger services
would be excluded.
It is proposed to finance bulk of future projects through PPPmodel.
The Government is considering to set-up a Railway University for both
technical and non-technical subjects and tie up with technical institutions
for introducing railways oriented subject for graduation and skill
development.
8.2 Capital Market Initiatives
Uniform tax treatment for pension fund and mutual fund linked retirement
plans.
Extend a liberalized facility of 5% withholding tax to all bonds issued by
Indian corporates abroad for all sectors and extend the validity of the
scheme to 30 June 2017.
Liberalize the ADR/GDR regime to allow issuance of depository receipts on
all permissible securities.
Introduction of uniform KYC norms and inter-usability of the KYC records
across the entire financial sector.
71
Introduce single operating demat account so that Indian financial sector

consumers can access and transact all financial assets through this one
account.
Complete the ongoing process of consultations with all the stakeholders on
enactment of the Indian Financial Code and reports of the Financial Sector
Legislative Reforms Commission.
Allow international settlement of Indian debt securities.
Revamp the IDR and introduce a much more liberal and ambitious BhDR.
8.3 CertainOther Proposals
All cases of indirect transfers arising out of retrospective amendments will
be scrutinized by a high level committee of CBDT before initiating any
action. Further, the Government will not bring in any retrospective
amendments ordinarily.
High level committee to interact with trade and industry where CBDT /
CBEC to issue appropriate clarification within 2 months wherever required.
Measures to be taken for strengthening the AAR.
The Government shall consider the comments received from the
stakeholders on the revised DTC. The Government will also review the
DTC in its present shape and take a view on the whole matter.
Legislative and administrative changes to sort out pending tax demands for
more than Rs. 4,00,000 crores under dispute and litigation.
Convergence with International Financial Reporting Standards by adoption
of the new Indian Accounting Standards by the Indian Companies
voluntarily for FY2015-16 and mandatorily from FY2016-17.
Slum development to be included in the list of CSR activity to encourage the
private sector to contribute more.
To review revival of SEZs and make them effective instruments of industrial
production, economic growth, export promotion and employment
generation. SEZs to be developed in Kandla and JNPT.
Comprehensive policy to be announced to promote Indian ship building
industry.
72
73
While preserving the public ownership, the capital of banks (in line with
Basel - III norms) will be raised by increasing the shareholding of the people
in a phased manner through sale of shares largely through retail to common
citizens of India.
To establish an Export Promotion Mission to bring all stakeholders under
one umbrella.
To appoint Committee to examine the financial architecture for MSME
sector, remove bottlenecks and create new rules and structures to be set-
up and give concrete suggestion in 3 months.
Scheme for development of new airports in Tier I and Tier II Cities to be
launched for implementation through Airport Authority of India or PPPs.
A green Energy Corridor Project is being implemented to facilitate
evacuation of renewable energy across the country.
Ultra Mega Solar Power Projects in Rajasthan, Gujarat, Tamil Nadu,
Andhra Pradesh and Ladakh to be launched.
To develop additional 15,000 km gas pipelines using PPPmodel, which will
increase usage of gas (domestic as well as imported) and in the long-term
will reduce dependency on any one energy sources.
Banks to be permitted to raise long term funds for lending to infrastructure
sector with minimum regulatory pre-emption such as CRR, SLR and priority
sector lending.
9.1 Gems andJewellery Industry
9.1.1 Key highlights
The Gems and Jewellery industry in India is
one of the worlds largest with its market
size estimated at Rs. 5,67,000 crores
(Exports Rs. 2,13,000 crores and Domestic
Rs. 3,54,000 Crores) for FY 2012-13. The
exports for FY 2013-14 stood at approx.
Rs. 2,10,224 Crores as per the provisional
data released by GJEPC.
The Gems and Jewellery sector has been
playing a very important role in the Indian economy and Gems and Jewellery
exports contribute for more than 15%of Indias total exports.
India is one of the largest consumers of gold ( 975 tons for FY 2012-13)
accounting for more than 20%of the worlds gold consumption, most of which
are used in the manufacture of jewellery.
The industry is a major contributor towards the countrys foreign exchange
earnings.
The industry is also one of the largest employment providers in India.
Personal income tax exemption limit increased by Rs. 50,000 i.e. from Rs.
2,00,000 to Rs. 2,50,000 in the case of individual taxpayers who are below
the age of 60 years. Similarly, the exemption limit in case of senior citizens
increased from Rs. 2,50,000 to Rs. 3,00,000. This shall benefit the
employees / workers, as the industry is highly labour intensive.
Increase in investment limit for claiming deduction under section 80C of the
IT Act from Rs. 1,00,000 to Rs. 1,50,000 and increase in deduction limit on
account of interest on loan in respect of self-occupied house property from
Rs. 1,50,000 to Rs. 2,00,000. This shall result into benefit of tax savings to
the employees / workers, as the industry is highly labour intensive.
Repatriation of dividends from foreign companies to Indian companies (in
which it has shareholding of 26%or more) to be continued at a lower tax rate
of 15%without any sunset date.
Disallowance of expenses for failure to deduct and pay tax on specified
9.1.2 Positive proposals / impact

CHAPTER 9 : IMPACT ON SELECT INDUSTRIES
payments to residents restricted to 30% of such payments instead of 100%
disallowance.
AAR scope expanded to resident taxpayers with some threshold.
Introduction of roll-back provision in the APAscheme so that an APAentered
into for future transactions is also applicable to international transactions
undertaken in the previous 4 years in the specified circumstances.
The range concept to be introduced for determination of ALP under the TP
regulations.
Manufacturing units having FDI are now allowed to sell their products through
retail including E-commerce platforms. This shall enable Gems and Jewellery
companies having FDI to sell diamonds or jewellery through own or third party
e-commerce platforms.
Pre-forms of precious and semi-precious stones exempted from BCD.
Unbranded articles of precious metals exempted from excise duty for the
period 1 March 2011 to 16 March 2012.
The variance level and the parameter of measurement in respect of re-import
of cut and polished diamonds has been changed from height and
circumference ( 0.01 mm) to diameter for round shape diamonds (
0.05mm) and length and breadth for diamonds of other shapes ( 0.07mm).
The allowable variance in weight ( 1 cent) remains unchanged.
The scope of disallowance of expenditure for non-deduction of tax has been
extended to all expenditure on which tax is deductible.
Expenditure on CSR as referred to in section 135 of the CompaniesAct, 2013
not to be allowed as deduction under section 37 of the ITAct.
provisions of computing DDT on net dividends resulting into effective DDT
rate of 20.47%.
It is proposed to provide that an unlisted security and units of Mutual Funds
(other than equity oriented funds) be treated as short term capital assets if it is
held for not more than 36 months as against existing period of not more than
12 months.
BCD on half-cut or broken diamonds increased from NILto 2.5%. BCD on cut
and polished diamonds and coloured gemstones increased from 2%to 2.5%.
However, rough diamonds continue to be levied at NILrate of duty.
The period of limitation for Cenvat Credit or refund has been reduced from 1
year to 6 months, which shall impact the refund of service tax paid by Gems
and Jewellery companies on input services.
9.1.3 Negative proposals / impact

9.2 Entertainment AndMedia Industry
9.2.1 Key highlights
The Indi an Medi a and

Ent er t ai nment ( M&E )
industry is a Rs. 91,800
crores industry reporting an
annual growth of 11.8% in
2013.
The M&E industry broadly
comprises Television, Films, Print, Electronic Media, Radio, Music,
Animation, Digital Advertising, Gaming, etc. Each of these segments has
their own impact on the masses.
Paradigm shift in Indian consumers lifestyles coupled with rising disposable
incomes has led to the increased importance of this industry. The Indian M&E
industry is the fastest growing industry and is expected to grow at CAGR of
14.2 %by 2018.
Increase in investment limit for claiming deduction under section 80C of the IT
Act from Rs. 1,00,000 to Rs. 1,50,000.
of 15%without any sunset date.
payments to residents restricted to 30% of such payments instead of 100%
disallowance.
AAR scope expanded to resident taxpayers with some threshold.
Colour picture tube used in cathode ray televisions exempted from Customs
Duty, and BCD on LCD and LED TV panels below 19 inches reduced from
present 10%to Nil.
The scope of disallowance under section 40(a)(ia) of the IT Act has been
Expenditure on CSR as referred in section 135 of the Companies Act, 2013
provisions of computing DDT on net dividends resulting into effective DDT
rate of 20.47%.
held for not more than 36 months as against the existing period of not more
than 12 months.
Service tax levy to include the activity of sale of space or time in online or
mobile segments.
Indias IT and ITeS services industry
with its exponential growth over the past
years is an unique export-led success
story which has put India on the global
map.
Indian IT and ITeS industry is divided
into four major segments IT services, business process management
(BPM), software products and engineering services and hardware. CRISIL
Research expects the ITeS industrys export revenues to grow by 12%in FY
2014-15 and the domestic ITeS market is expected to grow at 12%to 13 %in
FY2014-15.
The revenues of the IT-BPM sector is around US$ 105 billion registering a
growth of 10.3%in FY2013-14.
It is also a provider of skilled employment both in India and abroad,
generating direct employment for nearly 3.1 million workers and indirect
employment for around 10 million workers in FY2013-14.
Act from Rs. 1,00,000 to Rs. 1,50,000.
9.3 InformationTechnology andITeS Industry

9.3.1 Key highlights:
9.3.2 Positive proposals / impact:

of 15%without any sunset date
payments to residents restricted to 30%of such payments instead of 100%
disallowance.
Introduction of roll-back provision in the APAscheme so that an APAentered
into for future transactions is also applicable to international transactions
undertaken in the previous 4 years in the specified circumstances.
The range concept to be introduced for determination of ALP under the
transfer pricing regulations.
AAR scope to be expanded to resident taxpayers with some threshold.
provisions of computing DDT on net dividends resulting into effective rate of
DDTof 20.47%.
12 months.
Infrastructural development mirrors the overall health of a nations economy.
The infrastructure sector accounts for 26.7%of India's industrial output.
The Planning Commission has projected that investment in infrastructure
would almost double at US$ 1,025 billion in the Twelfth Five Year Plan (2012-
17). The value of total roads and bridges infrastructure in the country is
projected to grow at a CAGR of 17.4% over FY 201217. The total
approximate earnings of the Indian Railways on originating basis during FY
201314 were Rs 140,485.02 crore (US$ 23.34 billion) as against Rs
121,831.65 crore (US$ 20.25 billion) during FY201213.
9.3.3 Negative proposals / impact:
9.4 Real Estate AndInfrastructure Industry:
9.4.1 Key highlights:
Twelfth Five Year Plan (2012-17). The value of total roads and bridges
infrastructure in the country is projected to grow at a CAGR of 17.4%over FY
201217. The total approximate earnings of the Indian Railways on
originating basis during FY 201314 were Rs 140,485.02 crore (US$ 23.34
billion) as against Rs 121,831.65 crore (US$ 20.25 billion) during FY
201213.
According to the data released by DIPP, the construction development sector
(including townships, housing, built-up infrastructure and construction-
development projects) attracted total FDI worth US$ 22,994.20 million in the
period April 2000 to December 2013. Construction (infrastructure) activities
during the period received FDI worth US$ 2,352.64 million.
In the next 10 years, FDI in the sector is expected to increase to US$ 25
billion.
The sector is the second largest employer after agriculture and is slated to
grow at 30%over the next decade.
Act from Rs. 1,00,000 to Rs. 1,50,000 and increase in deduction limit on
account of interest on loan in respect of self-occupied house property from
Rs. 1,50,000 to Rs. 2,00,000. This shall result into benefit of tax savingstothe
Requirement of built-up area and capital conditions for FDI to be reduced
from 50,000 square meters to 20,000 square meters and US$ 1,00,00,000 to
US$ 50,00,000 respectively for development of smart cities.
Slum development to be a part of CSR activity.
increased from Rs. 2,50,000 to Rs. 3,00,000. This shall benefit the
Conducive tax regime prescribed for Infrastructure Investment Trusts and
Real Estate Investment Trusts to be set up in accordance with regulations of
SEBI.
Banks will be allowed to give long-term loans to infrastructure.
Scheme for development of airports in Tier I and Tier II cities through AAI or
PPP.
SEZs to be developed in Kandla and JNPT.
Building smart cities and "Housing for All by 2022" is on the priority list of the

new government. These new satellite cities and smart metros will help kick
start these cities by proving empoyment and boost the real estate sector.
An investment of an amount of Rs. 37,880 crores in NHAI and state roads is
proposed.
Any advance money retained or received in the course of negotiations for
transfer of a capital asset to be included in the total income.
provisions of computing DDT on net dividends resulting into effective rate of
DDTof 20.47%.
12 months.
Exemption from service tax on renting of immovable property service
provided to Educational Institutes has been withdrawn w.e.f. 11 July 2014.
Valuation of works contract with respect to maintenance, repair, completion
and finishing services such as glazing, plastering, floor and wall tiling,
installation of electrical fitting of an immovable property, for the purposes of
charging Service Tax has been enhanced to 70% (from 60%) of the total
amount charged for the works contract w.e.f. 1 October 2014.

One of the major hurdles faced by
businesses, while operating on an
international scale, is the complexity of
taxation systems existing in various
jurisdictions. India being a major player in
the world market has entered into
comprehensive DTAAs with almost 87
countries in order to mitigate the taxation
complexities and to facilitate international
business transactions. In this chapter, we have compiled the tax rates in respect of
Dividend, Interest, Royalty and Fees for Technical Services, based on the DTAAs
entered into by India with various countries.
Sr.
No.
Country Dividend
[Note 1]
Interest Royalty FTS Remarks
Tax rate Tax rate Tax rate Tax rate
CHAPTER 10 : DTAA RATES
(As updated up to the Finance (No.2) Bill, 2014)
Rate as per ITAct Nil [Note 1] 20%[Note 6] 25%[Notes 25%[Notes Rate as per IT Act (
3 and 6] 3 and 6] increased by applicable surcharge
and education cess) or DTAA rate,
whichever is more beneficial shall
apply.
1. Albania 10% 10%[Note 4] 10% 10%
2. Armenia 10% 10%[Note 4] 10% 10%
3. Australia 15% 15% Note 5 Covered
under
Article for
Royalty
4. Austria 10% 10%[Note 4] 10% 10%
5. Bangladesh 10%/ 15% 10%[Note 4] 10% No 10%tax on dividends if at least 10%of
separate the capital is owned by company; in
provision any other case 15%.
6. Belarus 10%/ 15% 10%[Note 4] 15% 15% 10%tax on dividends if at least 25%of
the shares are owned by company; in
any other case 15%.
7. Belgium 15% 15%/ 10% 10% 10% 1. Interest taxable at 10%if recipient is
bank; in any other case 15%.
2. MFN clause with respect to Royalty
and FTS.
8. Botswana 7.5%/ 10% 10%[Note 4] 10% 10% 7.5%tax on dividends if at least 25%of
the capital is owned by company; in
any other case 10%.
to be further
81
Sr.
No.
Country Dividend
[Note 1]
9. Brazil 15% 15%[Note 4] 15%(25% Covered 15%tax on dividends if paid to a
for under company; in any other case as per
trademark) Article for domestic tax laws.
Royalty
10. Bulgaria 15% 15%[Note 4] 15%/ 20% 20% 15% tax on royalties if relating to
copyrights of literary, artistic or
sci ent i f i c wor ks, ot her t han
cinematograph films or films or tapes
used f or r adi o or t el evi si on
broadcasting; in any other case 20%.
11. Canada 15%/ 25% 15%[Note 4] Note 5 Note 5 15%tax on dividends if at least 10%of
the voting power is owned by
company; in any other case 25%.
12. China 10% 10%[Note 4] 10% 10%
13. Cyprus 10%/ 15% 10%[Note 4] 15% 15%/ 10% 1. 10%tax on dividends if at least 10%
of the shares are owned by
2. Technical Fees are taxable @10%
under Article 13 and Fees for
Included Services is chargeable
@15%under Article 12.
14. Czech Republic 10% 10%[Note 4] 10% 10%
15. Denmark 15%/ 25% 15%/ 10% 20% 20% 1. 15%tax on dividends if at least 25%
[Note 4] of the shares are owned by
2. Interest taxable at 10%if recipient is
16. Estonia 10% 10%[Note 4] 10% 10%
17. Ethiopia 7.5% 10%[Note 4] 10% 10%
18. Finland 10% 10%[Note 4] 10% 10% MFN clause with respect to Dividend,
Interest, Royalty and FTS.
19. France 10% 10%[Note 4] 10% 10% MFN clause with respect to Dividend,
20. Georgia 10% 10%[Note 4] 10% 10%
21. Germany 10% 10%[Note 4] 10% 10%
22. Greece Taxable as per domestic laws in No
source country separate
provision
23. Hungary 10% 10%[Note 4] 10% 10% MFN clause with respect to Dividend,
24. Indonesia 10%/ 15% 10%[Note 4] 15% No 1. 10%tax on dividends if at least 25%
separate of the shares are owned by
provision company; in any other case 15%.
82 RSM Astute Consulting
Sr.
No.
Country Dividend
[Note 1]
83
2. The tax rates on dividend income,
royalties and FTS (In the earlier
DTAA, no separate provision for
FTS) have been reduced to 10%
but the same is yet to be notified.
25. Iceland 10% 10%[Note 4] 10% 10%
26. Ireland 10% 10%[Note 4] 10% 10%
27. Israel 10% 10%[Note 4] 10% 10% MFN clause with respect to Dividend,
28. Italy 15%/ 25% 15%[Note 4] 20% 20% 15%tax on dividends if at least 10%of
any other case 25%.
29. Japan 10% 10%[Note 4] 10% 10%
30. Jordan 10% 10%[Note 4] 20% 20%
31. Kazakhstan 10% 10%[Note 4] 10% 10% MFN clause with respect to Dividend,
32. Kenya 15% 15%[Note 4] 20% No 17.50% tax in case of Management
separate and Professional fees.
provision
33. Korea 15%/ 20% 15%/ 10% 15% 15% 1. 15%tax on dividends if at least 20%
[Note 4] of the capital is owned by company;
in any other case 20%.
34. Kuwait 10% 10%[Note 4] 10% 10%
35. Kyrgyz Republic 10% 10%[Note 4] 15% 15%
36. Latvia 10% 10%[Note 4] 10% 10%
37. Libya Taxable as per domestic laws in No
source country separate
provision
38. Lithuania 5%/15% 10% 10% 10% 5% tax on dividends if at least 10% of
the shares are beneficially owned by
company (other than a partnership); in
any other case 15%.
39. Luxembourg 10% 10%[Note 4] 10% 10%
40. Malaysia 5% 10%[Note 4] 10% 10%
41. Malta 10%/ 15% 10%[Note 4] 15% 15%/ 10% 1. 10%tax on dividends if at least 25%
2. FTS, ancillary and subsidiary to
Royalty under Article 12, are
taxable @10%under Article 13 and
Fees for Included Services is
chargeable @15%under Article 12.
Sr.
No.
Country Dividend
[Note 1]
42. Mauritius 5%/ 15% Taxable as per 15% No 5%tax on dividends if at least 10%of
domestic laws separate the capital is owned by company; in
[Note 4] provision any other case 15%.
43. Mongolia 15% 15%[Note 4] 15% 15%
44. Montenegro 5%/ 15% 10%[Note 4] 10% 10% 5% tax on dividends if at least 25% of
the capital is owned by company
(other than a partnership); in any other
case 15%.
45. Morocco 10% 10%[Note 4] 10% 10%
46. Mozambique 7.5% 10%[Note 4] 10% No
separate
provision
47. Myanmar 5% 10%[Note 4] 10% No
separate
provision
48. Namibia 10% 10%[Note 4] 10% 10%
49. Nepal [5%/10%] [10%] [Note 4] 15% No 1. 5% tax on dividends if at least 10%
separate of the shares are owned by
2. MFN clause with respect to Royalty,
if Nepal enters into treaty with a
lower rate
50. Netherlands 10% 10%[Note 4] 10% 10% MFN clause with respect to Dividend,
51. New Zealand 15% 10%[Note 4] 10% 10%
52. Norway 10 % 10 %[Note 4] 10% 10%
53. Oman 10%/ 12.5% 10%[Note 4] 15% 15% 10%tax on dividends if at least 10%of
any other case 12.5%.
54. Philippines 15%/ 20% 15%/ 10% 15% No 1. 15%tax on dividends if at least 10%
[Note 4] separate of the shares are owned by
2. Interest taxable @ 10% if recipient
is FI (including an insurance
c ompany ) and wher e t he
interest is payable by a company
resident of Philippines to a resident
of India in respect of public issues of
bonds, debentures or similar
obligations; in any other case 15%.
3. Royalty taxable @ 15% if it is
payable in pursuance of any
collaboration agreement approved
by the Government of India. No
rates prescribed in any other case.
55. Poland 15% 15%[Note 4] 22.5% 22.5%
84
Sr.
No.
Country Dividend
[Note 1]
56. Portuguese 10%/ 15% 10%[Note 4] 10% 10% 10%tax on dividends if at least 25%of
Republic the capital stock is owned by company
for an uninterrupted period of 2 years
prior to the payment of dividend; in any
other case 15%.
57. Qatar 5%/ 10%. 10%[Note 4] 10% 10% 5% tax on dividends if at least 10% of
any other case 10%.
58. Romania 10% 10%[Note 4] 10% 10%
59. Russian Federation 10% 10%[Note 4] 10% 10%
60. Saudi Arabia 5% 10%[Note 4] 10% No
separate
provision
61. Serbia 5%/ 15% 10%[Note 4] 10% 10% 5% tax on dividends if at least 25% of
case 15%.
62. Singapore 10%/ 15% 10%/ 15% 10% 10% 1. 10%tax on dividends if at least 25%
bank or similar FI including
an i nsur ance company; i n
any other case 15%.
63. Slovenia 5%/ 15% 10%[Note 4] 10% 10% 5% tax on dividends if at least 10% of
the capital is owned by company; in
any other case 15%.
64. South Africa 10% 10%[Note 4] 10% 10%
65. Spain 15% 15%[Note 4] 10% 10% 1. 10% tax on royalties if paid for the
use or right to use any industrial,
commercial or scientific equipment;
in any other case 20%.
2. MFN clause with respect to Royalty
and FTS.
66. Sri Lanka 7.5% 10%[Note 4] 10% 10%
67. Sudan 10% 10%[Note 4] 10% 10%
68. Sweden 10% 10%[Note 4] 10% 10% MFN clause with respect to Dividend,
69. Swiss 10% 10%[Note 4] 10% 10% MFN clause with respect to Dividend,
Confederation Interest, Royalty and FTS.
70. Syria 5%/ 10% 10%[Note 4] 10% No 5% tax on dividends if at least 10% of
separate the shares are owned by company
provision (other than a partnership); in any other
case 10%.
85
Sr.
No.
Country Dividend
[Note 1]
71. Tajikistan 5%/ 10%. 10%[Note 4] 10% No 5%tax on dividends if at least 25%of
separate the capital is owned by company (other
provision than a partnership); in any other case
10%.
72. Tanzania 5%/10% 10%[Note 4] 10% No 5% tax on dividends if at least 25%of
separate the shares are beneficially owned by
73. Thailand 15%/ 20% 25%/ 10% 15% No 1. 15%tax on dividends if at least 10%
[Note 4] separate of the voting shares are owned by
provision payee company and the payer is an
industrial company, 20% if payer
company is an industrial company
or the payee company owns at least
25%of the voting shares; and in any
other case as per the domestic laws
of the payer company.
any FI including an insurance
74. Trinidad and 10% 10%[Note 4] 10% 10%
Tobago
75. Turkey 15% 10%/15% 15% 15% Interest is taxable at 10%if recipient is
[Note 4] bank, insurance company or similar
FI in any other case 15%.
76. Turkmenistan 10% 10%[Note 4] 10% 10%
77. Uganda 10% 10% [Note 4] 10% 10%
78. Ukraine 10%/ 15% 10%[Note 4] 10% 10% 10%tax on dividends if at least 25%of
case 15%.
79. United Arab 10% 5%/ 12.5% 10% No Interest taxable at 5% if recipient is
Emirates [Note 4] separate bank or similar financial institution; in
provision any other case 12.5%.
80. United Arab As per As per Taxable in No
Republic (Egypt) domestic law domestic law source separate
country as provision
per
domestic
tax rate
81. United Kingdom 15%/ 10% 15%/ 10% Note 5 Note 5 1. Interest taxable at 10%if recipient is
[Note 4] bank; in any other case 15%.
2. Dividend taxable at 15% where
dividend is paid out of income
derived directly or indirectly from
immovable property; in other case
10%.
86
Sr.
No.
Country Dividend
[Note 1]
82. United Mexican 10% 10% 10% 10%
States [Note 4]
83. United States of 15%/ 25% 10%/ 15% Note 5 Note 5 1. 15%tax on dividends if at least 10%
America [Note 4] of the voting stock is owned by
bonafide bank or FI including an
insurance company; in any other
case15%.
84. Uruguay 5% 10%[Note 4] 10% 10%
85. Uzbekistan 15%[10%] 15%[10%] 15%[10%] 15%[10%] 1. Rates provided in bracket are
[Note 4] applicable from FY 2013-14.
2. Interest received from transaction
approved by source countrys
government will be exempt. In any
other case, normal provisions of
domestic law will apply.
86. Vietnam 10% 10% 10% 10%
[Note 4]
87. Zambia 5%/ 15% 10% 10% 10% 1. 5%tax on dividends if at least 25%
[Note 4] of the shares are owned by company
duri ng a peri od of 6 months
immediately preceding the date of
payment of dividend; in any other case
15%.
NewDTAAs signedbut not yet notified
88. Colombia 5% 10% 10% No Press release dated 13 May 2011.
87
Notes:
1. As per section 115-O of the IT Act, subject to certain exceptions, any amount declared,
distributed or paid by a domestic company by way of dividend shall be chargeable to DDT
@16.995%which further needs to be grossed up. In such cases, dividend distributed (which is
subject to DDT) is not subject to any withholding tax and is tax exempt in the hands of the
recipient shareholders in India. The rates mentioned in the Table are applicable to dividend other
than the dividend declared, distributed or paid by Indian companies on which DDT is applicable.
[Such as deemed dividend under Section 2(22)(e) of the ITAct.]
2. Unless otherwise provided in the DTAA, both the States have right to tax.
3. With effect from FY2013-14, the rate of tax under the ITAct on Royalty and/or FTS receivable by
a non-resident is increased to 25% (plus applicable Surcharge and Education Cess) by the
Finance Act, 2013. As per section 90(2) of the IT Act, tax rate as per the provisions of DTAA or
the ITAct, whichever is beneficial to the assessee, shall apply. For availing the benefit of DTAA,
furnishing of TRC and self declaration in Form 10Fby the payee shall be mandatory.
4. Interest derived and beneficially owned by the Government, a political sub-division or a local
authority or certain institutions like the RBI or Central Bank of other State or any other institution
as may be agreed upon is exempt from taxation in the country of source.
5. Tax rate is 10% in case of Royalties for equipment rental and fees for services ancillary or
subsidiary thereto. For other cases, the tax rate is 15%. However, for first 5 years of the
agreement, the rate is 20%in case of payer other than Government or specified institution and
15%for the subsequent years.
6. In case, the payee is not able to furnish his PAN to the payer, tax shall be deducted at the higher
of the following rates (i) rate specified in the relevant provisions of the ITAct or (ii) at the rate or
rates in force or (iii) at the rate of 20%.
88
CHAPTER 11 : TDS RATES
(As updated up to the Finance (No. 2) Bill, 2014)
In this chapter, we have compiled the
relevant provisions of TDS relating to
r es i dent s and non- r es i dent s ,
incorporating herein the nature of
payment, threshold limits for tax
deduction and the applicable rates of
TDS for different classes of recipients.
Sr.
No.
Nature of Payment Section Proposed
threshold for
deduction w.e.f.
1 April 2014
Rate at
which Tax
is to be
deducted
[Note 1]
Existing threshold
for deduction
Proposed
rate at
which Tax
is to be
deducted
89
1. Salary 192 As per slab rates prescribed for senior citizens
(includes very senior citizens) and other individuals.
2a. Interest other than 194A Payment in excess of 10% Payment in excess of 10%
interest on securities Rs. 5,000 / Rs. 10,000 Rs. 5,000 / Rs. 10,000
[Notes 2 and 3] p.a. p.a.
2b. Interest on Securities 194A Payment in excess of 10% 10%
including listed Rs. 5,000 for interest
debentures on debentures
Payment in excess of
Rs. 10,000 for interest
on 8% savings
(Taxable) Bonds,
2003
3. Winnings from lottery or 194B Payment in excess 30% Payment in excess 30%
crossword puzzle or of Rs. 10,000 of Rs. 10,000
card game or other game
4. Winnings from 194BB Payment in excess 30% Payment in excess 30%
horse race of Rs. 5,000 of Rs. 5,000
5. Payments to 194C Payment in excess of 2% (1% for Payment in excess of 2% (1% for
contractors Rs. 30,000 per contract individual Rs. 30,000 per contract individual
[Note 3 and 4] or Rs. 75,000 p.a. in and HUFs) or Rs. 75,000 p.a. in and
aggregate aggregate HUFs)
6. Insurance commission 194D Payment in excess 10% Payment in excess 10%
of Rs. 20,000 of Rs. 20,000
7. Commission or 194H Payment in excess 10% Payment in excess 10%
brokerage [Note 3] of Rs. 5,000 p.a. of Rs. 5,000 p.a.
8. Payment to non-resident 194E No threshold 20% No threshold 20%
sportsmen / entertainer /
sports association
9. Payment in respect of 194EE Payment in excess of 20% Payment in excess 20%
deposits under National Rs. 20,000 Rs. 20,000
Savings Scheme, 1987
90
Sr.
No.
Nature of Payment Section Proposed
threshold for
deduction w.e.f.
1 April 2014
Rate at
which Tax
is to be
deducted
[Note 1]
Existing threshold
for deduction
Proposed
rate at
which Tax
is to be
deducted
10a. Rent of Land / Building / 194I
Furniture or fitting [Note3] of Rs. 1,80,000 p.a. of Rs. 1,80,000 p.a.
10b. Rent of Plant, Machinery 194I Payment in excess 2% Payment in excess 2%
or Equipment [Note 3] of Rs. 1,80,000 p.a. of Rs. 1,80,000 p.a.
11. Fees for professional and 194J Payment in excess 10% Payment in excess 10%
technical services / of Rs. 30,000 p.a. of Rs. 30,000 p.a.
royalty / remuneration to
Director other than salary
[Notes 3 and 5]
12. Payment / credit of 194IA Property in excess of 1% Payment in excess 1%
consideration to a Rs. 50,00,000 of Rs. 50,00,000
resident transferor of any
immovable property
13. Payment to non-resident 195 As per the rate in force or rate specified in the relevant DTAAs,
of sum chargeable to tax whichever is beneficial [Note 6]
in India
Payment in excess 10% Payment in excess 10%
Notes:
1. Higher TDS rate of 20%for not furnishing correct PAN: In case the payee is not able to
furnish his / her PAN to the payer, tax shall be deducted w.e.f. 1 April 2010 at higher of
the rates specified in the relevant provision of the ITAct or the rates in force or 20%.
2. Under section 194Aof the ITAct, the threshold limit is Rs.10,000 where the payer is a
banking company or a co-operative society engaged in banking business, or in case of
deposits with post office under a scheme notified by Central Government and Rs.
5,000 in any other cases. Further, tax is not to be deducted, if the payee furnishes to the
payer a declaration in writing in duplicate in Form No.15Gor 15H, as the case may be.
3. An individual or HUF is not liable to deduct tax. However, an individual or HUF, who is
liable to tax audit under section 44AB during the financial year immediately preceding
the financial year in which sum is credited or paid, shall be liable to deduct tax under
sections 194A, 194C, 194H, 194I and 194J, as the case may be.
4. No tax is required to be deducted at source on credit or payment of transport charges, if
the transporter furnishes a valid PAN.
5. Tax is required to be deducted on remuneration paid to a director which is not in the
nature of salary.
6. For the purpose of claiming DTAA benefit, the payee shall furnish PAN as per
provisions of section 206AAand also a valid Tax Residency Certificate (TRC) from its
resident country and self declaration in Form No. 10F.
7. As per CBDT circular no. 1 of 2014 dated 13 January 2014, it has been clarified that a
payer shall not be required to deduct TDS on service tax component wherever in terms
of the agreement between the payer and payee, the service tax component comprised
in the amount payable to a resident payee is indicated separately.
CHAPTER 12 : DIRECT TAX AND
SERVICE TAX COMPLIANCE CALENDAR
(As updated up to the Finance (No. 2) Bill, 2014)
In this chapter, we have provided an overview of the
various direct tax and service tax compliances from the
perspective of a Company, Partnership Firm (including
LLP), Individual and HUF.
91
I. Due dates for filing of Return of Income (ROI), Return of Wealth
and Transfer Pricing (Notes 1 and 2)
Person covered under tax audit
(other than those to whom transfer pricing is applicable)
Person covered under transfer pricing 30 November
Other persons 30 September 31 July 31 July (Note 2)
II. Advance Tax Payments for Income Tax (Note 3)
1st Installment - on or before 15 June 15% Not Applicable Not Applicable
2nd Installment - on or before 15 September 45% 30% 30%
3rd Installment - on or before 15 December 75% 60% 60%
4th Installment on or before 15 March 100% 100% 100%
III. Tax Deducted at Source (TDS)
Tax must be deducted at the time of payment,
in case of salary
In case of payments other than salary, at the time
of making payment or credit, whichever is earlier
Tax deducted must be deposited in the bank by 7th day
of following month except tax deducted for payment
or credit made in March must be deposited by 30 April
IV. Tax Collected at Source (TCS)
Tax must be collected at the time of receipt or debit,
whichever is earlier
Tax collected must be deposited within one week from
the last day of the month in which the collection is made.
V. Due dates for filing of TDS / TCS Returns
For quarter ended June 15 July
For quarter ended September 15 October
For quarter ended December 15 January
For quarter ended March 15 May
VI. Due dates for issue of Form16 (for Salaries) / Form16A (for other than Salaries) and Form27D (For TCS)
(Note 4)
Issue of Form 16 annually 31 May
Issue of Form 16A / 27D for quarter ended June 30 July
Issue of Form 16A / 27D for quarter ended September 30 October
Issue of Form 16A / 27D for quarter ended December 30 January
Issue of Form 16A / 27D for quarter ended March 30 May
(ROW), obtaining Tax Audit Report
30 September
Nature of Compliances
Company Partnership
Firm / LLP
Individual
and HUF
Person
person is covered
Applicable under tax audit
in the preceding
previous year
Applicable, only if
person is covered
Applicable under tax audit
in the preceding
previous year
Applicable, only if
DIRECT TAX COMPLIANCE CALENDAR
92
VII. Due date of submission of Statement under section 285 of the IT Act
Non-resident having liaison office in India to Within 60 days
file statement in Form 49C from the end of financial year
VIII. Due date for filing Statement under section 285BA of the IT Act
Specified persons to furnish Statement in respect of 31 August
specified financial transactions
IX. Due dates for filing of appeals before the income-tax appellate authorities
Objections before the Dispute Resolution Panel Within 30 days from the receipt
of the draft assessment order
Appeal to the Commissioner of Income-tax (Appeals) Within 30 days from the date of service of notice
of demand or the relevant order sought to be
appealed against
Appeal to the Income-tax Appellate Tribunal (Note 5) Within 60 days from the date on which order
sought to be appealed against is communicated
Nature of Compliances
Company Partnership
Firm / LLP
Individual
and HUF
Person
Notes:
1 Only Companies, Individuals and HUFs are required to file ROW.
2. In case of working partner of a partnership firm, whose accounts are required to be
audited under section 44AB of the ITAct, the date of filing of ROI is 30 September.
3. Advance tax payment for income-tax is applicable to every person where the amount
of income-tax payable is Rs.10,000 or more.
4. Every person, being a non-resident having Liaison Office in India shall, in respect of
its activities in a financial year, file a statement in Form No. 49C within 60 days from
the end of the financial year i.e. 30 May to the Assessing Officer.
5. Memorandum of cross objection is to be filed within 30 days from the receipt of notice
intimating that the appeal has been preferred before the Tribunal, against any part of
the order under appeal, if required.
6. Dividend Distribution Tax under section 115O of the IT Act must be paid within 14
days from the date of declaration, distribution, or payment of dividend, whichever is
earlier.
Due date for payment of Service Tax
1
For Individual, partnership firm and LLP By 6th of the following month for every quarter
1
For Others (Companies, Trusts, HUF, AOP, Societies, etc.) By 6th of the following month for every month
Interest on late payment of Service Tax
Gross Value of taxable services in preceding FY is 18% p.a. - first 6 months
2
Rs. 60,00,000 or above 24% p.a. - delay beyond 6 months up to 1 year
30% p.a. - delay beyond 1 year
Filing of Service Tax returns
3
April to September 25 October
4
October to March 25 April
5
Late fees for delay in filing of returns
For delay up to 15 days Rs. 500
For delay beyond 15 days up to 30 days Rs. 1,000
6
For delay beyond 30 days Rs. 1,000 + Rs. 100 per day
Due date for filing of appeal
Appeal to be filed before Commissioner of Central Within 2 months from date of receipt of the order. The
Excise (Appeals) against order of adjudication authority Commissioner of Central Excise (Appeals) has the
subordinate to Commissioner of Central Excise power to condone delay in filing of appeal for a further
period of one month provided sufficient cause is shown
for non-filing the appeal within stipulated period of 2
months.
Appeal to be filed before Customs, Excise and Service Within 3 months from date of receipt of the order.
TaxAppellate Tribunal (CESTAT) against order of CESTAT has powers to condone the delay in filing of
Commissioner of Central Excise or Commissioner of appeal if it is satisfied that there was sufficient cause for
Central Excise (Appeals) not presenting the appeal within the stipulated period.
93
Particulars
Due dates/quantum of
interest and late filing fees
Notes:
1. The due date for payment of Service Tax for the month or quarter ended on 31 March
is 31 March itself.
2. For Service provider having turnover below Rs. 60,00,000 in the preceding financial
year, the specified rate shall be reduced by 3%.
3. The due date for filing of Service Tax returns for the period April to September for
Input Service Distributor is 30 October.
4. The due date for filing of Service Tax returns for the period October to March for Input
Service Distributor is 30 April.
5. In case Service Tax is NIL, the authority may waive the late filing fees on being
satisfied that there is sufficient reason for not filing the return.
6. Maximum late filing fees shall not exceed Rs. 20,000
7 . The following categories of person must mandatorily obtain Service Tax Registration
and comply with the provisions:
l
Every person liable to pay Service Tax;
l
An Input Service Distributor;
l
Every provider of Taxable Service whose aggregate value of taxable service
in financial year exceeds Rs. 9,00,000.
SERVICE TAX COMPLIANCE CALENDAR
AAI AirportsAuthority of India
AAR Authority for Advance Ruling
ADR American Depository Receipt
AE Associated Enterprise
ALP ArmsLength Price
AMT Alternate Minimum Tax
AO Assessing Officer
AOP Association of Persons
APA Advance Pricing Agreement
AY Assessment Year
BCD Basic Customs Duty
BhDR Bharat Depository Receipt
BOI Body of Individuals
BSE Bombay Stock Exchange
CAGR Compounded Average Growth Rate
CBDT Central Board of Direct Taxes
CBEC Central Board of Excise and Custom
CIF Cost Insurance and Freight
CCR Cenvat Credit Rules
CIT Commissioner of Income Tax
CPI Consumer Price Index
CRR Cash Reserve Ratio
CSR Corporate Social Responsibility
CTT Commodities Transaction Tax
CVD Additional Duty of Customs levied under
section 3(1) of the CustomsTariff Act, 1975
DDT Dividend Distribution Tax
DIPP Department of Industrial Policy and
Promotion
DRP Dispute Resolution Panel
DSIR Department of Scientific & Industrial
Research
DTA Domestic Tariff Area
DTC Direct Taxes Code
DTAA Double Taxation Avoidance Agreement
ECB External Commercial Borrowing
EOU Export Oriented Unit
FC Factor Cost
FDI Foreign Direct Investment
FI Financial Institutions
FII For ei gn I ns t i t ut i onal I nv es t or s /
Foreign Institutional Investments
FIPB Foreign Investment Promotion Board
FTS Fees for Technical Services
FTZ Free Trade Zone
FY Financial Year
GAAR General Anti Avoidance Rules
GDP Gross Domestic Product
GDR Global Depository Receipt
GJEPC Gems and Jewellery Export Promotion
Council
GST Goods and Services Tax
HUF Hindu Undivided Family
IDR Indian Depository Receipt
IIM Indian Institute of Management
IIT Indian Institute of Technology
IPO Initial Public Offer
IT Information Technology
ITeS Information Technology enabled Services
ITAct Income-taxAct, 1961
ABBREVIATIONS
ITAT Income TaxAppellate Tribunal
JNPT Jawaharlal Nehru Port Trust
KYC Know Your Customer Guidelines
LLP Limited Liability Partnership
MFN Most Favoured Nation
MRP Maximum Retail Sale Price
MMR Maximum Marginal Rate
MAT Minimum Alternate Tax
MRO Maintenance Repair and Overhaul
MSME Micro, Small and Medium Enterprises
NABARD National Bank for Agriculture and Rural
Development
NASSCOM The National Association of Software and
Services Companies
NCCD National Calamity Contingent Duty
NGO Non-Government Organisation
NHAI National HighwayAuthority of India
NRI Non-Resident Indian
OCB Overseas Corporate Bodies
PAN Permanent Account Number
PIO Person of Indian Origin
PPP Public Private Partnership
PSU Public Sector Undertaking
QIB Qualified Institutional Buyer
R&D Research and Development
RBI Reserve Bank of India
RECL Rural Electrification
Corporation Limited
REIT Real Estate Investment Trust
ROI Return of Income
ROW Return of Wealth
RSP Retail Sale Price
SAD Special Additional Duty of Customs
l ev i ed under s ub- s ec t i on ( 5) of
section 3 of the CustomsTariff Act, 1975
SDT Specified DomesticTransaction
SEBI Securi t i es and Exchange Board of
India
SEZ Special Economic Zone
SLR Statutory Liquidity Ratio
SME Small and Medium Enterprises
SOP Self-Occupied Property
SPV Special Purpose Vehicle
SUV Sports Utility Vehicle
SSI Small Scale Industries
TCS Tax Collected at Source
TDS Tax Deducted at Source
TP Transfer Pricing
TPO Transfer Pricing Officer
TRC Tax Residency Certificate
ULIP Unit Linked Insurance Policy
UMPP Ultra Mega Power Projects
VAT Value Added Tax
VCC Venture Capital Company
VCF Venture Capital Fund
VCU Venture Capital Undertaking
WDV Written Down Value
w.e.f. with effect from
WPI Wholesale Price Index
WTAct Wealth TaxAct, 1957
India Offices
RSM International Offices
RSM International's Global Presence
New Delhi-NCR
Jodhpur
Indore
Pune
Kochi
Bengaluru
(Bangalore)
T (91-22) 6696 0644 / 6121 4444 F (91-22) /
E emails@astuteconsulting.com W www.astuteconsulting.com
Offices: Mumbai, New Delhi-NCR, Chennai, Kolkata, Bengaluru, Surat, Ahmedabad, Hyderabad,
Jodhpur, Indore and Pune.
2820 5685 2287 5771
Gandhidham, Kochi,
For further information please contact:
RSM Astute Consulting Group
13th Floor, Bakhtawar, 229, Nariman Point, Mumbai - 400 021.
RSM Astute Consulting Group is a member of RSM network. Each member of the RSM network is an independent accounting and advisory firm which
practicesin its own right. TheRSM network is not itself aseparatelegal entityin anyjurisdiction.

RSM is the brand used by a network of independent accounting and advisory firms each of which practices in its own right. The network is not itself a
separatelegal entityof anydescription in anyjurisdiction. Thenetwork is administeredbyRSM International Limited, a company registeredin Englandand
Wales (company number 4040598) whose registered office is at 11 Old Jewry, London EC2R 8DU. The brand and trademark RSM and other intellectual
property rights usedbymembers of the network are ownedbyRSM International Association, an association governedbyarticle 60 et seqof the Civil Code
of Switzerlandwhoseseat is in Zug.
RSM AstuteConsulting, 2014

India Budget 2014-Highlights

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INDIA

Loading/unloading, packing, storage or warehousing and transportation of

The composite cap of foreign investments to be raised to 49% with full

referred to in Section (2j) of SEZ Act, 2005 for

(which are domestic companies) availing these

33AB Available for

33ABA Available for

specified types of plant and machinery).

Amortization of expenditure on prospecting etc. of

tomake mediumsize investments inplant andmachinery eligible for deduction,

acquisition of any land or goodwill or financial instrument, wholly and exclusively,

Amortization of amalgamation or demerger expenses

The benef i t i s ext ended t o

Introduce single operating demat account so that Indian financial sector

9.1.2 Positive proposals / impact

9.1.3 Negative proposals / impact

The Indi an Medi a and

9.3 InformationTechnology andITeS Industry

Increase in deduction limit on account of interest on loan in respect of self-

9.4.2 Positive proposals / impact

9.4.3 Negative proposals / impact

Related Interests

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