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Friday, 11 July 2014

Budget is the Blue print of the Government, present team of Narendra Modi’s team headed by Arun Jaitly, Finance Minister has done tremendous job, in conceptualizing and making in to an effective blue print for the Indian Inc. It is practically not possible to address all Sectors, Industries, Projects of Public Interest in one single policy document and blue print of plan of action for running the government of a Country with largest Democracy.

It is pertinent to not that this Budget has taken enough care about the lager canvass of the country as a whole. Lets have a look at the best measures taken up in the Budget:

  1. Industries

    1. Setting up on eBiz Platform, where all business and investment related clearances and compliances are available in one window. All the Central Government Ministries and Departments will integrate their services on this platform, by December 31. Thought it is a welcome measure, time means money, and six months is a very big time, if this kind of platform is going to boost the Industry as a whole and in turn it’s going to boos the revenues of the Government, then its imperative that it should be completed in at best three months time, we are sure that there are capable corporate in India, who can deliver the same sans fixing the deadline of 6 months.
    1. Investment allowance @15% for the Investments by Manufacturing Companies in New Plant and Machinery exceeding Rs.25 Crores in a year, is definitely a blessing for fuelling the additional investments in Manufacturing Sector, how ever if the MAT is rationalized, by reducing further the rate of tax presently it is 18.5%, there would be more takers, better still if this benefit is restricted to the Investments which generate employment opportunities.
    1. Proposal to set up a Rs.10,000 Crores venture capital fund, for providing equity, quai equity, soft loans and other risk capital for start-up companies is a welcome move, how ever the name of the game is Implementation and administration, till the proposal is effectively planned and implemented, we have noting to cheer up on this proposal.

    1. Entrepreneur Friendly Exit norms and legal bankruptcy framework would be developed for SME’s to enable easy exit. This is definitely a best proposal if and when implemented would help the SME.
  1. Individuals

    1. Basic Exemption raised from Rs. 2 lacs to Rs.2.5 lacs corresponding limit for Senior Citizens raised from Rs.2.5 lacs to Rs.3 Lacs.
    2. Additional Tax break on home loan interest of Rs.50,000/-, this is a welcome measure for assesses who have taken higher home loan, whose annual interest is crossing or about to cross Rs.2 lacs.
    3. Investment Threshold for PPF Investment raised to 1,50,000/-.
    4. KVP, Kisan Vikas Patra’s allowed as Investment option u/s 80C.
new tax slab structure for individuals stands as:

Individual (Other than Senior Citizen)
Senior Citizens (aged 60 years & above but below 80 years)
Very Senior Citizen (aged 80 years & above)
Income upto Rs. 250,000 – Nil tax
Income upto Rs. 300,000 – Nil tax
Income upto Rs. 500,000 – Nil tax
Income from Rs. 250,001 to Rs. 500,000 – 10% tax
Income from Rs. 300,001 to Rs. 500,000 – 10% tax
Income from Rs. 500,0001 to Rs. 10,00,000 – 20% tax
Income from Rs. 500,0001 to Rs. 10,00,000 – 20% tax
Income from Rs. 500,0001 to Rs. 10,00,000 – 20% tax
Income above Rs. 10,00,000 – 30% tax

Income above Rs. 10,00,000 – 30% tax
Income above Rs. 10,00,000 – 30% tax

  1. Capital Markets

    1. Debt Mutual Funds Taxed as Bank Deposits, hither to the dividend from mutual funds used to be tax free, needing the Investors to shift towards Equity oriented Mutual Funds

    1. Profits of Foreign Portfolio Investors be taxed as capital gains, this is a move to bring now boost towards capital market investments, but considering the complex Double Tax Avoidance treaties, and their implementation in India, there is a fair chance to Pull out their Investments out of Indian Markets than, entering India as a Porfolio Investors, hope the government should carefully have a re-look on this. Hope this gives lot of business for the Professionals Involved in DTA.

  1. International Taxation

      For reducing litigation in Indian Transfer Pricing regime by introducing

    1. Roll Back provision in Advance Pricing Agreements (APA). Roll back mechanism in the APA Scheme for a period of four years preceeding the first previous year for which the APA is applied, subject to prescribed conditions.
    2. Range Concept for determining arm’s length price
    3. Allowing multiple year data for comparable analysis. One year data is used for comparable analysis with some exception as per the current regulation. It is proposed to amend regulations to allow the use of multiple year data for comparability analysis.
    1. TPO would now have the authority to levy penalty under section 271G of two per cent of the value of international transactions or specified domestic transactions for failure to furnish prescribed information or documentation w.ef.1 October 2014.

  1. Corporate Taxation
a. Section 80-IA: Extension of 10-year tax holiday to undertaking which begin generation, distribution and transmission of power by March 31, 2017.

b. Section 115-O & 115R: Dividend declared by a domestic Company must be grossed up for applying DDT resulting in an effective rate increase from 16.99 per cent to 20.47 per cent (including surcharge and cess). This amendment shall take effect from 1 October 2014.

c. Section 40(a)(i): In respect of disallowance for nonpayment of tax from payment to non-resident, the time limit of payment of withholding tax into the government treasury has been extended till date of filing of return of income similar to the timelimit available for payment of withholding taxes in respect of payments to resident.

d.  Section 40a(ia): Disallowance of expenditure due to non-withholding of tax on payments made to resident taxpayers is restricted to 30 per cent instead of 100 per cent under existing provisions. Further, the disallowance under this category has been extended to all payments made to resident taxpayers which are subject to withholding tax (e.g. salary, director’s fees, etc.)

e. Section 115JC: The adjusted total income for AMT shall be computed by adding investment linked deduction on capital expenditure for specified business (Section 35AD) net of depreciation.

                f.   REITs and Infrastructure Investment Trusts shall enjoy tax pass through status.

g.  Section 112: Concessional rate of 10% has been proposed to withdrawnfor debt oriented mutual funds.

h. Section 220: Liability of assessee to pay interest on amounts specified in the notice of demand extended up to the disposal of appeal by the last appellate authority or disposal of proceedings. In cases where tax payable was reduced due to orders of the settlement commission, etc. but was restored to earlier levels, interest under Section 220 of the Act shall be payable from the date of first notice of demand upto the date when the demand is paid.

i.  Section 200A: The deductor was permitted to make corrections in the statement pursuant to Centralized Processing of Statements of Tax Deducted at Source Scheme, 2013. However, there was no provision in the Act enabling filing of the correction statement. The act of correction and processing the statement has now been codified and shall came into effect from 1 October 2014.

j.  Section 201: The period for passing an order deeming a person to be an assessee in default for failure to deduct the whole or any part of tax on payment to a resident has been extended to seven years from the end of the FY in which payment is made or credit is given w.e.f. 1 October 2014.

The above measures would go a long way in clearing litigations in International Taxation, involving Transfer Pricing.

Overall it is matured Budget with a larger goal of containing fiscal deficit, which gave marginal relief to Middle Income group, how ever what is expected of this is reduction of Inflation and rationalization of tax laws in India, which would not only increase the tax compliance, but supports the exchequer by way of additional revenue through taxes only thing is Government should decide whether they want More from Few or Few from More.

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