Highlights of Tax Proposals in Budget 2015-16

DIRECT TAXES

1. No Change to be made in Slab Rates of Income tax for Individuals, HUF, AOP, BOI and firms.

2. Corporate tax rate to reduce:

Corporate tax rate to be rationalised. Earlier the Tax Rate was 30% of Income offered for
Tax, the same is to be reduced to 25% of the income offered to tax over a period of four
years. (No change is proposed to be effective from FY 2015-16)

3. Wealth-tax Act is proposed to be deleted for the Assessment year 2016-17.

4. Super Rich Surcharge: Additional surcharge on income tax of 2 per cent applicable to all assesses having taxable income of over Rs. 1 crore annually. (Effective from 1st April, 2015)

5. Domestic Transfer Pricing - Threshold limit for specified domestic transfer pricing increased from Rs. 5 Crore to Rs. 20 Crore u/s section 92BA of the Income Tax Act. (Effective from Financial year 2015- 2016)

6. MAT Relaxed: MAT provision under section 115JB not to apply to capital gain to FIIs and share of profit to an AOP. (Effective from Financial year 2015- 2016).

7. General Anti Avoidance Rules (GAAR): The existing provisions of General Anti Avoidance Rule (GAAR) introduced by the Finance Act, 2013 which was earlier proposed to be effective from FY 2015-16 has been deferred by 2 years.

8. Residential Status Section 6: A foreign company will be considered as a Resident in India in any previous year in terms of proposed clause 3(ii), if its place of effective management at any time in that year, is in India”.

Place of effective management means: A place where key management and commercial decision that are necessary for the conduct of the business of an entity as a whole are in substance made. (Effective from Previous year 2015-16)

9. Section 9 Indirect Transfer of Indian Assets:

A new Explanation 6 has been inserted in Section 9 to define the value of assets located in India specified under Explanation 5 of the said section under which the share or interest in a company or entity incorporated outside India shall be deemed to have situated in India, if to tax in India, transfer of any shares or interest in a foreign company/ entity in case underlying assets in India owned by such foreign company or entity exceeds Rs. 10 crores and represents altleast 50% of the value of assets owned by the company or entity. (Effective from Previous year 2015-16)

This taxability will not arise if the said foreign company directly owning Indian assets do not hold management right or control or share/ interest exceeding 5% along with associate enterprises.

10. Sukanya Samriddhi Scheme – Deduction under Section 80C & Tax free interest Sukanya Samriddhi Scheme meaning Girl Child Prosperity Scheme is a special deposit scheme launched by Prime Minister for girl child.

Under the scheme, an interest of 9.1 per cent is provided on deposited amount which is tax free. Under this scheme, a bank account can be opened by the parent or legal guardian of a girl child of less than 10 years of age with a minimum deposit of ₹ 1,000/-up to ₹ 1, 50,000/- in any post office or authorised branches of commercial bank in an year.

Partial withdrawal up to 50 per cent of the account balance is allowed to meet education expenses of the girl child till she attains 14 years of age. The account will remain operative up to 21 years of age of girl child or till marriage of the girl child.

Deduction Under section 80C is also available for the amount contributed every year.

11. Section 32

a. Additional Depreciation on acquisition of new Plant & Machinery

An additional depreciation @20% is allowed on acquisition of new plant and machinery. However, the quantum of depreciation would be restricted to 50%, if the asset acquired by the assesse during the previous year has been put to use for the purposes of business for a period less than one hundred and eighty days in that previous year.

Now, Section 32 has been amended to allow carry forward of balance 50% deprecation
to be allowed as a deduction in the next year. This amendment is a clarificatory in nature and may be considered even for earlier years.

b. The rate of additional depreciation @ 35% shall be allowed instead of 20% if the enterprise is set up in backward area in State of Andhra Pradesh & Telangana.(Effective from year commencing 1 April, 2015)

12. DEDUCTIONS

a. Deduction in respect of contribution to notified Pension Schemes under Section 80CCC has been increased to Rs. 150,000/- from Rs. 100,000/-.

b. Additional deduction of Rs. 50,000 for contribution to National Pension Scheme u/s 80CCD shall be allowed to all individuals.

c. Deduction u/s 80G:

i. Donation made to National fund for control of Drug Abuse eligible for 100% deduction(Effective from 1 April, 2016)

ii. 100% deduction for contributions, other than CSR, to Swachh Bharat Kosh and Clean Ganga Fund(Effective retrospective from 1st April, 2014)

d. Deduction u/s 80D:- (Health Insurance)

Super Senior Citizens above the age of 80 years who are not covered by Health Insurance, to be allowed deduction of Rs. 30,000 towards actual medical expenditure. (Effective from 1st April, 2016)

e. Serious Diseases: Deduction limit of Rs. 60,000 to be enhanced to Rs. 80,000 with respect to specified diseases of serious nature for senior citizen u/s 80DDB. (Effective from 1st April, 2016.

f. Disability Deduction: Deduction limit of Rs. 50,000 to be enhanced to Rs. 75,000 for disabled person along with enhancement of limit of Rs. 1 Lac to Rs. 1.25 Lacs in case of severe disability u/s 80U of Income Tax Act. (Effective from 1st April, 2015).

g. 80JJA –Special deduction for employment creation

The existing provisions contained in section 80JJAA of the Act, inter alia, provide for a deduction to an Indian company, deriving profits from manufacture of goods in a factory, equal to 30% of additional wages paid to new regular workmen, in excess of 100 workmen employed by the assessee in such factory, in the previous year, for three assessment years including the assessment year relevant to the previous year in which such employment is provided. A further deduction is allowed for every increase beyond 10% of regular workforce for 30% of their salary up to 3 years.

With a view to encourage generation of employment, it is proposed to amend the said section so as to extend the benefit to all assesses having manufacturing units (rather than restricting it to corporate assesses only) employing new regular workmen in excess of fifty workmen employed during the previous year.

This amendment will take effect from Assessment Year 2016-17.

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