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TAX PROPOSALS 2014 AT A GLANCE ON DIRECT TAX

TAX PROPOSALS 2014 AT A GLANCE ON DIRECT TAX. INDIVIDUAL (OTHER THAN SENIOR CITIZEN & senior most Citizen) Including WOMAN & HUF, AOP, BOI- TAX SLAB. Senior Citizen from the age of 60 years to less than 80 years. Senior Citizen of 80 years and above :TAX SLAB. MANOJ KUMAR MITTAL & CO.

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TAX PROPOSALS 2014 AT A GLANCE ON DIRECT TAX

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  1. TAX PROPOSALS 2014 AT A GLANCEON DIRECT TAX MANOJ KUMAR MITTAL & CO.

  2. INDIVIDUAL (OTHER THAN SENIOR CITIZEN & senior most Citizen) Including WOMAN & HUF, AOP, BOI- TAX SLAB MANOJ KUMAR MITTAL & CO.

  3. Senior Citizen from the age of 60 years to less than 80 years Senior Citizen of 80 years and above :TAX SLAB MANOJ KUMAR MITTAL & CO. MANOJ KUMAR MITTAL & CO.

  4. Surcharge • Surcharge of 10% in case of person • (other than company) having total income exceeding 1.00 crores however subject to limit of amount more than 1 crores rupees. MANOJ KUMAR MITTAL & CO.

  5. In the case of domestic companies having total income more than 1 crores but less than Rs. 10.00 crores, surcharge @ 5% in case income exceeds 10.00 crores, surcharge @ 10%. MANOJ KUMAR MITTAL & CO.

  6. In the case of companies other than domestic companieshaving total income more than 1 crores but less than Rs. 10.00 crores, surcharge @ 2%, in case income exceeds 10.00 crores, surcharge @ 5%. • Marginal relief will be available. MANOJ KUMAR MITTAL & CO.

  7. No change in Education & Secondary Higher Education Cess of 3% MANOJ KUMAR MITTAL & CO.

  8. Section 115O-Tax on distributed profit of domestic company and 115R- Tax on distributed income to unit holder • 115O(IB)-“(1B) For the purposes of determining the tax on distributed profits payable in accordance with this section, any amount by way of dividends referred to in sub-section (1) as reduced by the amount referred to in sub-section (1A) [hereafter 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), be equal to the net distributed profits. • 115R(2A)-“(2A) For the purposes of determining the additional income-tax payable in accordance with sub-section (2), the amount of distributed income referred therein shall be increased to such amount as would, after reduction of the additional income-tax on such increased amount at the rate specified in sub-section (2), be equal to the amount of income distributed by the Mutual Fund.”; MANOJ KUMAR MITTAL & CO.

  9. Eg. Dividend distributed Amount Rs. 85 • Increased by Amount (85*.15/1.15) Rs. 15 • Increased Amount Rs. 100 • DDT 15% of Rs.100 Rs. 15 • Tax Payable 115O/115R Rs. 15 • Dividend Distributed to shareholder Rs. 85 W.e.f 01.10.2014 MANOJ KUMAR MITTAL & CO.

  10. Section 2(42A)-Short Term Capital Assets • For unlisted Security and a unit of mutual fund( other than an equity oriented mutual fund) shall be short term capital assets if is held for not more than 36 months. MANOJ KUMAR MITTAL & CO.

  11. Sec 32AC-Investment in P&M • If a company invest more than 25 crores in new assets (being P&M) during the F.Y.2014-15, deduction of 15% of the aggregate amount of actual cost of new assets will be allowed. • If a company invest more than 100 crores in new assets (being P&M) combined during the F.Y.2013-14 and 2014-15, deduction of 15% of the aggregate amount of actual cost of new assets for PY 2014-15 will be allowed even if the amount is below 25 crores. • No transfer of such assets for next five years except for amalgamation or merger. • W.e.f.01.04.2015 MANOJ KUMAR MITTAL & CO.

  12. MANOJ KUMAR MITTAL & CO.

  13. Sec 80IA(4)(iv)- Extension of sun set date to power sector • The deduction of profit under this is available to the undertaking engaged in generation or distribution of power or transmission or distribution by laying new lines or substantial renovation or modernization in this area. • This benefit is extended for A.Y.2017-18 also MANOJ KUMAR MITTAL & CO.

  14. Sec 112- Tax on long Term Gain on units • Section 112 is proposed to amended to allow the concessional rate of tax of ten per cent. on long term capital gain to listed securities (other than unit) and zero coupon bonds. • W.e.f. A.Y.2015-16 MANOJ KUMAR MITTAL & CO.

  15. Sec-35AD-Deduction in respect of capital expenditure on specified Business Section 35AD-It is proposed to include two new businesses as “specified business” for the purposes of the investment-linked deduction under section 35AD so as to promote investment in these sectors, which are :- • (a) laying and operating a slurry pipeline for the transportation of iron ore; • (b) setting up and operating a semiconductor wafer fabrication manufacturing unit, if such unit is notified by the Board in accordance with the prescribed guidelines. • A new sub-section (7A) in section 35AD to provide that any asset in respect of which a deduction is claimed and allowed under section 35AD, shall be used only for the specified business for a period of eight years beginning with the previous year in which such asset is acquired or constructed. • If any asset on which a deduction under section 35AD has been allowed, is demolished, destroyed, discarded or transferred, the sum received or receivable for the same is chargeable to tax under clause (vii) of section 28. MANOJ KUMAR MITTAL & CO.

  16. sub-section (7B) has been proposed to be introduced to provide that if such asset is used for any purpose other than the specified business, the total amount of deduction so claimed and allowed in any previous year in respect of such asset, as reduced by the amount of depreciation allowable in accordance with the provisions of section 32 as if no deduction had been allowed under section 35AD, shall be deemed to be income of the assessee chargeable under the head “Profits and gains of business or profession” of the previous year in which the asset is so used. • Example: • Deduction claimed under section 35AD on a capital asset : Rs. 100 • Depreciation eligible on such asset under section 32 : Rs. 15 • Profit chargeable to tax in accordance with the proposed • sub-section (7B) of section 35AD : Rs. 85 MANOJ KUMAR MITTAL & CO.

  17. The provision of section 7B are not applicable to sick Industrial company. • If deduction claimed u/s 35AD, then no deduction under chapter VI A and section 10AA. • W.e.f.2015-16 MANOJ KUMAR MITTAL & CO.

  18. 80C- Deduction • The limit of deduction increased from 1 lacs to 1.5 lacs. MANOJ KUMAR MITTAL & CO.

  19. Sec 24- Deduction from income from house property • The deduction of interest under income from house property in case of self occupied property is from 1.5 lacs to 2 lacs. MANOJ KUMAR MITTAL & CO.

  20. 194LC-Concessional rate of tax on overseas borrowing • The benefit of concessional rate tax is extended to interest on long term bond. • The benefit is extended under this section up to 01.07.2017. • Section 206AA not applicable. • W.e.f. 01.010.2014 MANOJ KUMAR MITTAL & CO.

  21. 115BBD- Reduction in tax rate on certain dividends received from certain foreign company • It provides for tax @15% of gross dividend received by an indian company from a specified foreign company. • The benefit of it has been extended for A.Y.2015-16 and subsequent assessment year. MANOJ KUMAR MITTAL & CO.

  22. Section 92CC-Roll back provision in Advance Pricing Agreement scheme • The “roll back” provisions refers 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. However, the “roll back” relief is provided on case to case basis subject to certain conditions. Providing of such a mechanism in Indian legislation would also lead to reduction in large scale litigation which is currently pending or may arise in future in respect of the transfer pricing matters. • This section provides for roll back mechanism in the APA scheme. The APA may, subject to such prescribed conditions, procedure and manner, provide for determining the arm’s length price or for specifying the manner in which arm’s length price is to be determined in relation to an international transaction entered into by a person during any period not exceeding four previous years preceding the first of the previous years for which the advance pricing agreement applies in respect of the international transaction to be undertaken in future. MANOJ KUMAR MITTAL & CO.

  23. Sec 2(14)- Characterization of income in the case of Foreign Institutional investors • it is proposed to amend the Act to provide that any security held by foreign institutional investor which has invested in such security in accordance with the regulations made under the Securities and Exchange Board of India Act, 1992 would be treated as capital asset only so that any income arising from transfer of such security by a Foreign Portfolio Investor (FPI) would be in the nature of capital gain. • w.e.f.AY2015-16 MANOJ KUMAR MITTAL & CO.

  24. Sec 115JC- Alternate Minimum Tax • The definition of Adjusted total income has been enhanced so as to include now deduction claimed under section 35AD but however the amount of depreciation allowable under section 32 shall however be reduced in computing total Income. • W.E.F.2015-16 MANOJ KUMAR MITTAL & CO.

  25. Example • Total income : Rs. 60 • Deduction claimed under Chapter VI-A : Rs. 40 • Deduction claimed under section 35AD on a capital asset : Rs. 100 • Computation of adjusted total income for the purposes of AMT • Total income : Rs. 60 • Addition: (i) deduction under Chapter VI-A (on non-specified business) : Rs. 40 (ii) deduction under section 35AD (on specified business)Rs. 100 Less: depreciation under section 32 Rs. 15 : Rs. 85 • Adjusted total income under section 115JC Rs. 185 MANOJ KUMAR MITTAL & CO.

  26. Sec 115JD-Credit of AMT • This section is amended to provide for claim of credit of AMT paid in previous year irrespective of the fact that whether its gross adjusted total income is less than 20 lacs or there is no claim of any deduction under section 10AA or chapter VIA in such previous year. • Wef 2015-16 MANOJ KUMAR MITTAL & CO.

  27. Sec 56(2)(ix)-Taxability of advance forfeited taken for transfer of capital assets • Section 56(2)(ix) inserted 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. A con sequential amendment in clause (24) of section (2) is also being made to include such sum in the definition of the term 'income'. • The existing provision 51 is accordingly amended to provide that the amount received shall not be reduced from the cost of the assets • A.Y.2015-16 MANOJ KUMAR MITTAL & CO.

  28. 194DA- TDS on life insurance payment not covered under section 10(10D)subject to TDS • This section provides for deduction of TDS @2% on payment not covered under section 10(10D) subject to limit that the payment should not exceed Rs.1,00,000.00 • W.e.f. 01.10.2014 MANOJ KUMAR MITTAL & CO.

  29. Section 140-signing and verification of return • It provides that the return shall be verified by the person specified therein. • W.e.f.01.10.2014 MANOJ KUMAR MITTAL & CO.

  30. Section 11 to 13 vs section10 • Section 11(6) has been enacted to provide for non deduction of depreciation in respect of the capital assets which has been claimed as application of income at the time of acquisition in the same or any other previous year. • Section 11(7)-if the firm is registered under section 12AA(1) or 12A, then the firm can not claim exemption under general provision of section 10( except agriculture income or income under 10(23C)) thereof) • Similar provision are applicable for section 10(23C) MANOJ KUMAR MITTAL & CO.

  31. Section 10(23C)(iiiab) and (iiiac) of the Income Tax Act • Explanation has been inserted to define the meaning of “substantially financed by the government.” • if the Government grant to a university or other educational institution, hospital or other institution during the relevant previous year exceeds a percentage (to be prescribed) of the total receipts (including any voluntary contributions), of such university or other educational institution, hospital or other institution, as the case may be, then such university or other educational institution, hospital or other institution shall be considered as being substantially financed by the Government for that previous year. • w.e.f.2015-16 MANOJ KUMAR MITTAL & CO.

  32. Section 12AA- Cancellation of registration • 12AA(4) has been introduced to provide for cancellation of registration in the following circumstances:- • (i) its income does not enure for the benefit of general public; • (ii) it is for benefit of any particular religious community or caste (in case it is established after commencement of the Act); • (iii) any income or property of the trust is applied for benefit of specified persons like author of trust, trustees etc.; or • (iv) 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. • W.e.f 01.10.2014 MANOJ KUMAR MITTAL & CO.

  33. Section 115BBC-Anonymous Donation • Section 115BBC(1)(ii) has been amended to provided that the income-tax payable shall be the aggregate of the amount of income-tax calculated at the rate of thirty per cent on the aggregate of anonymous donations received in excess of five per cent of the total donations received by the assessee or one lakh rupees, 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 the five per cent of the total donations received by the assessee or one lakh rupees, as the case may be. • W.e.f. 2015-16 MANOJ KUMAR MITTAL & CO.

  34. Sec 12A- Applicability to earlier years of the registration granted to trust or institution • A proviso has been inserted in sub section 2 of section 12A to provide that that in case where a trust or institution has been granted registration under section 12AA of the Act, the benefit of sections 11 and 12 shall be available in respect of any income derived from property held under trust in any assessment proceeding for an earlier assessment year which is pending before the Assessing Officer as on the date of such registration, if the objects and activities of such trust or institution in the relevant earlier assessment year are the same as those on the basis of which such registration has been granted. MANOJ KUMAR MITTAL & CO.

  35. No reopening u/s 147 • Benefit non available to trust who applied for registration and was refused. • W.e.f.01.10.2014 MANOJ KUMAR MITTAL & CO.

  36. Section 92B- International transaction • Section 92B(2) has been amended to provide that that where, in respect of a transaction entered into by an enterprise with a person other than an associated enterprise, there exists a prior agreement in relation to the relevant transaction between the other person and the associated enterprise or, where the terms of the relevant transaction are determined in substance between such other person and the associated enterprise, and either the enterprise or the associated enterprise or both of them are non-resident, then such transaction shall be deemed to be an international transaction entered into between two associated enterprises, whether or not such other person is a non-resident. • W.e.f. 2015-16 MANOJ KUMAR MITTAL & CO.

  37. Section 271G-Levy of penalty for non furnishing of TP documents • The power of levy penalty given to TPO other than AO and commissioner (A). MANOJ KUMAR MITTAL & CO.

  38. Sec 37(1)- CSR • Explanation2 to section 37(1) inserted to provide that for the purposes of section 37(1) any expenditure incurred by an assessee on the activities relating to corporate social responsibility referred to in section 135 of the Companies Act, 2013 shall not be deemed to have been incurred for the purpose of business and hence shall not be allowed as deduction under section 37. However, the CSR expenditure which is of the nature described in section 30 to section 36 of the Act shall be allowed deduction under those sections subject to fulfillment of conditions, if any, specified therein. • W.e.f. 2015-16 MANOJ KUMAR MITTAL & CO.

  39. Section 40(a)(i)-disallowance of expenditure for non deduction of TDS in case of non resident • it is proposed to amend section 40 (a)(i) to provide that the deductor shall be allowed to claim deduction for payments made to non-residents in the previous year of payment, if tax is deducted during the previous year and the same is paid on or before the due date specified for filing of return under section 139(1) of the Act. MANOJ KUMAR MITTAL & CO.

  40. Sec 40(a)(ia)- disallowance of expenditure for non deduction of TDS in case of resident • -The scope of section 40(a)(ia) has been enlarged to include all payment on which TDS is required to be deducted under chapter XVII-B. Thus Salary, director fee has also be included. • The extent of disallowance has been restricted to 30% of any sum payable to the resident. • W.e.f. AY 2015-16 MANOJ KUMAR MITTAL & CO.

  41. Amendment in TDS provisions • Sec 200 has been amended to enable the deductor to file correction statement in respect of mistake or to add, delete or update the original TDS return. • Sec 200A has been amended to provide for processing of correction statement. • Section 201(3) has been amended to provide for reopening of case in case of non deduction of TDS for seven years from the end of financial year in which payment is made or credit is given. MANOJ KUMAR MITTAL & CO.

  42. Sec 271H has been amended to provide for levy of penalty by AO for failure to furnish TDS/TCS statements in certain cases or furnishing of incorrect information in TDS/TCS statements. • W.e.f.01.10.2014 MANOJ KUMAR MITTAL & CO.

  43. Sec 44AE-Business of plying hiring or leasing of goods carriage • The distinction between heavy good vehicle and vehicle other than HGV for presuming income per month has been finished and it is provided that for a uniform rate of presumptive income of Rs. 7500pm for all types of vehicle. • W.e.f AY 2015-16 MANOJ KUMAR MITTAL & CO.

  44. Sec 145-Income computation and disclosure standards • Sec 145(2) has been amended to provide for replacement of words “accounting standards” with words “income computation and disclosure standards” • Section 145(3) has been amended to restrict the use of accounting standard for the purpose of computation of income only. • Now the govt may notify income computation and disclosure standards from time to time and the AO will make assessment u/s 144 if the standards are not followed. MANOJ KUMAR MITTAL & CO.

  45. Section 47-Transaction not regarded as transfer • Clause viib has been inserted in section 47 to provide that any transfer of a capital asset, being a Government Security carrying a 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. • W.e.f.2015-16 MANOJ KUMAR MITTAL & CO.

  46. Sec 43(5)- Speculative transaction • The clause e of the proviso to section 43(5) has been amended to provide that eligible transaction in respect of trading in commodity derivatives carried out in a recognised association and chargeable to commodities transaction tax under Chapter VII of the Finance Act, 2013 shall not be considered to be a speculative transaction. • Wef AY 2014-15 MANOJ KUMAR MITTAL & CO.

  47. Sec 45- Capital Gain • A proviso to Sec 45(5)(b) has been inserted to provide that 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. • Wef 2015-16 MANOJ KUMAR MITTAL & CO.

  48. Sec 48- Cost inflation Index • Clause v of the explanation to section 48 has been amended to provide for “Cost Inflation Index” in relation to a previous year means such index as may be notified by the Central Government having regard to seventy-five percent of average rise in the Consumer Price Index (Urban) for the immediately preceding previous year to such previous year. • Earlier it was like such index as may be notified by the Government having regard to seventy-five percent of average rise in the Consumer Price Index (CPI) for urban non-manual employees (UNME) for the immediately preceding previous year to such previous year. • W.e.f 2016-17 MANOJ KUMAR MITTAL & CO.

  49. Sec 54 and 54F- Capital gain exemption in case of investment in a residential house property • Section 54 and 54F has been amended to provide that the benefit of roll over relief shall be available in respect of one house property only. • W.e.f 2015-16 MANOJ KUMAR MITTAL & CO.

  50. Sec 54 EC-CG exemption on investment in specified bonds • The amount of exemption has been restricted to Rs. 50 lacs only by inserting a proviso. • W.e.f AY 2015-16 MANOJ KUMAR MITTAL & CO.

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