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Union Budget, 2014

Union Budget, 2014. Indian Merchants’ Chamber C H Bhabha Memorial Endowment Public Meeting . July 11, 2014. Presented by Ketan Dalal. BJP manifesto on Taxes. Provide a non adversarial and conducive tax environment Rationalize and simplify the tax regime

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Union Budget, 2014

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  1. Union Budget, 2014 Indian Merchants’ Chamber C H Bhabha Memorial Endowment Public Meeting July 11, 2014 Presented by KetanDalal

  2. BJP manifesto on Taxes • Provide a non adversarial and conducive tax environment • Rationalize and simplify the tax regime • Overhaul the dispute resolution mechanisms • Bring on board all State governments in adopting GST, addressing all their concerns • Provide tax incentives for investments in R&D, geared towards indigenization of technology and innovation KetanDalal

  3. Direct Tax: The Big Picture • REITs and Infra investment trusts tax clarity. • FII Income: some clarity • Some aspects on tax dispute management addressed • Investment allowance and power sector: Incentives extended . • DTC not archived • Retro amendments on indirect transfer not neutralised; several ambiguities still untouched • CSR tax deduction • No cognisance of Tax Administrative Reforms Commission KetanDalal

  4. Personal Tax – Some Key Changes • TDS @ 2% on maturity receipts from taxable life insurance products w.e.f. from 1 October 2014 (if >= INR 1 lakh) • Relatively marginal benefits; amendments to DDT and debt funds a neutraliser KetanDalal

  5. Transfer of shares in non Indian companies (Vodafone controversy) • Status quo on existing disputes • Fresh cases to be scrutinised by high level CBDT committee • Recommendations of Shome Committee not implemented • Existing disputes continue • Going forward, lack of clarity on computation, applicability to small shareholders, listed foreign companies, etc KetanDalal

  6. Investment Allowance • Sunset by 31 March 2017 • Yearly investment threshhold; no aggregation over 3 years • 5 year lock-in (except in merger/demerger) • Current Investment allowance (100 cr.) scheme for investments continues (31st March 2015) • Carry forward not provided for –affects loss making / low profit making companies KetanDalal

  7. Business Deductions / Incentives • 10-year tax holiday for Power sector (S.80IA) extended till March 31, 2017 • Investment-linked deduction (S.35AD) – 100%; extended to 2 other items • Corporate Social Responsibility (CSR) expenses • CSR expenses expressly disallowed (though not for MAT purposes) • Disallowance of domestic payments for non-compliance of TDS; disallowance restricted to 30% of expense; salary now covered • IFRS convergence and Tax Accounting • Move towards Tax Accounting Standards (TAS) – Mandatory from FY 2016-17 KetanDalal

  8. Capital market related • FII taxation clarity; but what about private equity? • DDT related • Increase (companies) (no set off for foreign recipients) from 17% to 20.5% (approx) • Increase (Mutual funds) from 25% to 40% (individual recipients) and 34% to 51% (company recipients) • Holding period for unlisted shares / securities and non EOMF increased to 36 months (from 12 months) • Increase in tax rate on sale of debt oriented Mutual Funds from 10% to 20% • Lower TDS of 5% on all cross border borrowings KetanDalal

  9. Real estate sector: tax changes • REIT taxation now operationalised (single stage) (similarly Infrastructure Investment Trust) • Sponsor not liable to transfer of SPV to REIT • Interest income exempt in hands of Trust, but not for investor • Capital gains will be converse • Interest deduction for housing loan • Capital gains set off now restricted for one house (in India) KetanDalal

  10. Addressing tax disputes • Transfer pricing • Roll back mechanism introduced in APA • APA team to be strengthened to expedite disposals • Range concept alongside arithmetic mean and use of multiple year data proposed – alignment with global best practices • Advance Ruling • Advance Rulings facility extend for residents tax payer • Tax liability above defined threshold • Settlement Commission • Scope of Settlement Commission to be enlarged KetanDalal

  11. Summing up Lets look at this budget and February 2015 as one integrated exercise ! KetanDalal

  12. Thank You KetanDalal

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