Presenting below the Ayes and the Nays (the welcome and the unwelcome) of proposals relating to Direct Taxes in the Union Budget 2015-16 presented by the Honorable Finance Minister Shri Arun Jaitley on February 28, 2015:
AYE’s
Investment Promotion measures
– Reduction of Royalty rate to 10% to facilitate transfer of technology
– Rationalization of the Tax dispensation for Real Estate Investment Trusts to grant past through status for the rental income and tax-free transfer of promoter’s interest
– Conditions for claiming Tax Deduction for Additional wages for “New Work Men” employed by Manufacturing units relaxed
– Provisions to Facilitate location of Fund Management activity in India – but with strings attached
– Tax incentives for investments in backward districts in Andhra Pradesh and Telangana
Measures Reducing Tax uncertainty – Providing Tax Clarity -Simplifying compliance
– Threshold levels for Domestic Transfer Pricing compliance enhanced to INR 200 million from INR 50 million earlier
– Situations when the Indirect Transfers would be brought under Tax net clarified
– Implementation of General Anti-Avoidance Rules pushed forward further two years
– The 50% Additional Depreciation on assets acquired during the second half of the year not to go wasted and would be allowed in the subsequent year
– CBDT to introduce rules for Foreign Tax Credits and Rules for determining Tax residency status for crew member of Foreign bound ships
Measures to fight the scourge of Black Money / Parallel economy
– Measures introduced (and more in pipeline) to curb the menace of unaccounted money in foreign jurisdictions
– Measures to curb use of cash in Immovable property Transactions
– Quoting of Permanent Account Number mandatory for all purchases greater than INR 100,000
Health & Cleanliness
– Tax deduction limits for premiums paid to obtain Medical cover enhanced by 10K
– Additional deduction of 25K to differently-abled
– Tax deduction for disabled/ severely disabled enhanced to 75K /125K
– Medical expenses deduction limit enhanced to 80K for those aged 80+, for medical treatment of prescribed disease / ailments
– Promoting the ancient tradition of “Yoga” by including the same under the definition of “charitable purpose” – thereby facilitating Tax exemption for Trust /Institutions promoting Yoga
– Donations to “Swachh Bharat Kosh” (Clean India Fund) and ‘Clean Ganga Fund’ eligible for Tax deductions
Promoting Savings
– Additional deduction of INR 50K to investments in Pension Fund
– Scheme for tax savings for the Girl Child made more attractive with Tax exemptions to accrued interest
NAY’s
– Situations where a completed Audit can be revised by your Tax Commissioner widened – leading to greater uncertainty even on completed Audits (Assessments)
– The ‘Place of Effective Management’ Test introduced for determining Tax residency of companies too widely worded and can potentially lead to avoidable Tax litigation. To understand this better, read on- ‘This POEM won’t be music to your ears’.
OUR COMMENT
We Think the Ayes have it, the Ayes have it.