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 here- ‘This POEM won’t be music to your ears’.

–       Increase in the rate of surcharge for Corporates across the Board and for the Super-rich Individuals. Although the increase is marginal (from 10% to 12%), it flies against the stated intent of reducing the rate of corporate tax to 25% over the next four years.

 

OUR COMMENT

We Think the Ayes have it, the Ayes have it.