Highlights of Union Budget 2015-16

Union Budget 2015-16 at a glance

I.             Income Tax

For Individuals

There is no change in Income Tax slab rates as against for the F.Y.2014-15.

Wealth Tax has been abolished w.e.f. Financial Year 2015-16 and onwards.

• The surcharge for assessees whose total income is more than INR 10 Million is increased to 12% (as against 10% earlier). Thus, the Maximum Marginal Tax Rate (‘MMR’) in such cases would increase from 33.99% to 34.61%.

• Contributions/ investments made by an individual in the name of girl child to notified securities/schemes will be eligible for deduction under section 80C.

• Interest earned on Sukanya Samriddhi account will also be exempt.

• For salaried individuals, exemption on account of transport allowance is proposed to be doubled to INR 1,600 per month from the existing limit of INR 800 per month.

• Limit of deduction of Health Insurance Premium increased from INR 15,000 to INR 25,000 and for Senior Citizens, the exemption will be INR 30,000.

• Additional deduction of INR 50,000 for contribution to new pension scheme is proposed u/s 80CCD.

• It is proposed that in case of premature withdrawals of INR 30,000 or more, where employers manage their own private provident fund trust, tax will be withheld (TDS) @10%. This amendment is proposed to be effective from June 1, 2015.

• It is proposed that individuals not having taxable income and receiving payments under LIC upto INR 100,000 can claim relief of non-deduction of tax at source (TDS) by submitting Form 15G / 15H.

For Domestic Company / Partnerships

Tax rates remain unchanged at 30%* (plus applicable surcharge and education cess).

• The rate of surcharge is increased by 2% to 7% / 12% (as against 5% / 10% earlier) resulting in an increase in effective tax rates. Note: Effective tax rate for income upto INR 10 Million remains unchanged at 30.9%.

* It is proposed to reduce corporate tax rates from 30% to 25% over the next 4 years in a phased manner starting from Financial Year 2016-17

• The existing provisions provide for a special deduction for employment of new workmen by an Indian company deriving profits from manufacture of goods in a factory. The quantum of deduction allowed is 30% of additional wages paid to new regular workmen employed by the Indian company in such factory for 3 years, including the year in which such employment is provided. Further, the term ‘additional wages’ is defined to mean wages paid to new regular workmen in excess of 100 workmen employed during the previous year.

• It is proposed to extend the benefit of deduction towards additional wages to all assessees having manufacturing units (rather than restricting it to Indian companies). Further, to enable smaller units to claim this deduction, it is proposed to extend the benefit to units employing even 50 regular workmen (instead of 100 regular workmen).

• It is proposed to amend the period for which interest is payable under section 234B in case of reassessments and accordingly, the period for which the interest is to be computed will begin from the 1st day of the assessment year to the date of the reassessment order.

• Presently, all transporters, irrespective of their size, are eligible to claim exemption from withholding tax (TDS) by furnishing their PAN to the deductor/payer. An amendment has been proposed and the exemption shall now be available only to such transporters who own less than 10 goods carriage vehicles at any time during the previous year and who have also furnished a declaration to this effect along with PAN to the deductor/payer. This amendment will take effect from 1st June 2015.

• The definition of charitable purpose has been expanded to include ‘yoga’.

II.           Indirect Taxes

Tentative reiteration of GST rollout by 1st April 2016.

Central Excise & Customs

• General rate of excise duty rounded off to 12.50% as against the present rate of 12.36% by abolishing 2% education cess and 1% secondary and higher education cess.

• Consequently, the Counter Veiling Duty on imports also will become 12.50% or any other special rates as prescribed by the CBDT.

• Customs duty cess @3% will continue to attract on all imports.

The above changes will be effective from 1st March 2015.

• Inputs and capital goods are allowed to be sent directly to job worker’s premises at the direction of manufacturer or service provider.

Service Tax

• Service Tax rate increased from 12.36 percent to 14 percent and as soon as the increased tax rate becomes effective, education cess and secondary and higher education cess will no longer be applicable on service tax.

• A new chapter VI has been inserted in the Finance bill to levy Swachh Bharat Cess on all the taxable services @2% of the value of taxable services. The said SBC may not be eligible for Cenvat Credit as there are no amendments proposed in this Finance Bill for the Cenvat Credit Rules.

• Based on the above, all the taxable services will cost 16% more towards Service tax and SBC.

• In future, all services provided by Government or local authority to business entities will attract service tax levy.

• To ease the procedure for Reverse Charge Mechanism, the new Finance Bill proposed to bring the following services under the full reverse charge mechanism against the current mode of partial reverse charge mechanism:

◦ Supply of manpower services; and

◦ Security services.

The above mentioned revised tax rates and amendments will be effective from a date to be notified by the Central Government after the enactment of Finance Bill.

Cenvat Credit

• Time limit for availment of CENVAT credit on inputs and input services increased from 6 months to 1 year from the date of issuance of invoice, bill or challan.

• ‘Exempted goods’ to include ‘non-excisable goods’ removed from the factory for a price, which means that the proportionate CENVAT credit pertaining to inputs or input services used in or in relation to the manufacture of non-excisable goods is not allowed.

• Capital goods can remain with job worker for a period of 2 years (instead of 6 months allowed earlier) without requiring the reversal of CENVAT credit availed by the manufacturer.

• Credit of service tax paid by the recipient of service under partial reverse charge can be taken immediately on payment of tax; there is no need to wait for the payment of full value of service.

The above changes will be effective from 1 April 2015

Note: I have considered only the changes which are affecting the Individuals and Employers in normal circumstances. Please refer the Finance bill or consult for specific cases.  

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