Highlights of Union Budget 2014-15



Union Budget 2014-15  at a glance

I.             Income-tax

For Individuals,
Total Income                                                      Tax Rates (e)
Up to INR 250,000  (a),(b)                                                        NIL
INR 250,001 to INR 500,000 (c)                                                10%
INR 500,001 to INR 1,000,000                                                  20%
INR 1,000,001 and above (d)                                                  30%

a. For a resident individual aged between sixty and eighty, the basic exemption limit is INR 300,000.
b. For a resident individual aged eighty or above, the basic exemption limit is INR 500,000.
c. Rebate from tax of upto INR 2,000 or 100 per cent of the tax whichever is less available for a resident individual whose total income is below INR 500,000.
d. 10 per cent surcharge is applicable if the total income exceeds INR10,000,000.
e. A 3 per cent education cess is applicable on income-tax (inclusive of surcharge, if any).

► Deduction under section 80C on account of savings and investments increased by INR 50,000 from INR 100,000 to INR 150,000.
► Deduction for interest on housing loan for self-occupied house property increased by INR 50,000 from INR 150,000 to INR 200,000.
► Rates of corporate tax remain unchanged for both domestic and foreign companies.
► DDT to be paid after grossing up net profits distributed by the company or income distributed by mutual fund as the case may be.
► Concessional rate of withholding tax on interest on overseas borrowings extended to all LTBs (including LTIB). Further, the time line for obtaining overseas borrowing has been extended for three years up to 1 July 2017.
► Specified payments to a non-resident to be allowed as deduction if tax is deducted during the financial year and deposited on or before the due date of filing the return of income.
► Disallowance on account of non-deduction / late deduction and deposition of tax at source extended to cover all payments to a resident on which tax is deductible. Amount of disallowance to be restricted to 30% of the amount of expenditure.
Expenditure incurred on activities related to Corporate Social Responsibility not to be allowed as deductible expenditure.
► Deduction for investment in new plant and machinery
It is proposed that 15% of the cost of new plant and machinery be allowed as deduction in each of the financial years 2014-15, 2015-16 and 2016-17 in which such investment exceeds INR 25 crores in that particular year.
► Capital gain exemption on investment in a residential house property available only if the investment is made in one residential house situated in India.
► Multiple year data to be permitted for comparability analysis under TP.
► Range concept for determination of arm’s length price.

II.           Customs duty

► Peak rate of BCD remains unchanged at 10%.
Discretionary powers of CESTAT and commissioner (appeals) for grant of stay of pre-deposit has been replaced with a mandatory deposit of 7.5% for first appeal / 10% for second appeal of the duty demanded or penalty imposed or both. The pre-deposit is subject to upper ceiling limit of INR 100 million. The amendment is prospective and not applicable to appeals and stay applications pending for decision prior to enactment of Finance Bill.
► Discretionary power of CESTAT to refuse admission of appeal has been increased from the existing limit of INR 50,000 to INR 200,000.
► Advance ruling option made available to resident private limited companies.
► Free baggage allowance increased from INR 35,000 to INR 45,000.

III.          Excise duty

► No change in the basic Excise duty rate of 12.36%.
► Advance ruling option made available to resident private limited companies.
► Mandatory pre-deposit prescribed as 7.5% / 10% depending on the stage of appeal.
Excise Valuation Rules have been amended to prescribe that the sale price shall be deemed to be the transaction value even if goods are being sold below cost (if no additional consideration flows from the buyer), provides relief from the decision of the Supreme Court in case of Fiat India Private Limited.

IV.         Service tax

► No change in effective Service tax rate of 12.36%.
Exemption from Service tax extended to services in relation to serving of food or beverages by a canteen maintained in a factory having facility of air conditioning or air heating.
► Advance ruling option available to resident private limited companies.
► Mandatory pre-deposit prescribed as 7.5%/10% depending on the stage of appeal.
► Location of service provider to be the place of supply for an intermediary of goods.
► Powers granted to revenue officers to undertake search and seizure.
► Graded increase in interest rates for delay beyond six months (ranging from 24% to 30%).

V.           CENVAT Credit

► Credit of inputs and input services now required to be availed within six months from the date of invoice.
► LTUs no longer eligible to transfer credit availed on or after 11 July 2014.

VI.         CST

► No change in CST rate.

VII.        GST

► No GST implementation date announced, however commitment to introduce GST affirmed.

VIII.      Penalty under TP provisions

Penalty for failure to furnish any document or information under transfer pricing provisions:
► Presently, penalty for failure of filing or furnishing inaccurate tax withholding/tax collection range from INR 10,000 to INR 100,000. However, there is no mention as to who will levy such penalty.
► Now, it has been provided that the Assessing Officer may direct a taxpayer to pay such penalty.
This amendment will be effective from 1 October 2014.

IX.         Withholding tax / TDS

Provisions relating to withholding tax on overseas borrowing:
► Presently, a lower withholding tax rate of 5% applies on interest in respect of monies borrowed by an Indian company in foreign currency or by issue of LTIBs at any time on or after 1 July 2012 but before 1 July 2015 subject to certain conditions.
► Now, the benefit of concessional rate of withholding tax has been extended to all LTBs including LTIBs.
► Further, this benefit of lower withholding tax rate has been extended for overseas borrowing made up to 1 July 2017.
► Consequential amendment is also proposed in section 206AA to ensure that this benefit of lower withholding tax is extended to payment of interest on any LTBs referred to in section 194LC.
The above amendment will be effective from 1 October 2014.
Provisions relating to withholding tax from non-exempt payments made under life insurance policy introduced:
► As per section 194-DA, any sum received under a life insurance policy, which does not satisfy conditions laid down in section 10(10D) will now be subject to withholding tax at the rate of 2%.
However, withholding tax would not be attracted in case the sum paid during the year is less than INR 0.1 million.
The above amendment will be effective from 1 October 2014.

X.           Other Changes

► The Government has notified a minimum pension of INR 1,000 per month for all members subscribing to the Employee’s Pension Scheme, 1995.
► Further, the wage limit for mandatory participation in the Employee’s Pension Scheme, 1995 has been increased from INR 6,500 per month to INR 15,000 per month.
► Employees Provident Fund Organization will launch the Uniform Account Number Service for contributing members to facilitate portability of Provident Fund accounts.
► Limit for contribution to the Public Provident Fund Scheme has been increased from INR 100,000 to INR 150,000.
► Sum of INR 500 crore for developing a Textile mega-cluster at MYSORE and six other cities.



                                                            ------------------------