Budget Highlights - Direct Taxes

 

Budget Highlights - Important Direct Tax Proposals   

No change in in tax rates including the rate of surcharge/ education education cess. However, basic exemption limit for individual/ HUF/AOP is raised from Rs.2 lacs to Rs.2.5 lacs and for individuals of the age of 60 years or more but less than 80 years the basic exemption limit is raised from Rs.2.5 lacs to Rs.3 lacs.

 

Investment iin n Pubic Provident Fund Scheme has been increased increased from Rs.1 lacs to Rs.1.5 lacs. Correspondingly, investment limit u/s 80C has been raised from Rs.1 lacs to Rs.1.5 lacs.

 

Deduction limit on account of interest on loan taken for acquisition or construction of selfoccupied property has been raised from Rs.1.50 lacs to Rs.2 lacs.

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The benefit of concessional concessional rate of withholding tax of 5% u/s 194LC on interest paid by an Indian Company to non-residents on monies borrowed in foreign currency from a source outside India under a loan agreement or issue of long term bond is extended on borrowings made before 01.07.2014.

 

Any securiti securities es held by Foreign Institutional Investors would be treated as capital capital asset and therefore income arising from transfer of such securities would be treated as capital asset and not business income.

 

A roll back mechanism is introduced in Advance Pricing Pricing Agreement (APA). Presently, a person can get the arm’ arm ’s length price (ALP) determined in relation to an international transaction by entering the APA. The agreement is valid for a period not exceeding the 5 previous years. It is now provided that one such agreement is entered it would also apply for preceding four previous years.

 

Deduction u/s 32AC @ 15% which is presently made available to a company engaged in business of manufacturing or production of any article or thing if it acquires and install new plant and machinery exceeding Rs.100 crores has been reduced to Rs.25 crores to cover medium size investments. The benefit is available for three years i.e. for investment upto 31.03.2017.

 

Tax holi holiday day period u/s 80IA for ten years years is extended to undertaking which begin generation, distribution and transmission of power by 31.03.2017.

 

Any sum of money received as advance in course of transfer of capital asset, if forfeited would be chargeable to tax as income from other sources u/s 56 and not reduced from cost of acquisition of the asset as presently provided in section 51.

 

In case of payment to non-residents without deduction of tax at at source, expenditure is disallowed u/s 40(a)(i) if it is not paid within the time prescribed u/s 200(1). This period is now extended to provided that if tax is deducted during the previous year and paid before the due date of filing of return u/s 139(1), the expenditure would not be disallowed.

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In case of any payment to resident without deduction of tax at source, entire expenditure is allowed u/s 40(a)(ia). It is now provided that such disallowance should be restricted to 30% of the expenditure as against 100% disallowance presently made. Further, under existing provision only certain payments are covered. Certain payment such as salary, directors fees etc are not covered. It is provided that disallowance u/s 40(a)(ia) shall extend to all expenditure on which tax is deductible u/s Chapter XVIIB of the Act.

 

The presumptive income u/s 44AE in case of an assessee who is engaged in the business of

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plying, hiring or leasing goods carriages and owning not more than 10 goods carriages is presently Rs.5,000/- p.m for heavy good vehicles (HGV) and Rs.4,000/- p.m. for other than HGV. The distinction between HGV and other than HGV has been removed and the presumptive income is proposed at Rs.7,000/- p.m.  

Eligible transaction in respect of trading trading and commodity derivatives in in the recognized association and chargeable to commodity transaction tax shall not be considered to be a speculative transaction.

 

Section 54 and 54F provides exemption from capital capital gain where where assessee makes iinvestment nvestment in purchase/ construction of a residential house. There were controversy as to whether the word ‘a’ means one or any and whether the residential house should be in India Indi a only or can be outside India also. It is therefore proposed that benefit of section 54/54F would be available only when the investment is made in one residential house situated in India.

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Section 54EC is amended to provide that where capital gain arises from the transfer of a long term capital asset, the assessee can make investment in the specified capital asset within a period of 6 months of Rs.50 lacs only even if such period falls in two financial years.

 

Reference u/s 142A for estimating the value value of any investment, bullion, bullion, jewellery or property can be made by AO to the valuation officer even without rejecting the books of accounts. The valuation officer is required to send a copy of his estimates within a period of 6 months from the end of the month in which the reference is made.

 

Explanation 2 to section 37 is inserted to clarify that expenditure on Corporate Corporate Social Responsibility referred in section 135 of the Companies Act, 2013 shall not be deemed to be an expenditure incurred for the purpose of business. Thus, CSR expenditure would be disallowed in computing the total income.

 

The rate of tax on long term capital gain on transfer of units of mutual funds other than equity

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oriented funds is increased from 10% to 20%. Further, unlisted securities and the units of mutual funds other than equity oriented mutual funds shall be considered as short term capital asset if it is not held for more than 36 months.  

DDT iis s to levy on gross amount instead of the amount paid net net of taxes.

 

Government to review DTC DTC in its present shape and take a v view iew iin n a whole matter.

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