PPT Presentation of Union Budget 2014-Anil Mathur

Report
THE FINANCE (NO. 2)BILL
2014
SALIENT FEATURES
ON
PROPOSALS RELATING TO
DIRECT TAXES
CA. ANIL MATHUR
JAIPUR
RATE OF TAXATION /BASIC EXEMPTION
 No change in rate of tax, SC & Cess .
 Slab rates in case of individual, HUF , AOP, BOI is as under:-
Income Slab
Rate of Tax
Upto 250000/- *
Nil
250000 *- 500000/-
10 %
500000-1000000
20%
Above 1000000
30 %
* In case of senior citizen, it will be 300000/-.
 No change in slab for Super Senior Citizen.
 Rebate u/s 87A upto 2000/- for resident individual having
income upto 500000/- shall continue.
 Change in methodology of DDT will increase effective rate
of tax for companies
DEFINITIONS : IMPORTANT CHANGES
 2 (13A) :- Business Trust ( New )


Means : “ A trust registered as an infrastructure investment trust
or a real estate investment trust , units of which to be listed on
recognized stock exchange in accordance with SEBI regulations and
notified by Central Govt. in its behalf.”
2 (14) : Capital Asset ( modified)


Means :
a) Property of any kind held by an assessee, whether or not
connected with his business or profession;
b) any securities held by FII which has invested in such securities
in accordance with regulation made by SEBI , but does not
include :(i) any stock in trade [ other than securities referred to in sub clause
(b)]
Definitions:
(Continues…..)
 Explanation inserted to assign meaning of FII as per section 115
AD and securities as per clause (h) of section 2 of SCR Act.
 2 (24):- Income (modified)
New sub clause (xvii) added to include any sum of money
referred to in clause (ix) of sub section 2 of section 56 .

2 (42A) :- Short term capital assets (modified)
Proposes to provide that for short tern capital asset the period
of holding shall be less than 12 months in case of
i) a security (other than a unit) listed in recognized stock
exchange in India.
ii) A unit of an “ equity oriented fund ”
Accordingly for unlisted securities and unit other than equity
oriented fund, period of more than 36 months will be LTCG.
Sec. 10 : Important Changes
 10(23 C) :- It provides for exemption for income to
university / educational institutions / hospital / other
institutions substantially financed by the Govt.
 However substantially financed by the Govt. was
not defined and now it is proposed to mean such
percentage of total receipts including voluntary
contribution as may be prescribed.
 Income shall be determined without deduction/
allowance of depreciation on asset which has been
claimed as application of income.
 10 (23FC): Provides for exemption of any income of
a Business Trust by way of interest received or
receivable from a SPV.
Sec. 10 …………….continues…..
 10 (23FD) :- Any distributed income, referred in
section 115UA, received by a unit holder from the
business trust, not being that proportion of the
income which is of the same nature as the income
referred to in clause ( 23FC).
 10 (AA):- SEZ
It exempts 100 % profits of SEZ units from exports. A new
sub section (10) added to provide that such units not entitled
to claim benefit u/s 35 AD in respect of capital expenditure of
any specified business.
Taxation of Charitable Trust
 Income required to be applied / accumulated or set apart
for application u/s 11 shall be determined without any
deduction by way of depreciation on any asset claimed as
application.
 Where trust / institution is entitled for exemption u/s 11
then it will not be entitled to claim any exemption u/s 10.
 A trust / institution which is granted registration u/s 12AA
in an assessment year , benefit will be available for
preceding assessment year provided the object and
activities were same in earlier year and the registration was
not refused / cancelled. AO also debarred for reopening of
assessment of earlier
year. (with effect from
01.10.2014) .
 Registration u/s
12AA can also be cancelled where
provision of sec. 11 & 12 don’t apply due to operation of
section 13 (1). (with effect from 01.10.2014)
Income from House Property
╬Deduction in respect of interest
payment on housing loan for
acquisition / construction of SOP
increased from 150000/- to 200000/-
Income from Business & Profession : Sec. 32 AC: Investment in New P&M :-

-
-
- Investment allowance @ 15% now available to installation of new P &
M exceeding 25 crores after 31.03.2015 and upto 31.03.2017.
- Such allowance not available for 31.03.15 to companies eligible under
100 crores investment provision in past.
Sec .35 AD:Benefit of 100 % deduction in capital expenditure also extended to
following two more categories on or after 01.04.2014 :a) lying & operating a slurry pipe line for transportation of iron ore
b) setting up and operating a semi conductor wafer fabrication
manufacturing unit notified by the board in accordance with such
guidelines as may be prescribed.
Any asset in respect of which deduction is claimed need to be used in
such specified business for period of 8 years from the year in which it
was acquired/ constructed.
Income from Business & Profession
continues ……
- Where such asset used in specified business is used
for purpose other than specified business, difference
between deduction claimed and depreciation allowable
u/s 32 will be treated as income under profit & gains
for the year in which the asset is so used.
 Sec. 37 :- Disallowance of CSR expenditure
- it is clarified by way of explanation that any
expenditure on activity relating to Corporate Social
Responsibility referred to in section 135 of the
Companies Act shall not be deemed to be an
expenditure for the purpose of business or profession.
Income from Business & Profession
continues ……
 Sec. 40 : Amount not deductible
 In respect of payment to non resident or outside India for
payment of interest, royalty or FTS, it will not be
disallowed if tax deducted on such expenses has been paid
on or before due date of filling of return of income u/s 139
(1). Further, in case TDS has been paid after due date of
filling of return, such sum shall be allowed as deduction in
the year in which payment is made.
 For payment to resident u/s 40 (a)(ia) disallowance will
now be restricted to 30% of the expenditure. Deduction
will be available if the TDS payment is subsequently
made.
Income from Business & Profession
continues ……
 Sec. 43(5): Speculative Transactions :-
It is proposed that eligible transactions in respect of trading in
commodity derivatives in a recognized association shall not be
considered as speculative transaction tax if it is chargeable to
CTT. (Retrospective from A. Y. 2014-15).
 Sec. 44AE: Presumptive Income :-
Distinction between heavy goods vehicle and other vehicles has
been removed and uniform presumptive income of Rs. 7500/per month will be applicable to assessee engaged in plying ,
hiring or leasing goods carriers.
Capital Gain
 Sec. 45 (5):- Compulsory Acquisition
Any amount of compensation in pursuance of an interim
order of a court , tribunal or other authority shall be
deemed capital gain of the previous year in which the
final order is made.
 Sec 47 :- Transactions not regarded as transfer
 Any transfer of capital asset being government security
carrying periodic payment of interest, made outside
India by non – resident to another non – resident
through intermediary dealing in settlement of securities.
 Any transfer of capital asset being share of SPV to a
Business Trust in exchange of units allotted by Trust to
the transferor.
Capital Gain …….Continues…..
 Sec. 48 :- Indexation
Indexation will now be governed by “Consumer Price
Index ( Urban )” in place of existing “Consumer Price
Index for Urban Non Manual Employees” with effect
from 01.04.2016.
 Sec. 51:- Advance money
Advance money will be taxable under income from
other sources in following circumstances :a) The sum received is forfeited
b) The negotiation do not result in transfer of capital
asset
c) Would not be allowed as deduction while
calculating capital gains
Capital Gain …….Continues…..
 Sec. 54 / 54F : Investment in New Residential
House
The rollover benefit for capital gain arising in transfer of
residential house or any other capital asset will be
allowed only in respect of investment made in one
residential house in India.
 Sec. 54 EC :- Investment in specified financial
asset
the overall ceiling of investment during the financial year
in which asset was transfer and in subsequent financial
year will be restricted to 50 lacs.
Income from other sources
 Sec. 56 (2) (ix) :-
Any sum of money received as an advance or otherwise in
course of negotiations for transfer of a capital asset shall be
chargeable to tax under the head, if such sum is forfeited and
the negotiations don’t result in transfer of such capital assets.
Set off of Losses
 Sec. 73 : losses in speculating transactions of
business
If principal business of company is business of trading of
shares or banking, the business of trading of shares shall not
be deemed to be speculative business.
Deduction under Chapter – VI A
 Sec. 80C :-
Deduction available has been enhanced to 1.5 lac from 1
lac.
 Sec. 80CCD:

Deduction now available to employees of private sector irrespective
of their date of employment.
The amount of deduction shall not exceed 1 Lac
 Sec. 80CCE :-
The overall ceiling for deduction u/s 80C/ 80CCC ,
80CCD increased to 1.5 lac.
 Sec. 80 - IA :Time limit for set up etc. extended upto 31.03.2017 from
31.03.2014
Transfer Pricing
 Sec. 92B: Meaning of International Transaction
The section presently provides that any transaction entered by
an enterprise with a person other than an AE shall be deemed to
be transaction between two AE if there exist a prior agreement
between such persons and AE.
It is now proposed to provide that a transaction shall be
deemed to be an international transaction where enterprise or
AE or both of them are non – resident irrespective of whether
other person is resident or non resident.
 Sec. 92 CCC :- Advance pricing agreement
The APA may provide that ALP or manner of ALP is to be
determined, once entered will be applicable to 4 previous years
preceding the year where APA is applicable subject to such
conditions & manner as may be prescribed. (w.e.f.
01.10.2014.)
Taxation in special cases : Sec . 112 LTCG on units of mutual funds
Long term capital gain on transfer of units of mutual funds other than
units of equity oriented funds will not be eligible for concessional rate
of tax of 10 % under this section.
 Sec. 115A : Taxation of specified non – resident
A non resident including a foreign company will be taxed at
concessional rate of 5 % in respect of interest earned on any long term
bonds including infrastructure bonds issued by specified company or
a business trust, at any time between 01.10.2014 to 1. 07.2017.
 Sec. 115 BBC: Anonymous Donations :
Earlier 5 % of total such donation or Rs. 100000/- which ever is
higher is taxed @ 30% and other at normal rate. Now, income tax is
payable on total income computed after reducing the amount of
anonymous donation which has been taxed @ 30% as against
reducing the income by full amount of anonymous donations.
Taxation in special cases…Continues…
 Sec. 115BBD: Dividend from foreign company
Concessional tax rate of 15 % on dividend received
by an Indian Company from a foreign company in
which the Indian company holds at least 26 % of
equity capital shall continued without sunset clause.
 Sec . 115JC : Alternate Minimum Tax


While calculating AMT amount of capital expenditure u/s 35
AD to be included after reducing allowable depreciation.
Credit of tax paid shall be allowed whether or not income of the
person is more than 20 lac or there is claim u/s 10AA or chapter
VI A or 35AD.
Taxation in special cases…Continues…
 Sec. 115O : Dividend Distribution Tax
Methodology of calculating DDT proposed to be
changed by grossing up and in the manner that tax
on tax to be calculated. Effective rate of tax will be
increased (w.e.f. from 01.10.14) . Example as under :Particulars
Under existing
provision
Under proposed
amendments from
01.10.2014
Dividend Distributed
`100
` 85
Tax on Dividend Distributed
`15
` 15
Total outgoings of company
`115
`100
Effective rate of DDT
15%
17.65%
Special provisions related to Business
Trust
Sec. 115 UA
 New Chapter XII- FA to be incorporated for specific
provisions of taxation for Business Trust.
 It means a trust registered as “Infrastructure
Investment Trust "or a “Real Estate Investment
Trust” whose units are listed on a recognised stock
exchange & notified by the Central Govt. in this
behalf.
 BT to hold controlling interest as may be required in
a SPV being an India company.
 Exchange of shares of SPV against units of BT will
not be regarded as transfer.
Special provisions related to Business
Trust ………Continues……..
 Subsequent sales of units of BT subject to capital gain
tax depending upon period of holding .
 Period of holding of shares to be included in period of
holding of units of BT for capital gain.
 Interest income received by BT from SPV is exempt.
 However on distribution of such interest to unit
holders, BT to deduct tax on source at specified rate.
 Other income of BT at MMR.
 BT to furnish its return of income.
 New provisions related to STT on transaction of
purchase / sale of units of BT specified.
Power to survey
Sec. 133A (effective from 01.10. 2014): Power of survey extended for purpose of verification of
TDS / TCS.
 However, tax officer has no right to impound the books
of accounts.
 Period of retention & custody of books extended to 15
days from against 10 days.
Sec. 133C ( New section w.e.f. 01.10.14)
 For verification of information in its possession relating
to any person , the prescribed Income Tax authority may
issue a notice to such person requiring him to furnish
information / documents which may be useful or
relevant to any inquiry or proceeding.
Return of income / Assessment
 A mutual fund , securitization trust, venture capital
fund & venture capital company & Business Trust to
compulsorily file their tax returns.
 The requirement
of furnishing report/ statement (
regarding distributed income of a Mutual fund ) to be
dispensed with.
 The Govt. to notify income computation and disclosure
standards to be followed by any class of assessee or in
respect of any class of income.
 Power to make best judgement assessment to be given
to the AO in the event the income has not been
computed in accordance with such notified standards.
Return of income / Assessment….
continues…
Sec . 142 A :- (w. e. f. 01.10.14)
 The section has been substituted to overcome the court’s
decisions which held that before making reference to
valuation officer it was mandatory to reject the books of
accounts .
 It is now proposed that AO for purpose of assessment or
reassessment make a reference to VO to estimate the
value of asset , property for investment without
satisfying about the correctness or completeness of
accounts.
 Time limit of 6 months provided for sending of the
report.
Other amendments
Tax Deducted at source :


Sec. 194DA:- (w.e.f. 01.10. 14)
Non exempt sums payable under life insurance policy
including bonus aggregating to 1 lac or more during any
financial year will be subject to TDS @ 2 %.
Time limit as provided u/s 201 (3) (ii) for passing order u/s
201 (1) further extended by 1 year (i.e. 7 years).
Sec. 220 (1A) to be inserted to provide that any demand u/s
156 shall be deemed to be valid till the disposal of appeal by
the last appellate authority or disposal of proceedings , as the
case may be & such notice of demand shall have effect as
provided in the section of 3 of Taxation Laws (Continuation
and Validation of Recovery Proceedings ) Act , 1964.
Other amendments …….continues….
 Where as a result
of an order pursuant to
rectification order or any order by any appellate
authority or revision order u/s 263 , the amount on
which interest was payable u/s 220 is increased , the
assessee to be liable to pay interest on the amount
payable as a result of such order, from the day
immediately after the expiry of period of 30 days
from the date of service of notice of demand u/ s156
till the day on which the amount is paid.
 Sec. 269SS / 269T :-
E-payment is considered as valid payment.
Other amendments …….continues….
 Sec .276D (w.e.f. 01.10.14)


- Imposition of fine added alongwith provision for imprisonment .
Sec . 281B (w.e.f. 01.10.14)
- Power of Tax
Authority to extend period of provisional
attachment amended to provide that total period of extension
shall not exceed to 2 years or 60 days after the date of
assessment / reassessment , whichever is later.
Sec. 285 BA : AIR return
 Original section substituted and also made applicable to
certain prescribed financial institutions.
 Form & manner and time limit for information to be
furnished to be prescribed . Corrections can be made within
10 days if inaccurate information provided.
 Penalty of
50000/- can be levied in case of inaccurate
information .
Thank You

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