Budget 2015-16: Tax proposals

Odisha Channel Bureau New Delhi, Feb 28: Finance Minister Arun Jaitley has said that a very important dimension to our tax administration is the fight against the scourge of black money. He said that taxation is an instrument of social and economic engineering.Tax collections help the Government to provide education, healthcare, housing and other basic facilities to the people to improve their quality of life and to address the problems of poverty, unemployment and slow development. To achieve these objectives, it has been our endeavour in the last nine months to foster a stable taxation policy and non-adversarial tax administration. In his budget speech, Jaitley said that Goods and Services Tax (GST) introduced in the last Session will play a transformative role in the way our economy functions. This transformative piece of legislation in indirect taxation needs to be matched with transformative measures in direct taxation. He said that the rate of corporate tax is proposed to be reduced from 30% to 25% over the next four years. This will lead to higher level of investment, higher growth and more jobs.The broad things adopted in finalizing the tax proposals include:- A. Measures to curb black moneyB. Job creation through revival of growth and investment and promotion of domestic manufacturing and ‘Make in India’;C. Minimum government and maximum governance to improve the ease of doing business;D. Benefits to middle class taxpayers;E. Improving the quality of life and public health through Swachch Bharat initiatives; andF. Stand alone proposals to maximize benefits to the economy.Jaitley said that a considered decision has been taken to enact a comprehensive new law on black money to specifically deal with such money stashed away abroad. The Bill in this regard is proposed to be introduced in the current Session of the Parliament. The key features of the bill will include punishment of rigorous imprisonment up to ten years for concealment of income and assets and evasion of tax in relation to foreign assets. This offence will be made non-compoundable and offenders will not be permitted to approach the Settlement Commission. Penalty for such concealment of income and assets at the rate of 300 per cent of tax shall be levied. Non-filing of return or filing of return with inadequate disclosure of foreign assets will be punishable with rigorous imprisonment up to seven years.As regards curbing domestic black money, a new and more comprehensive Benami Transactions (Prohibition) Bill will be introduced in the current Session of the Parliament. Shri Jaitley said that this law will enable confiscation of benami property and provide for prosecution, thus, blocking a major avenue for generation and holding of black money in the form of benami property, especially in real estate. Quoting of PAN is being made mandatory for any purchase or sale exceeding the value of Rs.1 lakh. To improve enforcement, CBDT and CBEC will leverage technology and have access to information in each other’s data-base.Mentioning job creation as the second pillar of taxation proposals, Jaitley said that this will be ensured through revival of growth and investment and promotion of domestic manufacturing and ‘Make in India’. The tax ‘pass through’ is proposed to be allowed to both Category-1 and Category-2 alternative investment fund so that tax is levied on the investors in these funds and not on the funds per se.To rationalize the capital gain regime for the sponsors exiting at the time of listing of the units of Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) subject to payment of Securities Transaction Tax (STT) is proposed, he said. Permanent Establishment (PE) norm will be modified to encourage fund managers to relocate to India.The Finance Minister said that General Anti Avoidance Rule (GAAR) will be deferred by two years. It will apply to investments made on or after 01-04-2017, when implemented. In order to facilitate young entrepreneurs rate of income tax on royalty and fees for technical services will be reduced from 25 per cent to 10 per cent.To generate greater employment opportunities the benefit of deduction for employment of new regular workman to all business entities will be extended.The eligibility threshold of minimum 100 regular workmen will be reduced to 50.Recognizing the importance of indirect taxes in the context of promotion of domestic manufacturing and ‘Make in India’, the Finance Minister said basic custom duty on certain inputs, raw materials, intermediates and components in 22 items is proposed to be reduced to minimize the impact of duty evasion. All goods except populated printed circuit boards for use in manufacture of ITA bound items are proposed to be exempted from SAD.Subject to actual user condition SAD will be reduced on import of certain other imports and raw materials. Jaitley said wealth tax is proposed to be abolished and replaced with an additional surcharge of 2 per cent on the super rich with the taxable income of over Rs.1 Crore. With this 2 per cent additional surcharge a collection of Rs.9,000 Crore is targeted against a tax sacrifice of Rs.1,008 Crore.To eliminate the scope for discretionary exercise of power and provide a hassle-free structure to the tax payers, Shri Jaitley proposed to increase the threshold limit from Rs.5 Crore to Rs.20 Crore.In order to rationalize the MAT provisions for FIIs, profits corresponding to their income from capital gains on transactions in securities which are liable to tax at a lower rate, shall not be subject to MAT, Shri Jaitley said.Education cess and the Secondary and Higher education cess is proposed to be subsumed in central excise duty. The general rate of central excise duty of 12.36 per cent including the cesses will be rounded off to 12.5 per cent. The Ad-valorem rates of excise duty lower than 12 per cent and those higher than 12 per cent with a few exceptions are not proposed to be increased. Excise duty on foot-wears with leather uppers and having retail price of more than Rs.1,000 per pair is proposed to be reduced to 6 per cent. Shri Jaitley said on-line central excise and service tax registration will be done in two working days. As a measure of business facilitation time limit for CENVAT credit on inputs and input services to be increased from 6 months to one year. Service tax plus education cess is proposed to be increased from 12.36 per cent to 14 per cent to facilitate transaction to GST. Jaitley said that cleanliness of households and clean environment are very important social causes. As an initiative to Swachh Bharat Abhiyan Shri Jaitley proposed 100 per cent reduction for contribution, other than by way of CSR contributions, to the Swachh Bharat Kosh. A similar tax treatment is also proposed for the Clean Ganga Fund, he said.Shri Jaitley proposed an increase in clean energy cess from Rs.100 to Rs.200 per metric tonne of coal, etc.to finance clean environment initiatives. He further said that excise duty of sacks and bags of polymers of ethylene other than for industrial use is proposed to be increased from 12 per cen to 15 per cent. He also mentioned an enabling provision to levy Swachh Bharat Cess at the rate of 2 per cent or less on all or certain services if need arises. Shri Jaitley said that services by common affluent treatment plant will be exempt from service tax. He also proposed concessions on customs and excise duty available to electrically operated vehicle and hybrid vehicle extended up to 31-03-2016.The Finance Minister proposed no change in the rate of personal income tax and rate of tax for companies in respect of income earned in the finance year 2015-16, assessable in Assessment Year 2016-17.Jaitley proposed to levy a surcharge @ 12 per cent on individuals, HUFs, AOPs, BOIs, artificial juridical persons, firms, cooperative societies and local authorities having income exceeding Rs.1 Crore. Surcharge in the case of domestic companies having income exceeding Rs.1 Crore and up to Rs.10 Crore is proposed to be levied @ 7 per cent and surcharge @ 12 per cent is proposed to be levied on domestic companies having income exceeding Rs.10 Crore. He further proposed that in the case of foreign companies the surcharge will continue to be levied @ 2 per cent if the income exceeds Rs.1 Crore and is up to Rs.10 Crore, and @ 5 per cent if the income exceeds Rs.10 Crore.It is also proposed to levy a surcharge @ 12 per cent as against current rate of 10 per cent on additional income tax payable by companies on distribution of dividends and buyback of shares, or by mutual funds and securitization trusts on distribution of income.The education cess on income tax @ 2 per cent for fulfillment of the commitment of the Government to provide and finance universalized quality based education and 1 per cent of additional surcharge called ‘Secondary and Higher Education Cess’ on tax and surcharge is proposed to be continued for the financial year 2015-16 for all taxpayers, the Minister said.Describing the extension of benefits to middle class tax payers as the priority of the government, Jaitley proposed the following concessions:- A. Increase in the limit of deduction in respect of health insurance premium from Rs.15,000 to Rs.25,000.(1) For senior citizens the limit will stand increased to Rs.30,000 from the existing Rs.20,000.(2) For very senior citizens of the age of 80 years or more, who are not covered by health insurance, deduction of Rs.30,000 towards expenditure incurred on the treatment will allowed.B. The deduction limit of Rs.60,000 towards expenditure on account of specified diseases of serious nature is proposed to be enhanced to Rs.80,000 in case of very senior citizens.C. Additional deduction of Rs.25,000 will be allowed for differently abled persons under Section 80DD and Section 80U of the Income-tax Act.D. The limit on deduction on account of contribution to a Pension Fund and the New Pension Scheme is proposed to be increased from Rs.1 lakh to Rs.1.5 lakh.E. To provide social safety net and the facility of pension to individuals and additional deduction of Rs.50,000 is proposed to be provided for contribution to the New Pension Scheme under Section 80 CCD. This will enable India to become a pensioned society instead of a pensionless society.F. Investments in Sukanya Samriddhi Scheme is already eligible for deduction under Section 80C. All payments to the beneficiaries including interest payment on deposit will also be fully exempt.G. Transport allowance exemption is being increased from Rs.800 to Rs.1,600 per month.H. For the benefit of senior citizens, service tax exemption will be provided on Varishta Bima Yojana.