Budget 2015
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Posted Date : 04-Mar-2015 , 07:13:13 pm | Posted By RATHI
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BUDGET 2015 / FINANCE BILL 2015
Customarily, the Finance Minister submits before the Parliament the Finance Bill ( popularly known as Budget ) every year on 28th February and it is normally a very anxiously awaited event throughout the Country as the common man as also the taxpayer comes to know of the Govt.’s Plans for the coming year as to how the Govt. will spend its’ resources and how it will raise the money for the expenditure. This year, being the first year of the Narendra Modi led BJP Govt. ( first single party non Congress Govt. in the Country since Independence ) , there were lot of expectations and lot of curiosity as to what the Finance Bill would have for everybody. And the fact that the person who is known as “Chanakya” of the new Govt. was presenting the Budget created more curiosity. Well, by now, all of us have got a fair idea as to what the Budget has been and what it contains for all of us. Since most of us belong to the industry which is reeling under unprecedented recession and slow down for last 2 years or services which are dependent for revenue mainly on the industry, we were more anxiously waiting for this Budget as to what ideas the Finance Minister has to kick start the Economy.
However, the FM has not announced any big bang measures except the slew of new schemes and spending plans which are likely to bring more money in the market and may create opportunities for the industries and employment for the masses. However, one very negative measure he has announced which is increase in the Service Tax Rate by 2% making it 14%. It may go up to 16% if he decides to levy additional surcharge of 2% being “Swachha Bharat Cess’, at a later date for which he has sought Parliament’s permission right now. Though much of the Service Tax has Cenvat element which reduces its impact on many businesses, the common public has to bear the ultimate burden of the Service Tax and they cannot get any relief in the form of CENVAT. Then it has cascading effect also. The reason given being to make it easy to move to GST Regime. How ? Not explained. When GST is introduced, many indirect taxes would get merged in it and the people are likely to be benefitted. Why tax the people right now when GST is one year away ? Further, many more services have been brought under the Service Tax net. When we start feeling that no more additions can be made to the List, they come up with new ideas every year and find out new services to tax us.
The Govt. is committed to make it easy for the MSME Sector to do business, as announced by the FM. However, is he not aware of the havoc the TDS Provisions have played with the small businesses ? Many small business enterprises have turnover in excess of Rs. 100 Lacs, the threshold limit for attracting the Tax Audit Provisions. But the turnover goes up due to price escalations and inflation. But majority of them do not have any infrastructure to handle payment of TDS and filing TDS Returns. Forget about infrastructure, majority of them do not find good accountants to prepare their accounts to even file the Income Tax Returns on time. But they have to mandatorily pay Rs. 200/- per day of default for delay in filing TDS /TCS Returns. What an irony ? It would have been appropriate if the FM had introduced Section 234E for large taxpayers having turnover beyond a threshold limit.
Life is going to be difficult for many depositors who are having deposits with Co-op. Banks as from the year 2015-16, these Banks will have to deduct tax at source from interest paid beyond Rs. 10,000/- on deposits ( be it Fixed/Time Deposit or Recurring Deposit ) to any depositor, member or non-member. Of course, this may not impact people who have all their deposits declared in their returns.
Wealth Tax has been abolished from FY 2015-16. A very good move, indeed. The tax payer will have some compliance burden lessened. Not many tax payers were filing Wealth Tax Returns but there were nagging fears that notices would start pouring in from the Dept. on this front also as they now possess excellent software infrastructure. The wealth tax has been replaced by a 2% surcharge on taxpayers having taxable income of Rs. 1 Crore or more. Further, to track the wealth held by individuals and entities, the information which was earlier to be filed under Wealth Tax Returns will now be made part of the Income Tax Returns.
Some rationalization has been made on the front of deduction for Medical Insurance Premia, Transport Allowance ( Conveyance Allowance ) or deduction in respect of handicapped persons or handicapped dependents. But the amendments in Section 269SS & Section 269T must be noted. No person shall accept from any person any loan or deposit or any some of money, whether as advance or otherwise, in relation to transfer of an immovable property, whether or not the transfer takes place. Similarly, no repayment of any advance in Cash of Rs. 20,000/- and above in relation to transfer of an immovable property, whether or not the transfer takes place. Now this limit of Rs. 20,000/- under Sections 269SS and Section 269T was fixed really long ago. It would have been better if this limit had been fixed at Rs. 50,000/- at least. However, since the FM is aspiring to have a Cashless Society, this was obviously out of question.
Some relief has been given for employing new workmen to manufacturing units by amending Section 80JJAA which is now available to Firms and Proprietorships apart from Companies also and the number of new workmen to be employed is brought down to 50 from 100 earlier. The deduction is 30% of wages to new workmen. Another rationalization is of Depreciation Provisions whereby a manufacturing unit would be able to claim additional depreciation of 20% on new plant & machinery purchased after 30th Sept. – 10% to be claimed in the year of installation/purchase and remaining 10% to be claimed in immediately succeeding year.
A big relief has been given by deferring the Provisions of GAAR, i.e. General Anti Avoidance Regulations. Further, the threshold for the Domestic Transfer Pricing Provisions to apply has been raised from Rs. 5 Crores to Rs. 20 Crores. Last but not the least, the FM, during his Budget Speech, put at rest any speculation regarding implementation of Direct Taxes Code which was neither to the liking of Tax Professionals not the Tax Payers and would have created avoidable chaos if it was implemented in the form in which it was drafted. In any case, many of the Provisions of the DTC have already been introduced in various Budgets since DTC was introduced.
Following Provisions have been introduced to curb the circulation of Black Money :-
- Acceptance or re-payment of an advance of Rs. 20,000 or more in cash for purchase of immovable property to be prohibited.
- A new section 37A is proposed to be inserted in FEMA. It provides that if any person holds any foreign exchange, foreign security or any immovable property outside India in contravention of section 4 of FEMA, the equivalent value of property in India can be seized. This power of seizure under FEMA is in addition to the penal action under Income-tax Act and penal action under FEMA.
- For concealment of income and assets and tax evasion in relation to foreign assets, following measures are proposed:
Prosecution with punishment of rigorous imprisonment up to 10 years;
Offences will be non compoundable;
Offenders will not be allowed to approach the Settlement Commission;
Penalty at the rate of 300% of tax evaded.
- For non filing of return or filing return with inadequate disclosure, Prosecution with punishment of rigorous imprisonment up to 7 years.
- New Benami Transactions Prohibition Act to be introduced in the Parliament during current session.
The person responsible for making cross border payment is required to furnish information as envisaged in Form 15CA and 15CB while making such payments. In order to ensure correct tax compliance, new section 271-I is proposed to be inserted whereby a penalty of Rs. 1,00,000/- will be levied in the event of failure to furnish information or furnishing of inaccurate information by the person responsible for making the payment to a non-resident. It is to be noted that the Forms are to be furnished whether the amount transferred is taxable or not.
The Employers should not overlook the seemingly innocuous amendment in section 192 of the Income-tax Act, by which following Provision has been inserted after sub-section (2C), with effect from the 1st day of June, 2015, namely:— “(2D) The person responsible for making the payment referred to in sub-section (1) shall, for the purposes of estimating income of the assessee or computing tax deductible under sub-section (1), obtain from the assessee the evidence or proof or particulars of prescribed claims (including claim for set-off of loss) under the provisions of the Act in such form and manner as may be prescribed.”.
Accordingly, appropriate deduction of tax from Salary after considering various deductions based on available evidence is the responsibility of the Employer. In case of short deduction, the Salary so paid may be liable for disallowance u/s. 40(a)(ia).
In this regard, it is also pertinent to note that there was amendment carried out by Finance (No.2) Act, 2014, w.e.f. 01/04/2015, i.e. Assessment Year 2014-15 whereby an assessee would get deduction of only 30% of the amount disallowed u/s. 40(a)(ia) in the earlier year for non deduction of tax at source but paid in subsequent year or payment of tax deducted at source after the due date of filing return of income. Obviously, now the penalty for non deduction of tax or non payment of tax within the due dates is quite heavy. These provisions are over and above the penal provisions for TDS defaults.
It is proposed to reduce Corporate Tax from 30% to 25% over the next four years, starting from next financial year. This is aimed at lowering the tax rate while doing away with multiple deductions and exemptions to arrive at Taxable Income.
On the Excise front, the time limit for taking CENVAT Credit has been extended to 12 months from the earlier 6 months which is quite welcome.
In respect of Service Tax, reimbursable expenses incurred by the service provider during the course of providing the services are proposed to be included in the amount subject to Service Tax. This is to curb the practice adopted by some assesses to split the entire work order in different categories to save tax.
Fortunately, standing by what he had committed earlier, the FM did not resort to retrospective amendments for which the earlier Finance Ministers, more particularly Mr. P. Chidambaram, were famous. This really goes a long way in avoiding unnecessary and avoidable litigation. Any amendment to the Act should be prospective so that the tax payers may be able to plan their tax affairs well in advance. However, the FM has not been able to avoid the temptation to bring in amendments to the Sections where the Courts had ruled against the Dept./Revenue.
A Trade Receivables Discounting System (TReDS) is proposed to be introduced which will be an electronic platform for facilitating financing of trade receivables of MSMEs. A really good measure to help MSME units recover their funds faster.
Comprehensive Bankruptcy Code of global standards is proposed to be brought in FY 2015-16. This will make it easy for units to close faster if going becomes tough for them and will enhance ease of doing business.
SETU ( Self-Employment and Talent Utilization) to be established as Techno-Financial, Incubation and Facilitation Programme to support all aspects of start-up business. This will help make it easy to start business for new entrepreneur.
A draft legislation is proposed to be prepared whereby the need for multiple prior permissions can be replaced by a pre-existing regulatory mechanism, to create ease of doing business in India and to make India an attractive Investment Destination.
Gold Monetization Scheme is proposed to be introduced which will allow the depositors of gold to earn interest in their metal accounts. This will encourage people to convert their Gold Holdings into Gold Bonds. In turn, Gold Imports would go down making life easier for the Govt. as it would reduce pressure on the currency as also Balance of Payments.
Visas on arrival to be increased to 150 countries in stages. This will help increase Tourism.
A project development company is proposed to be set up to facilitate setting up manufacturing hubs in CMLV countries; viz. Cambodia, Myanmar, Laos and Vietnam. This will create new opportunities for entrepreneurs, more particularly from MSME Sector.
Overall, the Finance Minister has announced a slew of measures to accelerate growth and rationalize many a procedures. He has announced various schemes which are forward looking and if those materialize, then doing business in India would really become easy. Till then, we have to keep our fingers crossed.
By :-
CA GOKUL B. RATHI, Pune
M : 98500 41311
Mail : gokulrathi007@yahoo.co.in
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Category :
Income Tax |
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