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Analysis of Budget from the perspective of Income Tax

Analysis of Budget from the perspective of

Income Tax

Key Highlights

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No change in rate of personal income tax.

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Proposal to reduce corporate tax from 30% to 25% over the next four years, starting from next financial year.

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Rationalisation and removal of various tax exemptions and incentives to reduce tax disputes and improve administration

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Rate of Income-tax on royalty and fees for technical services reduced from 25% to 10% to facilitate technology inflow

· 

Basic Custom duty on certain inputs, raw materials, inter mediates and components in 22 items, reduced to minimise the impact of duty inversion

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All goods, except populated printed circuit boards for use in manufacture of ITA bound items, exempted from SAD

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SAD reduced on import of certain inputs and raw materials.

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Central excise/Service tax assesses to be allowed to use digitally signed invoices and maintain record electronically

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Wealth-tax replaced with additional surcharge of 2 per cent on super rich with a taxable income of over Rs. 1 crore annually

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Education cess and the Secondary and Higher education cess to be subsumed in Central Excise Duty

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Time limit for taking CENVAT credit on inputs and input services increased from 6 months to 1 year

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Service-tax plus education cesses increased from 12.36% to 14% to facilitate transition to GST

· 

Donation made to National Fund for Control of Drug Abuse (NFCDA) to be eligible for 100% deduction u/s 80G of Income-tax Act

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100% deduction for contributions, other than by way of CSR contribution, to Swachh Bharat Kosh and Clean Ganga Fund.

· 

Limit of deduction of health insurance premium increased from Rs. 15000 to Rs. 25000, for senior citizens limit increased from Rs. 20000 to Rs. 30000.

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Limit on deduction on account of contribution to a pension fund and the new pension scheme increased from Rs. 1 lakh to Rs. 1.5 lakh.

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Additional deduction of Rs. 50000 for contribution to the new pension scheme u/s 80CCD

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Negative List under service-tax is being slightly pruned to widen the tax base.

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Service-tax exemption: Transport of goods for export by road from factory to land customs station

               
Memorandum to Budget:

DIRECT TAX.

· 

TDS exemption u/s 194C shall be limited to only those transporters who are eligible to compute their income under Sec. 44AE and not to all the transporters w.e.f. 01.06.2015

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It is proposed to amend the provisions of section 195 of the Act to provide that the person responsible for paying any sum, whether chargeable to tax or not, to a non-resident, not being a company, or to a foreign company, shall be required to furnish the information of the prescribed sum in such form and manner as may be prescribed. These amendments will take effect from 1st June, 2015

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It is proposed to insert a new provision in Act for deduction of tax at the rate of 10% on pre-mature taxable withdrawal from EPFS. However, some employees making pre-mature withdrawal may be paying tax at higher slab rates (20% or 30%). Therefore, the shortfall in the actual tax liability vis-à-vis TDS is required to be paid by these employees either by requesting their new employer to deduct balance tax or through payment of advance tax / self-assessment tax. These amendments will take effect from 1st June, 2015

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In order to have a better and meaningful monitoring mechanism for weighted deduction allowed under section 35 (2AB) of the Act, it is proposed to amend the provisions of section 35(2AB) of the Act to provide that deduction under the said section shall be allowed if the company enters into an agreement with the prescribed authority for cooperation in such research and development facility and fulfills prescribed conditions with regard to maintenance and audit of accounts and also furnishes prescribed reports. These amendments will take effect from 1st April, 2016.