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Finance Minister Mr. Arun Jaitley has presented today his first full budget for the fiscal year 2015-16, terming it as a growth focused budget, without tripping on the fiscal deficit constraints. The Finance Minister said the GDP growth is expected to accelerate between 8 to 8.5 percent in the fiscal year starting 2015.

The highlights of Budget 2015 is as below;

Income Tax Rates

No changes in tax rates in respect of income earned during the FY 2015-16.

Tax Rates for FY 2015-16 are given below:

A. (i) Individual, HUF, AOP, BOI,AJP

(ii) Individual resident in India (Age between 60 & 80 years)

(iii) Individual resident in India (Age above 80 years)

Surcharge increased from 10% to 12%, if Total Income exceeds Rs 1 crore.

Education Cess to be continued @ 3%

B.  Co-operative Societies 

Income Tax rates will continue to be the same as those specified for Financial Year 2014-15.

Surcharge increased from 10% to 12%, if Total Income exceeds Rs 1 crore.

Education Cess to be continued @ 3%

C.  Partnership Firms/LLP/Local Authorities: 

Income Tax rates will continue to be at 30%

Surcharge increased from 10% to 12%, if Total Income exceeds Rs 1 crore.

Education Cess to be continued @ 3%

D. Companies

No change in Tax rates. Income tax rate to be reduced to 25% over next 4 years starting from next FY.

Domestic Companies: Taxable at 30%

Surcharge increased by 2%:

If Total Income exceeds Rs 1 crore but less than 10 crore – @ 7 %

If Total Income exceeds Rs 10 crore – @ 12 %

Other than Domestic Companies: Taxable at 40%

No change in surcharge rate

If Total Income exceeds Rs 1 crore but less than 10 crore – @ 2 %

If Total Income exceeds Rs 10 crore – @ 5 %

Education Cess @ 3% to be continued.

Deductions from Gross Total Income Chapter VI-A

Section 80C: Deduction in respect of life insurance premia.. etc (w.e.f AY 2015-16)
Investments made in Sukanya Samriddhi Account Scheme will be eligible for deduction U/s 80C w.e.f AY 2015-16
Further, the Interest accruing on deposits in such account will be exempt from tax u/s 10(11A).

Section 80CCC: Deduction in respect of contribution to pension funds (w.e.f AY 2016-17)
The existing limit of deduction of Rs 1 lakh is raised to Rs 1.5 lakhs (within the overall limit provided in section 80CCE)

Section 80CCD: Contribution to pension schemes of Central Govt. (w.e.f AY 2016-17)

The existing limit of deduction U/s 80CCD(1) i.e assessee contribution to the pension scheme is omitted which currently restricts the deduction to Rs 1 lakh.

Therefore, the assessee can now claim deduction U/s 80CCD(1) up to 10% of salary in case of an employee or 10% of gross total income in any other case, within the overall ceiling limit of Rs. 1.5 lakhs u/s Sec 800CCE.

Additional Deduction: New subsection (1B) is proposed to provide for an additional deduction in respect of any amount paid, of up to Rs. 50,000 for contributions made by any individual assessees under the NPS.

It is also proposed to provide that no deduction under this sub-section shall be allowed in respect of the amount on which deduction has been claimed and allowed under sub-section (1).

Section 80D: Deduction in respect of health insurance premium (w.e.f AY 2016-17)

The limit in respect of health insurance premium is increased from Rs 15,000 to Rs 20,000.
For senior citizens, the limit is increased from Rs 20,000 to Rs. 30,000.

Super senior citizens who are not covered by health insurance, deduction of Rs 30,000 will be allowed towards medical expenditure.

Section 80DD: Medical treatment of dependent with disability (w.e.f AY 2016-17)
The existing limit of Rs 50,000 is increased to Rs 75,000
In the case of severe disability, limit enhanced from Rs. 100,000 to Rs. 125,000

Section 80DDB: Medical treatment in respect of specified diseases (w.e.f AY 2016-17)
Under the existing provisions to claim deduction under this section, a certificate in the prescribed form from a specialist working in a government hospital is required.
It is now proposed to provide that the assessee will be required to obtain a prescription from a specialist doctor.

A higher limit of up to Rs. 80,000 is set in case of very senior citizen for the expenditure incurred on medical treatment.

Section 80G: Donations to certain funds, etc
Deduction of 100% will be available in respect of donations to National Fund for Control of Drug Abuse.

Donations to Swachh Bharat Kosh and Clean Ganga Fund will be eligible for 100% deduction.

However, any sum spent in pursuance of Corporate Social Responsibility under sub-section (5) of section 135 of the Companies Act, 2013, will not be eligible for deduction from the total income of the donor.

Section 80JJAA: Deduction in respect of employment of new workmen (w.e.f AY 2016-17)

Deduction u/s 80JJAA was available only to corporate assessees only.
It is not proposed to extend the benefit to all assessees having manufacturing units.

It is also proposed to extend the benefit to smaller units as well employing 50 regular workmen instead of 100.

Section 80U:  Deduction in case of a person with disability (w.e.f AY 2016-17)

The existing limit of Rs. 50,000 is increased to Rs 75,000

In the case of severe disability, limit enhanced from Rs. 100,000 to Rs. 125,000

Royalty and Fees for technical services in case of non-residents

Section 115A: The rate of tax on royalty and technical fees reduced from 25% to 10%

TDS Amendments

Section 192: TDS on salary (w.e.f 1^st June 2015)

New sub-section (2D) is inserted:

For the purposes of estimating income of the assessee or computing tax deductible, the employer to obtain from the assessee the evidence or proof or particulars of prescribed claims (including a claim for set-off of loss) under the provisions of the Act in such form and manner as may be prescribed.

New Section 192A: Payment of accumulated balance due to an employee (w.e.f 1^st June 2015)

Its proposed to insert a new section 192A so as to provide that notwithstanding anything contained in any other provisions of this Act, the trustees of the Employees’ Provident Fund Scheme 1952 framed under section 5 of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, or any person authorized under the scheme to make payment of accumulate balance due to an employee participating in a recognized provident fund is includible in his total income owing to the provisions of rule 8 of Part A of the Fourth Schedule not being applicable, at the time of payment of accumulated balance due to the employee, deduct income-tax thereon @ 10%.

It is further proposed that no deduction shall be made if the payment or aggregate payment to the payee is less than Rs 30000.

Non furnishing of PAN by an employee to the trustees of the EPFS tax would be deductible at the maximum marginal rate.

Obtaining TAN is a procedural requirement which creates a compliance burden for those who are not covered by tax audit. In order to reduce the burden, section is amended to include section 192A within the purview of section 197A.

Section 194A: Interest other than Interest on securities (w.e.f 1^st June 2015)

1. As per the existing provisions contained in the proviso to sub-section (3)(i) of the aforesaid section, income credited or paid in respect of time deposits with a banking company or co-operative society or deposits with a public company, as the case may be, shall be computed with reference to the branch of the banking company or co-operative society or public company, as the case may be.

Amended: A new proviso inserted after the existing proviso in sub-section(3)(i) so as to provide that the amount referred to in the first proviso shall be computed with reference to the income credited or paid by the banking company or the co-operative society or the public company, as the case may be, where such banking company or the co-operative society or the public company has adopted core banking solutions.

2. The existing provisions of sub-section 3(v) provide that income was credited or paid by a co-operative society to a member thereof or any other co-operative society shall be exempt from the tax deduction.

Amended: It is proposed to provide that the exemption from TDS on payment of interest to members by a co-operative society shall not apply to the payments of interests on time deposits by the co-operative banks to its members.

3. Existing: Under section 194A(3)(ix) tax is not required to be deducted from the interest credited or paid on the  compensation  amount awarded by the Motor Accident Claim Tribunal if the amount of interest credited or paid during a financial year does not exceed Rs.50,000

Amended: Deduction of tax from interest payment on compensation shall be made only at the time of payment if the payment or aggregate payments during the financial year exceed Rs. 50000

4. The existing provision of TDS on payment of interest applied only to the interest payment on time deposits. The definition of “time deposits” excludes recurring deposit from its scope.

Amended:  Definition of “time deposits” is amended so as to include recurring deposits within the scope for the purpose of tax deduction.
Therefore, TDS will now have to be done on recurring deposits as well.

Section 19C: Payment to contractors (w.e.f 1^st June 2015)
At present, 194C exempts payments made to contractors during the course of plying, hiring and leasing goods carriage if the contactors furnish his PAN.
It is proposed to restrict such exemption to cases where such contractor owns 10 or less than 10 goods carriages at any time during the previous year and furnishes a declaration to such effect, alongside PAN.

Section 194-I: Rent (w.e.f 1^st June 2015)
No deduction shall be made under section 194-I where the income by way of rent is credited or paid to a business trust, being a real estate investment trust, in respect of any real estate asset held directly by such REIT.

Section 194LBA: Certain income from units of a business trust (w.e.f 1^st June 2015)

Section 194LBA is amended to provide for the distribution of income by a business trust being a real estate investment trust. For residents, TDS rate is 10% and for a non-resident (not being a company), or a foreign company TDS at the rate in force.

New Section 194LBB: Income in respect of units of investment fund (w.e.f 1st June 2015)

New section 194LBB is introduced to provide for TDS @ 10% on payments to a unit holder in respect of units of Investment Fund u/s 115UB

Section 194LD: Income by way of interest on certain bonds and Government securities

(w.e.f 1st April 2015)

Currently, a lower tax rate of 5% is applicable on interest payable to FII and QFI in respect of investments in government securities and rupee-denominated corporate bonds, if the interest is payable on or before June 1, 2015.

It is proposed to extend such concessional withholding tax rate on interest payable up to June 30, 2017.

Section 195: Other sums (w.e.f 1st June 2015)

Section 195(6) specifies that any person responsible for making payment to non-residents of any sum chargeable to Income Tax shall furnish information relating to such payments in such form and manner as prescribed. (i.e form 15CA and 15CB)

It is now proposed to extend the reporting requirement to all payments even in respect of payments which are not chargeable under Income Tax Act.

U/s 271-I Penalty is also prescribed now for non-furnishing of information or incorrect information a sum of Rs 1 lakhs
Section 197A: No deduction to be made in certain cases (w.e.f 1st June 2015)

Section 197A provides that tax shall not be deducted if the recipient of certain payments on which tax is deductible furnishes to the deductor a declaration (Form 15G/15H).

It is proposed to include payments referred in section 192A and 194DA as well eligible for filing a self declaration for non-deduction of tax in form 15G/15H.

Section 200: Duty of person deducting tax (w.e.f 1st June 2015)

Earlier there was no specific provision in the Act for system pertaining to reporting of payment of TDS/TCS made through book entry.

New subsection (2A) inserted:

In the case of an office of the government, where the tax deducted/collected has been paid without the production of challan the Pay and Accounts Officer or the Treasury Officer or the Cheque Drawing and Disbursing Officer or any other person by whatever name called who is responsible for crediting such sum or tax to the credit of the Central Government, shall deliver or cause to be delivered to the prescribed income-tax authority or to the person authorised by such authority, a statement in such form, verified in such manner, setting forth such particulars and within such time as may be prescribed.

Section 200A: Processing of statements of TDS (w.e.f 1st June 2015)

The existing provision of 200A does not provide for determination of fees payable u/s 234E at the time of processing the returns.
It is proposed that at the time of processing the TDS returns, late fee payable u/s 234E shall also be considered.
The sum payable or refundable shall be determined after adjusting the aforesaid computed sum against any amount paid under section 200 or section 201 or section 234E and any amount paid otherwise by way of tax or interest or fee

Section 203A: Tax deduction and collection account number (w.e.f 1st June 2015)
As per existing provisions every deductor or collector of tax should obtain Tax deduction account number or Tax collection account number as the case may be.

It is proposed that the requirement of obtaining and quoting TAN shall not apply to notified deductors and collectors.

Section 206C: Profits and gains from the business of trading in alcoholic liquor, forest produce, scrap, etc (w.e.f 1st June 2015)

Currently, there is no provision for allowing a collector to file a correction statement in respect of TCS statements.
It is proposed to amend Section 206C so as to allow the collector of tax to furnish TCS correction statements.

A  new subsection (3A) inserted, for payment made through book entry:
In case of an office of the Government, where the amount collected has been paid to the credit of the Central Government without the production of a challan, the Pay and Accounts Officer or the Treasury Officer or the Cheque Drawing and Disbursing Officer or any other person, by whatever name called, who is responsible for crediting such tax to the credit of the Central Government, shall deliver or cause to be delivered to the prescribed income-tax authority, or to the person authorised by such authority, a statement in such form, verified in such manner, setting forth such particulars and within such time as may be prescribed.

Section 206CB: Processing of statements of TCS (w.e.f 1st June 2015).

Existing provisions of the Act provide the method of processing of statements of TDS.
There is no procedure specified with respect to the processing of TCS.

It is proposed to insert a new section 206CB relating to processing of statements of TCS and the said section provide that statement of TCS or a correction statement made under section 206C shall be processed in the manner specified therein

Section 220: When tax payable and when assessee deemed in default (w.e.f 1st June 2015).
It is proposed to provide that where interest is charged for any period under 206C(7) of the Act on the tax amount specified in the intimation issued under proposed provision, then no interest shall be chargeable under section 220(2) of the Act on the same amount for the same period.

Section 272A: Penalty for failure to furnish information or furnishing inaccurate information under section 195 (w.e.f 1st June 2015)
Penalty of Rs 100 each day of default if any person fails to deliver or cause to be delivered a statement within the time as may be prescribed under section 200(2A ) or section 206C(3A)
[i.e. processing on TDS and TCS statements]

Minimum Alternate Tax (Section 115JB) (w.e.f AY 2016-17)
It is proposed that income received by companies under section 86 will not be includible within the meaning of book profits for the purpose of MAT under section 115JB. The expenses, if any debited to Profit & Loss account corresponding to such income are also proposed to be added back to the book profits for the purpose of computation of MAT.

It is also proposed that income from transactions in securities (other than short-term capital gains arising on transactions on which securities transaction tax is not chargeable) arising to Foreign Institutional Investors, shall be excluded from the changeability  of MAT and the profit corresponding to such income shall be reduced from the book profits.

Others

• Transport allowance: Exemption increased from Rs. 800 per month to Rs. 1,600 per month
• Definition of ‘charitable purpose’ enlarges to include ‘yoga’

Section 6: Residence in India
New explanation inserted:
Explanation 2: In the case of an Individual, being a citizen of India and the member of the crew of a foreign-bound ship leaving India, the period or periods of stay in India shall, in respect of such voyage, be  determined in the manner and subject to such conditions as may be prescribed.
(w.e.f AY 2015-16 retrospectively)

Subsection 3 amended: (w.e.f AY 2016-17)
Company shall be said to be resident in India in any previous year, if-
(i) It is an Indian company
(ii) its place of effective management, at any time in that year, is in India

Wealth Tax

Wealth Tax Act abolished w.e.f 1^st April 2016 i.e applicable from AY 2016-17 onwards

By CA Nisha Patil