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Union Budget, 2014 Indian Merchants’ Chamber C H Bhabha Memorial Endowment Public Meeting July 11, 2014 Presented by Ketan Dalal.

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Presentation on theme: "Union Budget, 2014 Indian Merchants’ Chamber C H Bhabha Memorial Endowment Public Meeting July 11, 2014 Presented by Ketan Dalal."— Presentation transcript:

1 Union Budget, 2014 Indian Merchants’ Chamber C H Bhabha Memorial Endowment Public Meeting July 11, 2014 Presented by Ketan Dalal

2 Slide 2 BJP manifesto on Taxes Provide a non adversarial and conducive tax environment Rationalize and simplify the tax regime Overhaul the dispute resolution mechanisms Bring on board all State governments in adopting GST, addressing all their concerns Provide tax incentives for investments in R&D, geared towards indigenization of technology and innovation Ketan Dalal

3 Slide 3 Direct Tax: The Big Picture REITs and Infra investment trusts tax clarity. FII Income: some clarity Some aspects on tax dispute management addressed Investment allowance and power sector: Incentives extended. DTC not archived Retro amendments on indirect transfer not neutralised; several ambiguities still untouched CSR tax deduction No cognisance of Tax Administrative Reforms Commission What has happened What has not Ketan Dalal

4 Slide 4 Personal Tax – Some Key Changes 2% on maturity receipts from taxable life insurance products w.e.f. from 1 October 2014 (if >= INR 1 lakh) Particulars Current (Rs) Proposed (Rs) Basic exemption limit2,00,0002,50,000 Interest on housing loan1,50,0002,00,000 Deduction for investment (S. 80C) 1,00,0001,50,000 Relatively marginal benefits; amendments to DDT and debt funds a neutraliser Ketan Dalal

5 Slide 5 Transfer of shares in non Indian companies (Vodafone controversy) Status quo on existing disputes Fresh cases to be scrutinised by high level CBDT committee Recommendations of Shome Committee not implemented Existing disputes continue Going forward, lack of clarity on computation, applicability to small shareholders, listed foreign companies, etc Ketan Dalal

6 Slide 6 Investment Allowance Sunset by 31 March 2017 Yearly investment threshhold; no aggregation over 3 years 5 year lock-in (except in merger/demerger) Current Investment allowance (100 cr.) scheme for investments continues (31 st March 2015) Eligible taxpayers InvestmentThresholdQuantum Companies in manufacturing sector Plant and machinery acquired and installed Investment > INR 250 mn in a financial year 15% (over and above normal depreciation) Carry forward not provided for –affects loss making / low profit making companies Ketan Dalal

7 Slide 7 Business Deductions / Incentives 10-year tax holiday for Power sector (S.80IA) extended till March 31, 2017 Investment-linked deduction (S.35AD) – 100%; extended to 2 other items Corporate Social Responsibility (CSR) expenses -CSR expenses expressly disallowed (though not for MAT purposes) Disallowance of domestic payments for non-compliance of TDS; disallowance restricted to 30% of expense; salary now covered IFRS convergence and Tax Accounting -Move towards Tax Accounting Standards (TAS) – Mandatory from FY Ketan Dalal

8 Slide 8 Capital market related FII taxation clarity; but what about private equity? DDT related -Increase (companies) (no set off for foreign recipients) from 17% to 20.5% (approx) -Increase (Mutual funds) from 25% to 40% (individual recipients) and 34% to 51% (company recipients) Holding period for unlisted shares / securities and non EOMF increased to 36 months (from 12 months) Increase in tax rate on sale of debt oriented Mutual Funds from 10% to 20% Lower TDS of 5% on all cross border borrowings Ketan Dalal

9 Slide 9 Real estate sector: tax changes REIT taxation now operationalised (single stage) (similarly Infrastructure Investment Trust) -Sponsor not liable to transfer of SPV to REIT -Interest income exempt in hands of Trust, but not for investor -Capital gains will be converse Interest deduction for housing loan Capital gains set off now restricted for one house (in India) Ketan Dalal

10 Slide 10 Addressing tax disputes Transfer pricing -Roll back mechanism introduced in APA -APA team to be strengthened to expedite disposals -Range concept alongside arithmetic mean and use of multiple year data proposed – alignment with global best practices Advance Ruling -Advance Rulings facility extend for residents tax payer -Tax liability above defined threshold Settlement Commission -Scope of Settlement Commission to be enlarged Ketan Dalal

11 Slide 11 Summing up Ketan Dalal Lets look at this budget and February 2015 as one integrated exercise !

12 Slide 12 Thank You Ketan Dalal


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