KrayMan KrayMan Complire Consultare Union Budget 2015 Highlights PRIVATE & CONFIDENTIAL This Newsletter provides information of general nature and is not meant to be a substitute for professional advice in any manner. 1 Introduction KrayMan Union Budget 2015-16 is the first full year Budget announced by the new Government amidst high expectations of big-bang reforms Government's commitment to restore investor confidence and improve India's global ranking on ease of doing business was acknowledged through announcements on reduction in compliance burden, combat the menace of black money, promoting and incentivizing ‘Make in India’ and ‘Swachh Bharat’ initiatives, e-governance programs and measured tax incentives India’s most awaited tax reform, GST, having already tabled through Constitutional Amendment Bill in the Parliament is poised to be implemented from 1 April 2016. Excise duty and service tax rates have been simplified by subsuming Education Cess. However, Service Tax rate have increased to 14% On Direct Tax front, Corporate tax rates is proposed to be reduced to 25% over next 4 years accompanied by removal of incentive provisions. Increase in surcharge of 2% to offset Wealth Tax abolishment. The other positive impact was reversal of higher WHT on Royalty and FTS to 10%. However, tax slab rates for individuals remain unchanged Overall, the Budget is a balancing act of populism and pragmatism for the poor, the middle class and the corporate sector High Expectations from the FM 2 KrayMan Key Policy Announcements 3 Key Policy Announcements Economic Indicators GDP growth projected between 8 to 8.5% Fiscal deficit target of 3% to be achieved in 3 years till 2017-18 Tapered Inflation partly helped by fall in global oil and gas prices; CPI inflation projected at 5%; Monetary Policy Framework Agreement with RBI to keep inflation below 6% Stock market - Second best performing in 2014 Projects ‘Housing for All by 2022’ added to Prime Minister initiatives of ‘Make in India’, ‘Skill India’, ‘Swachh Bharat Abhiyaan’ and ‘Minimum Government, Maximum Governance’ KrayMan Development of Eastern Eastern regions of India and North Need to cut subsidy leakages through JAM Trinity - a combination of ‘Jan Dhan Yojna’, ‘Aadhar’ and Mobile numbers to allow transfer of benefits directly to the beneficiaries at low cost with minimal leakage or cash handling Measures to curb black money Comprehensive new law to curb black money outside India with stringent measures including rigorous imprisonments and steep penalties Confiscation of overseas assets held by Indian residents in violation of FEMA regulations or equivalent Indian assets held by the resident Encourage entrepreneurship - to turn youth into job creators 4 Key Policy Announcements KrayMan Manufacturing Financial Market Job creation through revival of growth and investment and promotion of domestic manufacturing – ‘Make in India’ Distinction between different forms of foreign investments Improve ease of doing business – ‘Minimum Government and Maximum Governance’ Setting-up project development company to facilitate setting up manufacturing hubs in CMLV countries - Cambodia, Myanmar, Laos and Vietnam Micro Units Development Refinance Agency (MUDRA) Bank to be created Infrastructure Increase in outlays of roads and railways Tax free infrastructure bonds for the projects in the rail, road and irrigation sectors RBI registered NBFCs with asset size of INR 5000 Mn and above to be considered as ‘Financial Institution’ enabling them to fund SME and mid-corporate businesses Foreign investments in AIF to be permitted Forward Market Commission to be merged with SEBI to strengthen regulation of commodity forward market and reduce speculation Comprehensive Bankruptcy Code global standards to be introduced of Gold Monetization Scheme - Interest on metal accounts; Jewelers to obtain loans in their metal account 5 KrayMan Direct Tax Proposals 6 Corporate Tax KrayMan No change in basic corporate tax rate; Acceptance or repayment of an advance of INR 20,000 or more in cash for EC and SHEC Proposal to reduce basic corporate tax rate from 30% to 25% over next four purchase of immovable property to attract penalty Wealth-tax proposed to be abolished in years starting 1 April 2016 Surcharge increased by 2% as offset for abolishing Wealth Tax; New Surcharge lieu of increase in the rate of surcharge by 2% on high income bracket taxpayers Information regarding assets subject to rates: 7% where Total Income above INR 10 Mn but does not exceed INR 100 Mn wealth-tax to be captured in the income tax returns 12% where Total Income exceeding INR 100 Mn 12% on additional income tax payable by companies, mutual funds and securitization trusts on distribution of dividends and buyback of shares 7 International Tax Indirect transfers by foreign company taxable in India on proportionate basis and only if the value of Indian assets exceeds 50% of the value of the global assets Fund managers of offshore funds in India would not constitute business connection of such offshore fund in India subject to compliances / conditions Non-Indian company to be treated as a resident in India if it has a POEM in India at any time during the Financial Year POEM - place where key management and commercial decisions in substance KrayMan Domestic Transfer Pricing threshold increased from INR 50 Mn to INR 200 Mn Foreign tax credit rules to be notified Applicability of GAAR provisions deferred by two years; Rules applicable to investments on or after 1 April 2017 FII income (except in case of STCG on which STT is not chargeable) not subject to MAT Interest payable by an Indian branch of a foreign bank to its head office or other branch to be taxable in India and subject to applicable WHT are made 8 Other Tax Proposals KrayMan Charitable Activities Enhanced Depreciation 100% deduction towards contributions to Manufacturing units set up in notified Swatch Bharat Kosh, Clean Ganga mission backward area in Andhra Pradesh / and National Fund for Drug Abuse not Telangana on or after 1 April 2015 to be considered as CSR spend eligible for additional depreciation @ 35%. ‘Yoga’ included in ‘charitable’ purpose the definition of Additional investment allowance at 15% on new plant & machinery acquired and installed during 1 April 2015 till 31 March 2020 Income of charitable trust in excess of 15% can be accumulated for exemption only if the prescribed Form is filed on or before Additional depreciation at 20% on new the due date of income tax return plant and machinery used for less than 180 days – 50% to be allowed in the year of Withholding Tax acquisition and installation and the balance 50% in the succeeding financial year WHT on payments to non-residents towards Royalty and FTS reduced to 10% Deduction for employment of new on gross basis workmen now eligible to all taxpayers (instead of only corporates); Benefit Lower WHT of 5% on gross basis on extended to units employing 50 regular interest paid to FIIs and QFIs extended by workmen (instead of 100) two years to 30 June 2017 9 Personal Tax KrayMan No change in the income-slabs, tax rates Investments in SSAS to be eligible for deduction under section 80C; Interest and and EC and SHEC for individuals withdrawals to be exempt from tax Surcharge to be increased from 10% to Deductions for self and dependent in case 12% where income exceeds INR 10 Mn of disability to be increased to INR 75,000 Exemption for transport allowance to be p.a. (INR 125,000 in case of severe increased from INR 800 to INR 1,600 per disability) month Deduction for chronic diseases for very Contribution to NPS aligned to INR senior citizens up to INR 80,000 p.a. 150,000 with INR 50,000 being additional Withholding Tax @ 10% on taxable deduction provident fund withdrawals where payment Deduction for health insurance premium to is INR 30,000 or more. In case, PAN not be increased from INR 15,000 to INR furnished by the employee, tax to be 25,000 p.a. For senior citizens (60 years or deducted at maximum marginal rate above), deduction to be increased from INR 20,000 to INR 30,000 p.a. For very senior citizens (above 80 years) not covered under health insurance, medical expenditure of INR 30,000 p.a. qualify for deduction 10 Personal Tax KrayMan Income Slabs Tax Rate Up to 250,000 Nil 250,001 to 500,000 10% 500,001 to 100,0000 20% Above 100,0000 30% Basic Exemption limit for resident super senior citizens (> 80 years) - INR 500,000 Basic Exemption limit for resident senior citizens (> 60 years) – INR 300,000 Specified Investments u/s 80C – INR 150,000; Additional deduction of INR 50,000 on Contribution to NPS Rebate from tax of upto INR 2,000 or for a resident individual whose total income is below INR500,000 12% surcharge is applicable if the total income exceeds INR 10 Mn 3% education cess is applicable on income-tax 11 KrayMan Indirect Tax Proposals 12 Excise Duty KrayMan Excise duty rate increased from 12.36% to 12.5%; EC and SHEC exempted on all products Change in rates of excise duty on specified products like mobile handsets and Tablets, chassis of ambulances, cement, LED lights / lamps or fixtures, wafers for use in manufacture of IC modules for smart cards, specified raw material for use in manufacture of pacemakers, aerated and mineral waters amongst others Facility of issuance of digitally signed invoices introduced. However, transporter of goods needs to carry self-attested hard copies Preservation of records in electronic form permitted to manufacturers Direct dispatch of inputs and capital goods by manufacturer or service provider to job worker permitted Direct dispatch of goods to registered dealer / importer’s customer premises permitted. Simplification of registration process in Central Excise 13 Service Tax KrayMan Effective service tax rate increased from 12.36% to 14% Full reverse charge in case of: Manpower supply and security services Swachh Bharat Cess to be imposed on select taxable services @ 2% received by a body corporate from an individual, HUF or partnership firm ‘Consideration’ to include reimbursable expenditure (subject to conditions) Mutual fund agents / distributors Aggregators Uniform abatement of 70% for transport by rail, road and vessel with a condition of Above effective from 1 March 2015 non availment of Cenvat credit on inputs, Exemption on GTA services provided to capital goods and input services (effective exporter for transportation of goods from from 1 April 2015) container freight station / inland container Service tax payable on 60% of service value in case of passsenger air transport services other than economy class depot / from place of removal to land customs station (effective from 1 April 2015) (effective from 1 April 2015) 14 New Taxable Services KrayMan Admission to entertainment events or distributors access to amusement facilities Contract manufacturing / job work production of alcoholic liquor for human of mutual to mutual fund fund agents, /asset management companies and marketing agents of lottery tickets Public telephone services consumption All services provided by the Government or local authorities to business entities Construction, Services erection, commissioning, Performing artists in folk or classical art forms of music, dance and theatre for an amount exceeding INR 100,000 installation, completion, fitting out, repair, maintenance, renovation, or alteration services provided to Government for certain specified projects Transportation of food-stuff except milk, salt and essential food grain like flour, pulses and rice 15 Service Tax – Exemptions & Credits Admission to award function, concert, pageant, musical performance or any sporting event where amount charged is less than INR 500 Admission to a museum, national park, wildlife sanctuary, tiger reserve or zoo Recognized sports event or exhibition to cinematographic film, circus, dance etc. continue to be exempt Ambulance Services Life insurance services provided under Varishtha Pension Bima Yojna Services provided by Common Effluent Treatment Plant operator Services provided by way conditioning, pre-cooling, waxing, retail packing, labelling and vegetables which do not essential characteristics of preripening, of fruits alter its KrayMan Time limit for availment of Cenvat Credit increased from six months to one year Effective 1 April 2015, in case of partial reverse charge; Cenvat Credit can be availed by the service recipient as under: Service tax to be paid by the service recipient - credit can be claimed on depositing the same with the Government Treasury Service tax charged by service provider credit can be claimed immediately on receipt of invoice. However, credit to be reversed if payment not made within a period of 3 months which can be reavailed on making payment 16 Customs Duty KrayMan Effective customs duty rate marginally increased due to general increase in excise duty rates Effective Customs Duty increased from 25.85% to 26.43% for capital goods and 28.85% to 29.44% for other than capital goods Reduction of import duties of specific inputs and raw materials in order to address inverted duty structure concerns of the manufacturing sector Change in customs duty on specified products viz. metallurgical coke, petrol and high speed diesel oil, High Density Polyethylene for manufacture of telecommunication fibre cables, Active Energy Controller for manufacture of Renewable Power System inverters, Digital Still Image Video Cameras, LED TV Panels and commercial vehicles amongst others Similarly, change in CVD and SAD rates for certain specified products 17 Overall Consumer Impact Cheaper KrayMan Dearer Packed Fruits & Vegetables Leather Footwear LED / LCD panels LED lights & lamps Solar Water Heaters Pacemakers Incense Sticks Museum, Zoo, National Parks Ambulance Ambulance Services Microwave Ovens Refrigerator Compressors Local Mobile Phones Computer Tablets Tobacco Products Air Travel (non Economy) Eating Out Imported Commercial Vehicles Aerated drinks Packaged Water Plastic Bags & Sacks Liquor, Chit Fund Lottery Amusement & Theme Parks Cement Music Concerts 18 Glossary KrayMan AIF Alternative Investment Fund LTCG Long-Term Capital Gains CPI Consumer Price Index MAT Minimum Alternate Tax CSR Corporate Social Responsibility Mn Million CVD Countervailing duty NBFC Non-Banking Financial Company EC Education Cess NPS National Pension Scheme FDI Foreign Direct Investment PAN Permanent Account Number FEMA Foreign Exchange Management Act POEM Place of Effective Management FII Foreign Institutional Investors RBI Reserve Bank of India FPI Foreign Portfolio Investments REIT Real Estate Investment Trust FY Financial Year SAD Special Additional Duty FTS Fees for Technical Services SEBI Securities and Exchange Board of India GAAR General Anti-Avoidance Rules SHEC Secondary & Higher Secondary Education Cess GDP Gross Domestic Product SME Small and Medium Enterprises GST Goods and Services Tax SSAS Sukanya Samriddhi Account Scheme GTA Goods Transport Agency STCG Short-Term Capital Gains HUF Hindu Undivided Family STT Securities Transaction Tax INR Indian Rupees WHT Withholding Tax 19 KrayMan Contact Us CA Manan Agarwal CA Kratika Agarwal [email protected] M +91 99716 98268 [email protected] M +91 99716 98830 KrayMan Consultants LLP 1170A, 11th Floor, Tower B1 Spaze i-Tech Park Sector 49, Sohna Road Gurgaon – 122001 (India) Tel Web Affiliation +91 124 4309418 www.krayman.com Manan Agarwal & Associates Chartered Accountants 20
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