This document provides highlights of the Union Budget 2014-2015 for India. Some key points include: - The basic income tax exemption limit has been increased by Rs. 50,000. Tax rates remain unchanged. - Deduction limits under Section 80C have been increased from Rs. 100,000 to Rs. 150,000. - Service tax rate remains at 12% and is extended to new services like radio taxis. - Exemptions under the mega exemption notification have been extended to some services and withdrawn from others. - Changes have been made to provisions around interest on late payment of taxes, e-payment of service tax, and the reverse charge mechanism.

1. VIMAL TANDON & CO.
CHARTERED ACCOUNTANTS
BUDGET 2014-2015
HIGHLIGHTS

2. DIRECT TAXES
Individual
 Basic exemption limit for men, women and HUF resident in India
increased by ` 50,000.
 There is no change in the rate of income tax, surcharge , education and
SHE cess. The rates for AY 2015-16 will remain the same as in AY 2014-
15.
 Surcharge: The amount of Income-Tax computed as above, shall be
increased by surcharge @ 10% of such Income-Tax in the case, the
person has taxable income exceeding Rs.1 Crore.
 Cess: 3% cess on tax in all cases

3. Individual
 Rebate: The rebate under Section 87A inserted by Finance Act, 2013
being ` 2,000/- for individual resident assessee, whose Taxable Income
does not exceed ` 5,00,000/- to continue.
 Deduction u/s 80C – The limit of investments eligible for deduction
under section 80C has been increased from ` 1,00,000/- to ` 1,50,000/-.
 Investment cap in Public Provident Fund increased from ` 1,00,000/- to `
1,50,000/-.

4. Income tax slabs for individual
(Male/Female)/HUF taxpayers:
Income slab
(AY 2014-15)
Income slab
(AY 2015-16)
Rates of Income
Tax
Upto ` 2,00,000 Upto ` 2,50,000 Nil
` 2,00,001 to ` 5,00,000 ` 2,50,001 to ` 5,00,000 10%
` 5,00,001 to ` 10,00,000 ` 5,00,001 to ` 10,00,000 20%
Above ` 10,00,000 Above ` 10,00,000 30%

5. Income tax slabs for senior citizens:
Age Group
60-80yrs
Age Group
80yrs and above
Rates of Income
Tax
Upto ` 3,00,000 Upto ` 5,00,000 Nil
` 3,00,001 to ` 5,00,000 10%
` 5,00,001 to ` 10,00,000 ` 5,00,001 to ` 10,00,000 20%
Above ` 10,00,000 Above ` 10,00,000 30%

6. Capital Gains
 That the rollover relief under the section 54(1) where capital gains arises from
transfer of a residential house (long-term) and 54F(1) where capital gains arises from
transfer of a long-term capital asset, not being a residential house, is available if the
investment is made in only one residential house that is situated in India.
 That the investment made by an assessee in the long-term specified asset u/s 54EC,
out of capital gains arising from transfer of one or more original asset, during the
financial year in which the original asset or assets are transferred and in the
subsequent financial year does not exceed fifty lakh rupees.
Amendments effective from 10th July, 2014.
 An unlisted security and a unit of a mutual fund (other than an equity oriented mutual
fund) shall be a short-term capital asset if it is held for not more than thirty-six
months.
 The capital gains arising on transfer of mutual funds other than equity-oriented funds
to be taxes at 20% instead of the current concessional rate of 10%.

7. Domestic Companies
 The income tax rate for firms remains unchanged at 30%.
 Education Cess : 2% Secondary and Higher Education Cess: 1%.
 Expenditure on Corporate Social Responsibility (CSR) made, wherever applicable,
being in the nature of application of income, not to be allowed as deduction.
 Trading in shares by a company shall not be deemed as speculation business for the
purpose of Section 73.

8. Domestic Companies
 Section 115-O of the Act provides that a domestic company shall be liable for payment
of additional tax at the rate of 15 percent on any amount declared, distributed or paid
by way of dividends to its shareholders. Section 115-R of the Act similarly provides for
levy of additional income-tax in respect of income distributed by the mutual funds to its
investors at the rates provided.
 To ensure that tax is levied on proper base, the amount of distributable income and the
dividends which are actually received by the unit holder of mutual fund or shareholders
of the domestic company need to be grossed up for the purpose of computing the
additional tax.
Dividend Amount distributed
Increase by Rs. 15 [i.e. (85*0.15)/ (1‐0.15)]
Rs. 85
Increased amount Rs.100
DDT @ 15% of Rs. 100 Rs. 15
Tax payable u/s 115‐O is Rs.15
Dividend distributed to shareholders Rs.85

9. Foreign Companies
 The income tax rates remain unchanged at 40%
 Surcharge: 2%.
 Education Cess : 2% Secondary and Higher Education Cess: 1%

10. Firms
 The income tax rate for firms remains unchanged at 30%.
 Education Cess : 2% Secondary and Higher Education Cess: 1%.

11. Limited Liability Partnership
 The income tax rate for firms remains unchanged at 30%.
 Education Cess : 2% Secondary and Higher Education Cess: 1%.

12. Trusts
 Explanation added to Section 10(23C) to clarify that a university or other educational
institution, hospital or other institution shall be considered as being substantially
financed by the Government if the Government grant to a university or other
educational institution, hospital or other institution during the relevant previous year
exceeds a percentage (to be prescribed) of the total receipts (including any voluntary
contributions), of such university or other educational institution, hospital or other
institution.
 Where a trust or an institution has been granted registration for purposes of availing
exemption under section 11, and the registration is in force for a previous year, then
such trust or institution cannot claim any exemption under any provision of section 10
[other than that relating to exemption of agricultural income and income exempt
under section 10(23C)]. Similarly, entities which have been approved or notified for
claiming benefit of exemption under section 10(23C) would not be entitled to claim
any benefit of exemption under other provisions of section 10 (except the exemption
in respect of agricultural income).
 Income for the purposes of application shall be determined without any deduction or
allowance by way of depreciation or otherwise in respect of any asset, acquisition of
which has been claimed as an application of income under these sections in the
same or any other previous year.

13. Trusts
 In case where a trust or institution has been granted registration under section 12AA
of the Act, the benefit of sections 11 and 12 shall be available in respect of any
income derived from property held under trust in any assessment proceeding for an
earlier assessment year which is pending before the Assessing Officer as on the date
of such registration, if the objects and activities of such trust or institution in the
relevant earlier assessment year are the same as those on the basis of which such
registration has been granted.
No action for reopening of an assessment under section 147 shall be taken by the
Assessing Officer in the case of such trust or institution for any assessment year
preceding the first assessment year for which the registration applies, merely for the
reason that such trust or institution has not obtained the registration under section
12AA for the said assessment year.
However, the above benefits would not be available in case of any trust or institution
which at any time had applied for registration and the same was refused under
section 12AA or a registration once granted was cancelled.

14. Alternate Minimum Tax
 The existing provisions of section 115JC of the Act provide that where the regular
income tax payable by a person, other than a company, for a previous year is less
than the alternate minimum tax for such previous year, the person would be required
to pay income tax at the rate of eighteen and one half per cent on its adjusted total
income. The section further provides that the total income shall be increased by
deductions claimed under Part C of Chapter VI-A and deductions claimed under
section 10AA to arrive at adjusted total income.
Under the Act, the investment linked deductions have been provided in place of profit
linked deductions. These profit linked deductions are subject to alternate minimum
tax (AMT). Accordingly, with a view to include the investment linked deduction
claimed under section 35AD in computing adjusted total income for the purpose of
calculating alternate minimum tax, it is proposed to amend the section so as to
provide that total income shall be increased by the deduction claimed under section
35AD for purpose of computation of adjusted total income. The amount of
depreciation allowable under section 32 shall, however, be reduced in computing the
adjusted total income.
These amendments will take effect from 1st April, 2015 and will, accordingly, apply in
relation to the assessment year 2015-16 and subsequent assessment years.

15. Deductions and Exemptions
 Deduction u/s 80C - The limit of investments eligible for deduction under section 80C has been
increased from ` 1,00,000/- to ` 1,50,000/-.
 Investment cap in Public Provident Fund increased from ` 1,00,000/- to ` 1,50,000/-.
 Deduction limit on account of interest on loan u/s 24(b) in respect of self occupied house property
raised from Rs 1.5 lakh to Rs 2 lakh.
 Investment allowance at the rate of 15 percent to a manufacturing company that invests more
than Rs 25 crore in any year in new plant and machinery. The benefit to be available for three
years i.e. for investments upto 31.03.2017.
 Investment linked deduction extended to two new sectors, namely, slurry pipelines for the
transportation of iron ore, and semi-conductor wafer fabrication manufacturing units.
 10 year tax holiday extended to the undertakings which begin generation, distribution and
transmission of power by 31.03.2017.

16.  In case of non deduction of tax on payments, 30% of such payments will be
disallowed instead of 100 percent.
 The concessional rate of TDS u/s 194LC on interest paid on borrowing in foreign
currency extended from 30.06/2015 to 30.06.2017. Tax incentive extended to all
types of bonds instead of only infrastructure bonds.
Tax Deduction at Source/ Tax
Collection at Source

17.  Income arising to foreign portfolio investors from transaction in securities to be
treated as capital gains.
 Concessional rate of 15 percent on foreign dividends without any sunset date to be
continued.
 Any sum of money, received as an advance or otherwise in the course of
negotiations for transfer of a capital asset to be taxed under the head Income from
Other Sources if such sum is forfeiter or the negotiations do not result in transfer of
such capital asset.
 Eligible transaction in respect of trading in commodity derivatives carried out in a
recognised association and chargeable to commodities transaction tax under Chapter
VII of the Finance Act, 2013 shall not be considered to be a speculative transaction.
General

18. INDIRECT TAXES
SERVICE TAX
 Service tax rate retained at 12%.
 Amendment in existing services:
 Service tax leviable currently on sale of space or time for advertisements in broadcast media,
namely radio or television, has been extended to cover such sales on other segments like
online and mobile advertising. Sale of space for advertisements in print media, however,
would remain excluded from service tax. Print media is being defined in service tax law for
the purpose. This change will come into effect from a date to be notified later, after the
Finance (No.2) Bill, 2014 receives the assent of the President.
 New Services Taxed:
 Service tax is proposed to be levied on services provided by radio taxis or radio cabs,
whether or not air-conditioned [section 66D (o)(vi)]. The abatement presently available to
rent-a-cab service would also be made available to radio taxi service, to bring them on par.
This change will come into effect from a date to be notified later, after the Finance (No.2) Bill,
2014 receives the assent of the President.

19.  Changes to Mega Exemption – Notification No. 25/2012-ST:-
 Exemption extended to clinical research on human participants is being
withdrawn.
 Exemption extended to air-conditioned contract carriages like buses is
being withdrawn.
 Exemption in respect of services provided to Government or local authority
or governmental authority, will be limited to services by way of water supply,
public health, sanitation conservancy, solid waste management or slum
improvement and upgradation.
 Services by RBI, from outside India, in relation to management of foreign
exchange reserves has been exempted.
 Tour operator services to a foreign tourist exempt, if the same is provided in
relation to the tour conducted wholly outside India.

20.  Changes to Mega Exemption – Notification No. 25/2012-ST:-
 Exemption extended so far in respect of renting of immovable property
service received by educational institutions, stands withdrawn.
 Service tax exempted on loading, unloading, storage, warehousing and
transportation of cotton, whether ginned or baled.
 Goods transport services for transport of organic manure by vessel, rail or
road.
 Service provided by life insurance business under all life micro-insurance
schemes approved by the Insurance Regulatory Development Authority,
where sum assured does not exceed INR Insurance Regulatory
Development Authority, where sum assured does not exceed INR 50,000/-
 Service provided by Employees‟ State Insurance Corporation (ESIC) during
the period prior to 1.7.2012 is proposed to be exempted from service tax.

21.  Changes to Mega Exemption – Notification No. 25/2012-ST:-
 All services by hotel, inn, guest house, club, campsite for lodging or
residential purposes exempt , wherein the tarriff value is less than Rs. 1000
per day. Earlier, it was linked with renting only.
 Any other commercial place, rented out, providing service by way of
accommodation, including dharmashalas or ashram or such other entities
brought within the ambit of service tax. To remove any ambiguity, the word
“commercial” is being omitted. Renting of vacant land or buildings for hotels
would continue to be taxable irrespective of the hotel’s declared tariff.

22. Interest on Late Payment
Extent Of Delay Simple interest rate per
annum
Up to six months 18%
More than six months & up to
one year
18% for first six months, and
24% for the period of delay
beyond six months
More than one year 18% for first six months, 24% for
second six months, and 30% for
the period of delay beyond one
year

23. Interest on Late Payment
Small Scale sector
(Assessee whose taxable turnover doesn’t exceed ` 60 Lacs)
Extent Of Delay Simple interest rate per
annum
Up to six months 15%
More than six months & up to
one year
15% for first six months, and
21% for the period of delay
beyond six months
More than one year 15% for first six months, 21% for
second six months, and 27% for
the period of delay beyond one
year

24. E-payment of service tax is being made mandatory with
effect from the 1st Oct 2014.
Relaxation from e-payment may be allowed by the
Deputy Commissioner/Asst. Commissioner on case to
case basis [Notification 09/2014-ST].
E-Payment

25.  Service provided by a Director of Company or body corporate to the said
company to be brought under the reverse charge mechanism; service
receiver, who is a body corporate will be the person liable to pay service
tax.
 Services provided by Recovery Agents to Banks, Financial Institutions and
NBFC to be brought under the reverse charge mechanism; service receiver
will be the person liable reverse charge mechanism; service receiver will be
the person liable to pay service tax. [Notification 9/2014 -ST and 10/2014-
ST]
Changes to Service Tax Rules

26.  Changes to take effect from 1st October, 2014.
 Provision for prescribing conditions for determination of place of
provision of repair service carried out on temporarily imported goods
is being omitted. The second proviso to rule 4(a) is being amended
to prescribe that it would suffice for the purpose of exclusion of
repair service from applicability of rule 4(a) that the goods imported
for repair are exported after repair without being put to any use other
than that which is required for such repair. It may please be noted
that this exclusion does not apply to goods that arrive in the taxable
territory in the usual course of business and are subject to repair
while such goods remain in the taxable territory, e.g., any repair
provided in the taxable territory to containers arriving in India in the
course of international trade in goods will be governed by rule 4.
Changes to Place of
Provision of Services Rules

27.  The term intermediary will include a person who arranges or
facilitates supply of goods or services such as commission agent or
consignment agent and hence the place of provision of the same
would be the place of the service provider and shall be covered
under rule 9(c ) POP.
 The place of provision for services of hiring of aircraft and vessels
(other than yachts) up to a period of one month would be based on
location of recipient (currently, the same is based on location of
service provider).
Changes to Place of
Provision of Services Rules

28. The first Proviso to rule 7 of the Point of Taxation Rules (POTR) is
being amended to provide that point of taxation in respect of
reverse charge will be the payment date or the first day that occurs
immediately after a period of three months from the date of invoice,
whichever is earlier. This amendment will apply only to invoices
issued after 1st October 2014. A transition rule is being prescribed
(new rule 10 of POTR).
Applicable From 01.10.2014
Changes to Point of
Taxation Rules

29.  A manufacturer or a service provider shall take credit on inputs and
input services within a period of six months from the date of issue of
invoice, bill or challan w.e.f. 1st September,2014 [ newly inserted
proviso to rule 4 (1) and fifth proviso to rule 4(7) refer]
 Under reverse charge mechanism (except in case of partial reverse
charge) Cenvat Credit can be availed on payment of service tax.
The condition to pay invoice value to the service provider has been
dispensed with effective from 11 July 2014.
 Cenvat credit reversed on account of non-receipt of export proceeds
can be taken again, if export proceeds are received within one year
from the specified period.
Changes to CENVAT Credit Rules

30.  Under goods transport agency service, the condition for non-
availment of Cenvat Credit is required to be satisfied only by the
service provider and not by the service recipient.
 Under rent-a-cab operator and tour operator services, Cenvat
Credit would be available in respect of service tax paid by sub-
contractor in the same line of business. (01.10.2014)
 Transfer of credit by large taxpayer from one unit to another no
longer permitted (effective from 11 July 2014)
 Taxable portion in respect of transport of goods by vessel is being
reduced from 50% to 40%. Effective service tax will decrease from
the present 6.18% to 4.944%, with effect from 1st October, 2014.
Changes to CENVAT Credit Rules

31.  In renting of motor vehicle, where the service provider does not take
abatement the portion of service tax payable by the service provider
and service receiver will be modified as 50% each. This change will
come into effect from 1st of October 2014.
 In Rule 2A of the Service Tax (Determination of Value) Rules, 2006,
category “B” and “C” of works contracts are proposed to be merged
into one single category, with percentage of service portion as 70%;
this change will come into effect from 1st October, 2014. This
rationalization by way of merger of categories has been made to
avoid disputes of classification between these two categories.
Simplification of Partial Reverse
Charge mechanism

32.  Operational Amendments:
 The resident private limited company is being included as a class of
persons eligible to make an application for Advance Ruling in service
tax.
 As regards services covered under reverse charge, the requirement of
furnishing service tax registration number of service provider shall be
dispensed with.
 A service shall be treated as exclusively used for SEZ operations if the
recipient of service is a SEZ unit or developer, invoice is in the name of
such unit/developer and the service is used exclusively for furtherance
of authorized operations in the SEZ.

33.  Operational Amendments:
 Mandatory Pre- deposit
 Appeal with CCE(A) or CESTAT(First stage)------- 7.5% of tax or penalty or both;
 Appeal with CESTAT(Second stage)------------------10 % of tax or penalty or both
 It is pertinent to note that maximum amount of pre-deposit shall be Rs. 10 crores.
 Rate of exchange notified by CBEC shall not be required anymore.
Separate rules shall be framed to serve the purpose

34. BUDGET HIGHLIGHTS PRESENTATION BY :-
M/s Vimal Tandon & Co.
Chartered Accountants
A-107/1, Pal Mohan Plaza, 11/56,
D.B. Gupta Road, Karol Bagh,
New Delhi - 110005
Telefax – 23551056
Tel. 45032501
Mob. 9810221653, 9868171653
website - vimaltandon.com
charteredaccountantindelhi.com
e-mail. - vimaltandon@gmail.com
vtclients@gmail.com