RSM India publication - India Budget 2015 Highlights

INDIA
BUDGET 2015
- HIGHLIGHTS

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iINDIA BUDGET 2015 - Highlights
February 2015
INDIA
BUDGET 2015
- HIGHLIGHTS
Includes
ØG-20 Countries - Comparative Corporate and Personal Tax Rates
ØTax Incentives for Businesses
ØDTAA Rates
ØDirect Tax and Service Tax Compliance Calendar
RSM Astute Consulting

CONTENTS
CHAPTER 1 : INTRODUCTION
CHAPTER 2 : INDIAN ECONOMY - AN OVERVIEW
CHAPTER 3 : TAX RATES
CHAPTER 5 : TAX INCENTIVES FOR BUSINESSES
CHAPTER 6 : DIRECT TAXES - SIGNIFICANT CHANGES
6.1 Business Entities
6.2 Personal
6.3 Non Residents
CHAPTER 7 : INDIRECT TAXES - SIGNIFICANT CHANGES
7.1 Service Tax
7.2 Customs Duty
7.3 Central Excise
7.4 Goods and Services Tax
CHAPTER 8 :
6.4 Transfer Pricing
OTHER SIGNIFICANT PROPOSALS
INDIA
BUDGET 2015
- HIGHLIGHTS
9
12
15
24
41
64
75
41
48
51
56
64
69
71
74
EXECUTIVE SUMMARY
CHAPTER 9 : 79
CHAPTER 10 : 88
CHAPTER 11 : TDS RATES
DTAA RATES
96
ABBREVIATIONS 102
1
IMPACT ON SELECT INDUSTRIES
6.5 General 57
ii
CHAPTER 12 : DIRECT TAX AND
COMPLIANCE CALENDAR
SERVICE TAX 99
CHAPTER 4 : G-20 COUNTRIES - COMPARATIVE
CORPORATE AND PERSONAL TAX RATES
23
INDIA BUDGET 2015 - HighlightsRSM Astute Consulting

EXECUTIVE SUMMARY
1. DIRECTTAXES
1.1 EffectiveTaxRates
1.1.1 Personaltaxation
TheBillproposescertainmodifications
tothetaxstructureforindividuals
# Incaseofaresidentindividualoftheageof60yearsormore(seniorcitizen)
at any time during the previous year, the basic exemption income slab of
Rs. 3,00,000 continues to remain the same. For a resident individual of the
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Income Slabs
(Rs.)
Income Slabs
(Rs.)
Proposed
Tax Rates
Tax Rates
FY 2015-16 FY 2014-15
Nil
10.30% [tax rate
10% plus
education cess
3% thereon] of
income exceeding
Rs. 2,50,000
Rs. 25,750
plus 20.60%
[tax rate 20% plus
education cess 3%
thereon] of income
exceeding
Rs. 5,00,000
Rs. 1,28,750 plus
30.90% [tax rate 30%
plus education cess 3%
thereon] of income
exceeding
Rs. 10,00,000
0 - 2,50,000#
2,50,001# - 5,00,000*
5,00,001 - 10,00,000
10,00,001 - 1,00,00,000
Nil
10.30% [tax rate
10% plus
education cess 3%
thereon] of income
exceeding
Rs. 2,50,000
Rs. 25,750 plus
20.60% [tax rate
20% plus
education cess 3%
thereon] of income
exceeding
Rs. 5,00,000
Rs. 1,28,750 plus
30.90% [tax
rate 30% plus
education cess 3%
thereon] of income
exceeding
Rs. 10,00,000
0 - 2,50,000#
2,50,001# - 5,00,000*
5,00,001 - 10,00,000
10,00,001 - 1,00,00,000
Rs.32,00,725 plus
33.99% [(tax rate 30%
plus surcharge 10%
thereon) plus
education cess 3%
thereon] of income
exceeding
Rs.1,00,00,000
1,00,00,001^ and aboveRs. 32,58,920 plus
34.608% [(tax rate 30%
plus surcharge 12%
thereon) plus
education cess 3%
thereon] of income
exceeding
Rs.1,00,00,000
1,00,00,001^ and above
INDIA BUDGET 2015 - HighlightsRSM Astute Consulting

2INDIA BUDGET 2015 - HighlightsRSM Astute Consulting
age of 80 years or more (very senior citizen) at any time during the previous
year the basic exemption income slab of Rs. 5,00,000 continues to remain
thesame.
* A resident individual having income upto Rs. 5,00,000 continues to be
entitled to a rebate of tax payable [excluding education cess] or Rs. 2,000,
whicheverisless.
^ Marginal relief is available to ensure that the additional income tax payable,
including surcharge of 12% on the excess of income over Rs. 1,00,00,000,
is limited to the amount by which the income is more than Rs. 1,00,00,000.
However, no marginal relief shall be available in respect of the education
cess.
Itisproposedtoabolishthelevyofwealth-taxandtheinformationrelatingto
assets which is currently required to be furnished in the ROW shall be
capturedintheROI.
Limit of deduction of health insurance premium increased from Rs. 15,000
to Rs. 25,000. For senior citizens, limit of such deduction increased from
Rs. 20,000 to Rs. 30,000. Senior citizens above the age of 80 years, who
are not covered by health insurance, to be allowed deduction of Rs. 30,000
towards medical expenditure. Overall deduction limit under section 80D
shallnotexceedRs.30,000.
Deduction limit of Rs. 60,000 with respect to specified disease of serious
nature enhanced to Rs. 80,000 in case of senior citizen and additional
deductionofRs.25,000allowedfordifferentlyabledpersons.
Limit on deduction on account of contribution to a pension fund and the new
pension scheme increased from Rs. 1,00,000 to Rs. 1,50,000. Further,
additional deduction of Rs. 50,000 for contribution to the new pension
schemeundersection80CCD(1B)oftheAct.
SukanyaSamriddhiAccountSchemeisnotifiedfordeductionundersection
80C of the IT Act and interest earned and withdrawal from the Sukanya
SamriddhiAccountSchemeisproposedtobeexempt.
1.1.2 Corporatetaxation
Domestic Corporate base tax rate is proposed to be reduced from 30% to
25% over the next 4 years from the next financial year. However, for FY
2015-16, surcharge on the corporate tax / MAT has been increased from
5% to 7% where income exceeds Rs. 1,00,00,000 not exceeding
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Rs. 10,00,00,000 and from 10% to 12% where income exceeds Rs.
10,00,00,000, resulting into higher effective corporate tax / MAT rates.As a
result, companies having income exceeding Rs. 10,00,00,000 now be
liable to tax at effective rate of 34.608% as against 33.99%. Similarly, the
rateofMATstandsincreasedfrom20.9605%to21.3416%.
For computing DDT / tax on distributed income (buy-back of shares),
surcharge to be considered at 12% as against the existing surcharge of
10%. As a result, the rate for DDT / tax on distributed income stands
increased to 20.9248% {(15%+12% surcharge) plus 3% cess with grossing
up}.
For determination of residential status in case of the companies, 'Control
and Management' test under section 6 of the IT Act to be replaced with
POEMTest.
1.1.3 Partnershipfirms/LLP
For total income exceeding Rs. 1,00,00,000 tax is chargeable @34.608%
[(tax rate 30% plus surcharge 12% thereon) plus education cess 3%
thereon]. In other cases, the effective tax rate to remain unchanged @
30.90%.
AMT to be increased to 21.346% [(tax rate 18.50% plus surcharge 12%
thereon) plus education cess 3% thereon] in case the adjusted total income
exceeds Rs. 1,00,00,000. In other cases, the effective tax rate to remain
unchanged@19.055%.
1.2 ProposalsforBusinesses
Additionalinvestmentallowance@15%andadditionaldepreciation@35%
tonewmanufacturingunitssetupduringtheperiod1April2015to31March
2020innotifiedbackwardareasofAndhraPradeshandTelangana.
In case of new plant and machinery installed and used for less than 6
months by a manufacturing unit or a unit engaged in generation and
distribution of power, then the remaining 50% of the additional depreciation
istobeallowedimmediatelyinthenextyear.
Acceptance or re-payment of an advance of Rs. 20,000 or more in cash for
purchaseofimmovablepropertytobeprohibited.
Sponsors shall be entitled to concessional tax rate of 15% (plus applicable
surcharge andcess) on short term capital gains andexemption of long term
capital gains on off-loading of units under an IPO of listing of units of REITs,
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subjecttopaymentofSTT.
Further, the rental income of REITs from their own assets to have a pass
through facility, whereby distributed income or any part thereof received by
aunitholderfromtheREITwhichisinthenatureofincomebywayofrenting
or leasing or letting out any real estate asset owned directly by such REIT,
shall be deemed to be income of such unit holder and shall be charged to
tax.
REIT to deduct tax on rental income distributed to resident unit holders @
10% and in case non-resident unit holders at the rates in force as
applicable.
Benefit of accelerated deduction under section 80JJAA of the Act for
employment of new regular workmen to be applied to all types of
manufacturing entities. Further, the benefit under the section 80JJAA is
extendedtounitsemploying50workmeninsteadof100regularworkmen.
100% deduction for contributions, other than by way of CSR contribution, to
SwachhBharatKoshandCleanGangaFund.
It is proposed to amend section 2(15) of the Act to modify the ceiling on
receipts fromactivities inthenatureoftrade,commerce orbusiness to20%
of the total receipts from the existing ceiling of Rs. 25,00,000. Further,Yoga
tobeincludedwithintheambitofcharitablepurpose.
Tax 'pass through' to be allowed to all the sub-categories of category I and
categoryII AIFs.
PAN being made mandatory for any purchase or sale exceeding Rs.
1,00,000
As most of the provisions of DTC have already been included in the ITAct,
DTCwillnolongerbeintroduced.
Tax free infrastructure bonds are proposed to be introduced for the projects
intherail,roadandirrigationsectors.
1.3 ProposalforTransferPricing
The threshold limit for applicability of domestic transfer pricing provisions
proposedtobeincreasedfromRs.5,00,00,000toRs.20,00,00,000.
1.4 ProposalsforNon-residents
Provisionrelatingtoindirecttransfersundersection9oftheITActproposed
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to be amended to bring clarity by providing the definition and manner of
determination of “substantial interest”. It has been proposed that, the
indirect transfer of shares or interest will be taxed in India only if the
underlying fair value of Indian assets is more than 50% of the total assets of
the entity and subject to the fact that the value of Indian assets exceeds
Rs.10,00,00,000.
Tax rate for non-resident taxpayers in respect of Royalty and FTS reduced
from25%to10%.
Income from capital gains arising to FII to be excluded from chargeability of
MAT. Also, the share of the member of AOP, in the income of AOP, to be
excludedfromchargeabilityofMAT.
Fund managers in India not to constitute business connection of offshore
funds, subject to fulfillment of prescribed conditions by the fund and the
fundmanager.
Deeming fiction in section 9 of the ITAct introduced to provide that case of
foreign banking company, interest payable by branch office in India to the
head office shall be deemed to accrue or arise in India and shall be
chargeabletotax.
1.5 OtherProposals
Gold monetization scheme to be introduced to allow the depositors of gold
to earn interest in their metal accounts and the jewellers to obtain loans in
their metal account. It is also proposed to develop a Sovereign Gold Bond
Scheme.
Section6ofFEMAtobeamendedthroughFinanceBilltoprovidecontrolon
capital flows as equity will be exercised by Government in consultation with
RBI.
Foreign investments inAIFs to be allowed and distinction between different
types of foreign investments, especially between foreign portfolio
investmentsandFDItobedoneawaywithsubjecttocertainconditions.
Comprehensive bankruptcy code of global standards to be brought in FY
2015-16towardseaseofdoingbusiness.
An expert committee to examine the possibility and prepare a draft
legislation where the need for multiple prior permission can be replaced by
a pre-existing regulatory mechanism. This will facilitate India becoming an
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investmentdestination.
Implementation of GAAR to be deferred by 2 years i.e. the same will be
effectivefrom1April2017andwillapplyprospectively.
Benami Transactions (Prohibition) Bill to curb domestic black money
proposedtobeintroducedinthecurrentsessionoftheParliament.
Leverage of technology by CBDT and CBEC to access information from
eachother'sdatabases.
TARC recommendations to be appropriately implemented during the
courseoftheyear.
To effectively and forcefully deal with generation of black money and its
concealment, a Bill for a comprehensive new law to deal with black money
parkedabroadtobeintroducedinthecurrentsessionoftheParliament.
Public Debt Management Agency (PDMA) bringing both external and
domestic borrowings under one roof to be set up this year. Further, Forward
MarketscommissiontobemergedwithSEBI.
Proposal to introduce public contracts (resolution of disputes) bill to
streamlinetheinstitutionalarrangementsforresolutionofsuchdisputes
2.0 INDIRECTTAXES
2.1 ServiceTax
Effective Service Tax rate to remain unchanged at 12.36%. However, it is
proposed to increase effective rate to 14% from the date to be notified after
approval of the Finance Bill by the Parliament and the President. It is further
proposed to levy additional 2% Swachh Bharat Cess on all or any of the
taxable services. Once effective, service tax rate will be 14% or 16%, as the
casemaybe.
Uniform abatement rate notified for transportation by rail, road and vessel.
Servicetaxshallbepayableon30%ofthetaxablevalue.
Manpower supply services or security services which were covered under
partial reverse charge mechanism to be covered under full reverse charge
mechanism. Hence, in such cases, the service provider need not charge
service tax and all service tax will be payable under reverse charge by the
servicereceiver.
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CENVAT credit in respect of service tax paid under the partial reverse
charge mechanism to be available even if no payment is made to the
serviceprovider.
Services provided to Government for infrastructure projects like schools,
hospitalsandresidentialstaffquarterstobeliabletoservicetax.
Construction, erection, commissioning or installation of airports or ports to
beliabletoservicetax.
Services by way of access to amusement facility providing fun by means of
games, rides, bowling alleys, water parks, theme parks and such other
placesareproposedtobeliabletoservicetax.
Services by way of admission to entertainment events or concerts,
pageants, award functions, musical performances and non-recognized
sporting events are proposed to be liable to service tax if the consideration
forrighttoadmissionismorethanRs.500.
Services provided by a performing artist in folk or classical art forms of
music, dance or theatre to be liable to service tax if consideration charged
bysuchartistforthesaidperformanceismorethanRs.1,00,000.
Most services provided by Government or Local Authority are proposed to
be made liable to service tax other than those services specifically
exemptedbywayofnotificationorentryintheNegativelist.
Services by way of transportation by rail, vessel or road of tea, sugar,
jaggery,coffeeandedibleoiltobeliabletoservicetax.
Servicesbywayoftransportationbyrail,vesselorroadofriceandpulsesto
beexemptedfromservicetax.
Services by way of pre-conditioning, pre-cooling, ripening, waxing, retail
packing,labellingoffruitsorvegetablestobeexemptedfromservicetax.
Services provided by a mutual fund agent or a distributor of mutual fund to a
Mutual Fund or Assets Management Company to be liable to service tax
andtobecoveredunderreversechargemechanism.
Services provided by way of exhibition of movie by an exhibitor to the
distributor or an association of persons consisting of the exhibitor as one of
itsmemberstobeexemptedfromservicetax.
Alternative optional rate of service tax in relation to money changing

services, air travel agents services, insurance agent services and lottery
ticket agent services to be revised appropriately to counterpart with the
proposedchangeinrateofservicetax.
2.2 ExciseDuty
The general effective rate of basic excise duty has been increased from
12.36%to12.50%.
Time limit for availing CENVATcredit on inputs and input services has been
increasedfrom6monthsto1year.
Time limit for return of capital goods from a job worker has been increased
from6monthsto2years.
Provision relating to reversal for CENVAT credit presently applicable to
exempted goods and services, would be applicable to non-excisable goods
also.
Online registration under central excise and service tax to be done in 2
workingdays.
Central excise/Service tax assessees allowed to use digitally signed
invoicesandmaintainrecordselectronically.
The scheme of advance ruling being extended to resident firms, LLP,
proprietorshipfirmandOnePersonCompany.
2.3 Customs
NochangeinpeakrateofBCD.
Effective rate of BCD on import of commercial vehicles other than in case of
completelyknockeddownconditionisincreasedfrom10%to20%.
BCDonorganicLEDTVpanelsisreducedfrom10%toNIL.
SADhasbeenreducedonimportofcertaininputsandrawmaterials.
All goods used in manufacture of information technology agreement bound
itemsexceptforpopulatedprintedcircuitboardsareexemptedfromSAD.
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1.1 Background
In FY 2015-16, the UnionBudget
expects the Indian economy to grow
in the range of 8% to 8.5% making it
the fastest growing large economy in
the world. Standard & Poor's has
sharply raised India's growth
forecasts recently and said the
Indian economy should be a "bright spot" inAsia. S&P raised its India GDP
growthforecastto7.9%forFY2015-16and8.2%forFY2016-17.
TheUnionBudget2015isprimarilydrivenwiththeobjectiveofaccelerating
investment and growth as well as channelizing savings in to financial
instruments. Ithasannouncedpermittingtaxfreebondsforrailways,roads
and irrigation sector. A Gold monetization scheme is proposed to be
introduced to allow the depositors of gold to earn interest in their metal
accounts and the jewellers to obtain loans in their metal accounts. It is also
proposed to develop Sovereign Gold Bond Scheme for monetisation of
unutilized Gold (Indian gold holding estimated at US$ 1 trillion). The fiscal
deficit for FY 2015-16 is expected to be contained at 3.9% of GDP and
would be gradually reduced to 3% over the next 3 years, thereby laying a
roadmapforfiscalconsolidation.
The Budget has outlined its intent to lower the corporate tax rates over the
next 4 years from 30% to 25%, However, the tax rate for financial year
2015-16 has actually increased marginally from 33.99% to 34.608% due to
increase in surcharge from 10% to 12%. In turn, it has proposed phased
eliminationofdeductionsandexemptionsfromnextfinancialyear.
Indirect transfer of shares or interest will be taxed in India only if the
underlying fair value of Indian assets is more than 50% of the total assets of
the entity and the value of Indian assets exceeds Rs. 10 crores. The
controversy on MAT applicability to foreign institutional investors has been
put to rest. GAAR implementation is deferred by 2 years and will be
prospective from 1 April 2017. It has been clarified that Fund Managers in
India shall not constitute permanent establishment of offshore funds in
India. Tax 'pass through' is proposed to be allowed to both, Category I and
CategoryIIAlternativeInvestmentFunds.Itisproposedtodoawaywiththe
CHAPTER 1: INTRODUCTION

distinction for different types of foreign investments, especially between
foreign portfolio investments and foreign direct investments, and replace
themwithcompositecaps.
Reduction of TDS (or withholding tax) rate on royalty and fees for technical
services payments from 25% to 10% from FY 2015-16, is a very welcome
move for technological up-gradation in India.The increase in threshold limit
of specified domestic transactions to Rs. 20 crores from Rs. 5 crores is a
verywelcomemoveforsmallandmediumscaleindustry.
A deeming fiction in section 9 of the IT Act is introduced to provide that in
case of a foreign banking company, interest payable by branch office in
India to its head office, shall be deemed to accrue or arise in India and shall
be chargeable to tax. This will induce foreign banks to set up a subsidiary
companyinsteadofaBranchmodel.
There has been no change in the personal tax rates. The basic exemption
limit continues at Rs.2.50 lacs. With a view to replace wealth tax, an
additional surcharge of 2% is proposed in case where income exceeds Rs.
1 Crore. This will result in maximum marginal rate of 34.608% for financial
year 2015-16 as against 33.99% at present. The limit for deduction under
section 80C of Rs. 1,50,000 remains unchanged. Section 80C provides for
tax deduction in respect of investment in eligible savings such as Provident
Fund, ELSS, life insurance premiums, housing loan repayments, 5 year
bank deposits, NSC, ULIP to promote growth. Limit of deduction of health
insurance premium increased from Rs. 15,000 to Rs. 25,000. The wealth
tax currently levied at 1% per annum on certain select assets (such as
jewelleryandimmovableproperty)isproposedtobeabolished.
GST is proposed to be implemented with effect from 1 April 2016. The
excisedutyisincreasedto12.5%andservicetaxincreasedfrom12.36%to
14% and 16% in certain cases. The proposal to introduce a new Direct Tax
Code(DTC)inplaceoftheIncome-taxActhasbeenabandoned.Deduction
for contributions towards Swachh Bharat Kosh, Clean Ganga Fund and
National Fund for Control of Drug Abuse is proposed to be allowed upto
100%.
Acomprehensive new law on black money is proposed to be enacted which
will specifically deal with such money stashed away abroad. A new and
more comprehensive Benami Transactions (Prohibition) Bill will be
introducedtocurbdomesticblackmoneyandbenamiproperty.
A Comprehensive Bankruptcy Code of global standards is proposed to be

introduced in FY 2015-16 and PPP mode of infrastructure development to
be revisited and revitalised. An expert committee would examine the
possibility and prepare a draft legislation where the need for multiple prior
permissions can be replaced by a pre-existing regulatory mechanism. This
willfacilitateIndiabecominganinvestmentdestination.
The Budget is a serious Policy Statement for putting India back on the path
oflongtermsustainedeconomicgrowth.
In this booklet compiled by us, we intend to offer a broad outline of the
highlights of the Union Budget 2015 presented on 28 February 2015. We
have discussed the significant proposals of general interest in respect of
direct taxes. In respect of indirect taxes and other policy initiatives, only the
highlights have been briefly enumerated. Preceding the budget proposals
arethemacroindicatorsofIndianeconomywhichprovideabackdroptothe
legalandfinancialproposals.
This booklet is not an offer, invitation or solicitation of any kind and it does
not purport to be comprehensive, or to render legal, economic or financial
advice. This booklet should not be relied upon for taking actions or
decisions without appropriate professional advice as the facts of each case
have to be studied and the legal position analysed properly before taking
any action or decision in the matter. Further, this booklet contains only the
proposals and amendments as given in the Finance Bill, 2015, which may
be modified before it receives the approval and assent of the Parliament
and the President. The proposals regarding direct taxes would become
effective from AY 2016-17 (FY 1 April 2015 to 31 March 2016), unless
otherwise specified. In this booklet, the terms 'IT Act', 'the Rules' and 'the
Bill' are used for the "Income-taxAct, 1961", ''Income-tax Rules, 1962'' and
"Finance Bill,2015"respectively.
While all reasonable care has been taken in preparation of this booklet, we
accept no responsibility for any errors it may contain or for any omissions or
otherwise or for any loss, howsoever caused or sustained, by the person
whoreliesonit.
1.2 ScopeandLimitations

2.2 GeneralReview
The macro-economic situation in
India has improved significantly
during the current year. In FY 2015-
16, the Union Budget expects the
Indian economy to grow in the range
of 8% to 8.5% making it the fastest
growing large economy in the world.
Standard & Poor's has raised its India
GDP growth forecast to 7.9% for 2015-16 and 8.2% for 2016-17. The new
visionary political leadership, lower crude oil prices and better realization
from the divestment/allocation of public resources, have resulted in India
becominga“globaleconomichotspot”.
The performance of the Indian equity
markets also witnessed a dream run
wherein the BSE Sensex reached
29,362 on 28 February 2015 from the
level of 21,120 as on 28 February
2014.
CHAPTER 2 : INDIAN ECONOMY - AN OVERVIEW
2.1 IndiaAtAGlance-TheMacro-EconomicPerspective
GDP - 2014
GDP Growth Rate
lUS$ 7.227 trillion measured in terms of
PurchasingPowerParity(PPP)-3rdlargestin
theworld
lUS$2.047trillionintermsofMarketExchange
Rates
l7.4%p.a.forFY2014-15
l8.1%to8.5%forFY2015-16
Forex Reserves
lForexReservesofUS$340billion
Market Capitalization
lUS$1.66trillion
Rapid Advancement
lSecond largest telecommunications market in
theworld.
l3rd largest internet user base and TV market
intheworld.
Young Demography
lSecondmostpopulous-1.27billionpeople
lOver50%ofthepopulationbelow25years
Exchange Rate
l1US$=INR61.79(ason28February2015)
Political System
lFederal Republic with Parliamentary
democracy
lStablepoliticalregimeoverlast6decades
27/02 2009
/
26/02 2010
/
5/ 2 20 1
2 0 / 1
29/02 2012
/
BSE Sensex
8/ 2 0
2 0 /2 13
28/02 2014
/
28/02 2015
/
8,892
16,430
17,701 17,753
18,861
21,120
29,362
GDP Growth
5.1
6.9
7.4
8.3
2014-15
(Advance Estimated)
2015-16
(Advance Estimated)
2013-142012-13

The CAD was at US$ 18 billion in 2014-15 (April-September) as against US$
27 billion in the same period for 2013-14, primarily due to lower crude oil
import cost. As a proportion of GDP, the CAD declined from 3.1% in the first
halfof2013-14to1.9%inthefirsthalfof2014-15.
Headline inflation measured in terms of the Wholesale Price Index (WPI)
(base year 2004-05), which
remained persistently high at
around 6-9% during 2011-13,
moderated to an average of 3.4% in
2014-15 (April-December) on the
backoflowerfoodandfuelprices.
Net foreign investment surged from
US$ 8 billion in 2013-14 (April-
September) to US$ 38 billion in
2014-15 (April-September). Foreign investment inflows in 2014-15 are likely
to be in excess of US$ 55 billion, leading to a sizeable accretion to the foreign
reservesandwhichresultantlynowstandsataboutUS$340billion.
Based on the increased
foreign inflows and the
positive macro-economic
factors, the Indian Rupee
has been moderately
consistent and stood at
Rs. 61.79 per US$ as on
28February2015.
Factors like the steep
decline in oil prices, plentiful inflow of foreign funds, a benign external
environment and potential impact of the new government at the centre, bode
well for the growth prospects and the overall macroeconomic situation,
therebye creating an excellent opportunity to propel India onto a double-digit
growthtrajectory.
The aforesaid factors coupled with the challenges in other major economies
have thrust India amongst the most attractive investment destinations, well
aboveothercountries.
65
60
55
50
45
40
51.00
46.07 45.07
49.37
53.82
62.07 61.79
Rupees
Rupees/US $ rate
2 F brua y 200
8 e
r
9 2
28 February 010
b
a
1
28 Fe ru ry 20 1
2
b ua y 2 1
8 Fe r r
0 2
28 February 2013
u
2
28 Febr ary 014
27 February 2015
Foreign exchange reserves
294305
279 292 304
329
2009-10 2010-11 2011-12 2012-13 2013-14 2014-15(Est.)
400
350
300
250
200
150
100
50
US$Billion

2.3 India - Key Economic Indicators
1
NS
AE
Calculatedbasedonavailablefigures.
NewSeriesEstimates
AdvanceEstimate
a 2ndAdvanceEstimates
b Base(2004-05=100)
c Indicative rates announced by Foreign Exchange Dealers
Association of India (FEDAI) and from May 2012 onwards are
RBI’sreferencerates.
9,281NS 9,921NS
167.7 177.7
172.2 172.0
5.1
7.4
1.1
7.4
f3.4
2.1f
6.9
NS8,599 9,170NS 4.9 7.56.6
257.1 265.6 -0.8 -3.23.3
964.5 1014.8 4.0 9.9f6.0
6.0
1,706 1,640 -7.5 6.9-3.9
-0.1
d Fiscalindicatesfor2013-14arebasedontheprovisionalactual
e BudgetEstimates
f April-December2014
g Figuresfor2011-12to2013-14relatetoendoffinancialyearand
thefigurefor2014-15isatendJanuary2015
h AsonJanuary9,2015.
490 450 0.3 f3.6-8.3
300 314 -1.8 f4.04.7
292.0 304.2 -0.8 8.14.2
54.41 60.5
4.5d
13.5 0.511.2
4.8
(Rs.thousandcrore)
-Atconstantmarketprices
GVA Atbasicprices
(2011-12prices)
Indexofindustrial
productionb
Electricitygenerated
(Utilitiesonly)(billionKWH)
WholesalePriceIndex
(Average)
d
exchangerate)
(US$billion-AnnualAverage
1Atconstantmarketprices
Foodgrainsproduction
(milliontones)
Imports
(US$million)
Exports
Foreignexchangereservesg
(US$million)
(inUS$billion)
Averageexchange ratec
(Rs./US$)
Grossfiscaldeficit
(%ofGDP)
(Base:2004-05=100)
10,657AE
183.8
175.6
9,858AE
a257.1
1115.3
1,753
466
327
328.7
60.78
4.1e
Absolute values % change over previous period
Items
2014-152012-13 2013-142012-132013-14
GrossDomesticProduct
2014-15

CHAPTER 3 : TAX RATES
3.1 Individuals,HUFs,AOPsandBOIs
3.1.1 TaxRates
The Bill proposes certain
modifications to the tax structure for
individuals, HUFs, AOPs, and BOIs.
Consequently, the effective
proposed and present tax rates for
the FYs 2015-16 and 2014-15, in
case of individuals, HUFs,AOPs and
BOIsareasfollows:
Income Slabs
(Rs.)
Income Slabs
(Rs.)
Proposed
Tax Rates
Tax Rates
FY 2015-16 FY 2014-15
Nil
10.30% [tax rate
10% plus
education cess
3% thereon] of
income exceeding
Rs. 2,50,000
Rs. 25,750 plus
20.60% [tax rate
20% plus
education cess
3% thereon]
of income
exceeding
Rs. 5,00,000
Rs. 1,28,750
plus 30.90% [tax
rate 30% plus
education cess
3% thereon] of
income exceeding
Rs. 10,00,000
0 - 2,50,000#
2,50,001# - 5,00,000*
5,00,001 - 10,00,000
10,00,001 -1,00,00,000
Nil
10.30% [tax rate
10% plus
education cess 3%
thereon] of income
exceeding
Rs. 2,50,000
Rs. 25,750 plus
20.60% [tax rate
20% plus
education cess 3%
thereon] of income
exceeding
Rs. 5,00,000
Rs. 1,28,750 plus
30.90% [tax
rate 30% plus
education cess 3%
thereon] of income
exceeding
Rs. 10,00,000
0 - 2,50,000#
2,50,001# - 5,00,000*
5,00,001 - 10,00,000
10,00,001- 1,00,00,000
Rs. 32,00,725 plus
33.99% [(tax rate
30% plus surcharge
10% thereon) plus
education cess
3% thereon] of
income exceeding
Rs. 1,00,00,000
1,00,00,001^ and aboveRs 32,58,920 plus
34.608% [(tax rate
30% plus surcharge
12% thereon) plus
education cess
3% thereon] of
income exceeding
Rs.1,00,00,000
1,00,00,001^ and above

# In case of a resident individual of the age of 60 years or more (senior citizen)
at any time during the previous year, the basic exemption income slab of
Rs.3,00,000 continues to remain the same. For a resident individual of the
ageof80yearsormore(veryseniorcitizens)atanytimeduringtheprevious
year the basic exemption income slab of Rs. 5,00,000 continues to remain
thesame.Thetaxforotherslabswillchangeaccordingly.
* A resident individual having income upto Rs. 5,00,000 continues to be
entitled to a rebate of tax payable [excluding education cess] or Rs. 2,000,
whicheverisless.
^ Marginal relief is available to ensure that the additional income tax payable,
cess.
Theproposedincidenceofincome-taxforFY2015-16onindividuals,senior
citizens and very senior citizens having different income levels can be
exemplifiedasfollows:
* The tax incidence for HUFs, AOPs and BOIs will be same as that of
individuals.
3.1.2 Proposedtaxincidence
Annual
Income (Rs.) Individuals
(including women)*
Tax Liability (Rs.)
Very Senior CitizensSenior Citizens
2,50,000
3,00,000
4,00,000
5,00,000
8,00,000
10,00,000
25,00,000
50,00,000
1,00,00,000
1,50,00,000
-
5,150
15,450
25,750
87,550
1,28,750
5,92,250
13,64,750
29,09,750
49,89,320
-
-
-
-
61,800
1,03,000
5,66,500
13,39,000
28,84,000
49,60,480
-
-
10,300
20,600
82,400
1,23,600
587,100
13,59,600
29,04,600
48,83,552

3.2 Companies
3.2.1 Domesticcompanies
No changes are proposed in the corporate tax rate for FY 2015-16. The Bill
proposes to reduce the corporate tax rate from 30% to 25% over a
period of 4 years starting from the next financial year. However, the
rate of surcharge is proposed to be increased by 2% for FY 2015-16 in
case the income of the domestic companies exceeds Rs. 1,00,00,000.
As such, the effective tax rates and MAT rates for domestic companies for
FYs2015-16and2014-15areasfollows:
Marginal relief is available to ensure that the additional income tax payable,
including surcharge of 7% on the excess of income over Rs. 1,00,00,000, is
limited to the amount by which the income is more than Rs. 1,00,00,000.
Similarly, marginal relief is available to ensure that the additional income tax
payable, including surcharge of 12% on the excess of income over Rs.
10,00,00,000, is limited to the amount by which the income is more than Rs.
10,00,00,000.However,nomarginalreliefshallbeavailableinrespectofthe
educationcess.
Domestic
Company
FY 2015-16
Effective Tax Rates
Having total
income exceeding
Rs. 10,00,00,000
33.99% [(tax rate
30% plus
surcharge 10%
thereon) plus
education cess
3% thereon]
20.9605 %[(tax
rate 18.5%
plus surcharge
10% thereon)
plus education
cess 3%
thereon]
32.445% [(tax
rate 30% plus
surcharge 5%
thereon) plus
education cess
3% thereon]
FY 2014-15 FY 2015-16 FY 2014-15
Effective MAT Rates
19.055% (tax
rate 18.5%
plus education
cess 3%
thereon)
20.008 %[(tax
rate 18.5% plus
surcharge 5%
thereon) plus
education cess
3% thereon]
Having total
income
exceeding
Rs.1,00,00,000
but not exceeding
Rs.10,00,00,000
Having total
income upto
Rs. 1,00,00,000
30.90% (tax
rate 30% plus
education cess
3% thereon)
34.608% [(tax rate
30% plus
surcharge 12%
thereon) plus
education cess 3%
thereon]
33.063% [(tax rate
30% plus surcharge
7% thereon) plus
education cess 3%
thereon]
21.3416 % [(tax
rate 18.5% plus
surcharge 12%
thereon) plus
education cess
3% thereon]
20.38885 % [(tax
rate 18.5% plus
surcharge 7%)
plus education
cess 3%
thereon]
30.90% (tax rate
30% plus education
cess 3% thereon)
19.055% (tax
rate 18.5% plus
education cess
3% thereon)

3.2.2 Foreigncompanies
3.2.3 Taxondividend/incomedistributedbydomesticcompanies
No changes are proposed in the tax rate and surcharge. As such, the
effective tax rates for foreign companies for FYs 2015-16 and 2014-15 are
asfollows:
Marginal relief is available to ensure that the additional income tax payable,
including surcharge of 2% on the excess of income over Rs. 1,00,00,000, is
Similarly, marginal relief is available to ensure that the additional income tax
payable, including surcharge of 5% on the excess of income over
Rs.10,00,00,000, is limited to the amount by which the income is more than
Rs.10,00,00,000. However, no marginal relief shall be available in respect
oftheeducationcess.
NochangesareproposedintheDDTrate.However,therateofsurchargeis
proposed to be increased from 10% to 12%.As such, the effective DDTrate
for dividend to be distributed by domestic companies for FY 2015 -16 and
FY2014-15areasfollows:
Foreign Company
FY 2015-16
Effective Tax Rates
Having total income
exceeding
Rs.10,00,00,000
43.26% [(tax rate 40% plus surcharge 5% thereon)
plus education cess 3% thereon]
FY 2014-15
41.20% (tax rate 40% plus education cess 3% thereon)
Having total income
exceeding
Rs.1,00,00,000 but not
exceeding
Rs.10,00,00,000
Having total income
upto Rs. 1,00,00,000
42.024% [(tax rate 40% plus surcharge 2% thereon)
plus education cess 3% thereon]
Dividend Distribution
Tax Rate FY 2015-16
Effective DDT Rates
Rate of DDT on the
amount of dividend
received by the
shareholders
20.475% [(tax rate 15% plus
surcharge 10% thereon) plus
education cess 3% thereon
considering the grossing up
provisions]
FY 2014-15
education cess 3% thereon
considering the grossing up
provisions]

3.3 PartnershipFirms/LLPs
No changes are proposed in the tax rates. However, the rate of
surcharge is proposed to be increased from 10% to 12% in case of the
partnership firm/LLP having total income exceeding Rs. 1,00,00,000.
As such, the effective tax rates for partnership firms/LLPs for FYs 2015-16
and2014-15areasfollows:
Marginal relief is available to ensure that the additional income-tax payable,
includingsurchargeof12%ontheexcessofincomeoverRs.1,00,00,000,is
limited to the amount by which the income is more than Rs.1,00,00,000.
cess.
AMTcontinuesonnon-corporateassesseessuchaspartnershipfirms,sole
proprietorships, AOPs, HUFs, BOIs, etc. AMT is to be calculated on
adjusted total income (if the adjusted total income of such person exceeds
Rs. 20,00,000) if the regular income tax payable by such person is less than
AMT. No change has been proposed in the AMT rate. However, the
surcharge rate is proposed to be increased from 10% to 12% in case the
total income exceeds Rs. 1,00,00,000.As such, the effectiveAMT rates for
FYs2015-16and2014-15areasfollows:
3.4 AMTonallBusinessOrganizationsotherthanCompanies
Partnership
Firms/LLPs FY 2015-16
Effective Tax Rates
Having total income
exceeding
Rs.1,00,00,000
education cess 3% thereon]
FY 2014-15
Having total income
upto Rs.1,00,00,000
30.90% (tax rate 30% plus
education cess 3% thereon)
Non-Corporate
assessees FY 2015-16
Effective AMT Rates
Having total income
exceeding
Rs.1,00,00,000
21.3416% [(tax rate 18.50%
plus surcharge 12% thereon)
thereon]
FY 2014-15
Having total income
upto Rs.1,00,00,000
20.9605% [(tax rate 18.50%
plus surcharge 10% thereon
19.055% [(tax rate 18.50% plus
19.055% [(tax rate 18.50%
thereon]

cess.
No changes are proposed in the tax rate. However, the rate of surcharge is
proposed to be increased from 10% to 12%. As such, the effective tax rate
on income distributed by mutual fund for FY2015-16 and FY2014-15 are as
follows:
3.5 TaxonIncomeDistributedbyMutualFunds
Type of Income
39.52%*
(considering the
grossing up
provisions)
51.49% *
(considering the
grossing up
provisions)
Income distributed by a money market
mutualfundoraliquidmutualfundto
- anIndividualoranHUF
- others
Income distributed by a mutual fund
(including debt fund) other than a money
marketmutualfundoraliquidmutualfundto
- anIndividualoranHUF
- others
Income distributed by a mutual fund to non-
residents (not being company) under
infrastructuredebtscheme
Effective Tax Rate
FY 2015-16 FY 2014-15
40.52%* (considering
the grossing up
provisions)
52.92%*
(considering the
grossing up
provisions)
39.52%*(considering
the grossing up
provisions)
51.49%*
(considering the
grossing up
provisions)
40.52%*(considering
the grossing up
provisions)
52.92%*(considering
the grossing up
provisions)
6.01%*(considering
the grossing up
provisions)
6.12%*(considering
the grossing up
provisions)
* The tax rates are inclusive of surcharge of 12% for FY 2015-16 and 10% for FY 2014-15
andeducationcessof3%thereon.

3.6 Tax on Distributed Income of Domestic Company for Buy-back of
Shares
No changes are proposed in the tax rate. However, the rate of surcharge is
for distributed income of domestic companies for buy-back of shares for FY
2015-16andFY2014-15areasfollows:
Particulars
FY 2015-16
Effective Tax Rates
Rate of tax on the
amount of distributed
income of domestic
company
FY 2014-15
Type of Income
FY 2015-16
Effective Tax Rates
Income distributed by
a Securitization
- an Individual or a HUF
- others
28.325%
33.99%
FY 2014-15
28.84 %
34.608 %
3.7 TaxonDistributedIncomebySecuritizationTrust
No changes are proposed in the tax rate.
for distributed income of domestic companies for buy-back of shares for FY
2015-16andFY2014-15areasfollows:
However, the rate of surcharge is
3.8 OtherEntities
3.8.1 Co-operativesocieties
No change is proposed in the tax rate. However, the rate of surcharge is
proposed to be increased from 10% to 12%. As such, the tax rates for co-
operativesocietiesforFYs2015-16and2014-15areasfollows:

Income slab
(Rs.)
FY 2015-16
Tax Rates
0 - 10,000
10,001 - 20,000
20,001 - 1,00,00,000
Above - 1,00,00,000
FY 2014-15
10.30%
Rs.1,030 plus 20.60% of
income exceeding
Rs. 10,000
Rs. 3,090 plus 30.90% of
income exceeding
Rs.20,000
Rs. 34,57,339 plus
34.608% of income
exceeding Rs. 1,00,00,000
10.30%
Rs. 1,030 plus 20.60% of
income exceeding Rs.
10,000
Rs. 3,090 plus 30.90% of
income exceeding
Rs.20,000
Rs. 33,95,601 plus 33.99%
of income exceeding Rs.
1,00,00,000
cess.
No change is proposed in the tax rate. However, the rate of surcharge is
proposed to be increased from 10% to 12%.As such, the tax rates for local
authoritiesforFYs2015-16and2014-15areasfollows:
3.8.2 Localauthorities
includingsurchargeof12%ontheexcessofincomeoverRs.1,00,00,000is
cess.
Local authorities
FY 2015-16
Effective Tax Rates
Having total income
exceeding Rs. 1,00,00,000
Having total income up to
Rs.1,00,00,000
33.99% [(tax rate 30%
plus surcharge 10%
thereon) plus education
cess 3% thereon]
30.90% (tax rate 30% plus
education cess 3%
thereon)
FY 2014-15
34.608% [(tax rate 30%
plus surcharge 12%
thereon) plus education
cess 3% thereon]
30.90% (tax rate 30%
thereon)

CHAPTER 4 : G-20 COUNTRIES - COMPARATIVE
CORPORATE AND PERSONAL TAX RATES
Notes:
1. The above rates are MMR and inclusive of provincial or local taxes as may be applicable to domestic
companies/residentindividualsinrespectivecountries.
2. The taxation regime for personal taxes is progressive for all the G-20 economies except Russia and
SaudiArabia.
3. Corporate tax @ 35.64% is indicative effective rate of tax. In addition, size based business tax is also
leviedoncompanies.
4. Corporate tax @ 20% is payable on the pro-rata income to the extent of non-resident shareholding.
Saudi and the Gulf Cooperation Council (GCC) nationals or companies owned by them have to pay
Zakat(i.e.areligioustax)@2.5%.
5. Corporate tax comprises of federal tax (35%) as well as state and local government taxes which vary
from state to state. Personal tax comprises of federal tax (39.6%) and further each state and local
governmentcanalsolevytaxonincome.
6. The above rates are general rates to provide a comparative matrix. The detailed regulations in the
relevantcountriesneedtobereferredfordeterminingexactrates.
Sr. No. Country Corporate Tax Rate Personal Tax Rate
[Note 1] [Notes 1 and 2]
2. Australia 30% 45%
3. Brazil 34% 27.50%
4. Canada 31% 50%
5. China 25% 45%
6. France 38.11% 45%
7. Germany 34.82% 47.50%
8. India 34.608% 34.608%
9. Indonesia 25% 30%
10. Italy 31.40% 45.93%
11. Japan [Note 3] 35.64 % 50.84%
12. Mexico 30% 30%
13. Russia 20% 13%
14. Saudi Arabia [Note 4] 0% 0%
15. South Africa 28% 40%
16. South Korea 24.20% 41.80%
17. Turkey 20% 35%
18. United Kingdom 20% 45%
19. United States of America
1. Argentina 35% 35%
[Note 5] 35% 39.60%
The G-20 economies comprising of 19 countries and the
EU, account for almost 90% of the global GDP, 80% of
worldtrade(includingEUintra-trade)andtwo-thirdofthe
world population. Considering the significance of these
economiesandinordertoprovideanindicativeoverview
of the prevailing tax rates in these key economies, a brief
comparativematrixistabulatedbelow.

CHAPTER 5 : TAX INCENTIVES FOR BUSINESSES
(As updated up to the Finance Bill, 2015)
The IT Act provides for far reaching
tax holidays and other tax incentives
for businesses. We have briefly
enumerated below, the significant tax
holidays and incentives available to
businesses along with the nature of
deductions, eligibility criteria,
quantum of deduction and period for
which the deductions are available.
The tax holidays and incentives are
subject to fulfillment of specified conditions. The changes proposed by the Finance
Bill, 2015 are highlighted in bold font. The Budget 2015 has announced the plan
to reduce corporate tax rate from 30% to 25% over the next 4 years. However,
this process of reduction will be accompanied by rationalisation and removal
of various kinds of tax exemptions and incentives for corporate taxpayers
and hence the incentive listed below may undergo a substantial change over
thenext4years.
PeriodDetails of Exemption / DeductionSection Quantum
of Deduction
10AA First 5 years
Next 5 years
+Next 5 years
100%
50%
50%
New eligible unit set up in SEZ on or after 1 April
2005
Exemption is available to the entrepreneur as
referred to in Section (2j) of SEZ Act, 2005 for
profits derived from export of articles or things
or services, manufactured, or produced or
providedbyaneligibleunit.
The profits and gains derived from on-site
development of computer software (including
services for development of software) outside
India shall be deemed to be the profits and
gains derived from the export of computer
softwareoutsideIndia.
Thebenefitisalsoavailabletounitsengagedin
cutting and polishing of precious and semi-
preciousstones.
The deduction under this section is to be
computed in the same proportion, which the
export turnover of the eligible unit bears with
thetotalturnoverofthesaidunit.
The eligible units (which are domestic
companies) availing these deductions will be
subject to MAT @ 21.3416% [(tax rate 18.50%
plus surcharge 12%) plus education cess 3%
thereon] (having book profit exceeding Rs.
10,00,00,000) or 20.38885% [(tax rate 18.50%
Ø
Ø
Ø
Ø
Ø

Details of Exemption / DeductionSection
plus surcharge 7%) plus education cess 3%
thereon] (having book profit exceeding Rs.
1,00,00,000 but not exceeding Rs.
10,00,00,000 ) or 19.055% (tax rate 18.50%
plus education cess 3% thereon) (in other
cases).
From FY 2013-14, a person other than
Company shall be required to pay AMT @
21.3416% [(tax rate 18.50% plus surcharge
12%) plus education cess 3% thereon] (having
adjusted total income exceeding Rs.
1,00,00,000) or 19.055% (tax rate 18.50% plus
educationcess3%thereon)(inothercases).
In case any deduction has been claimed under
section 10AA for the specified business
mentioned in section 35AD(8)(c), no deduction
under section 35AD shall be available in the
same or any other assessment year in respect
ofsuchspecifiedbusiness.
+ The deduction is allowed only on creation of a
specified reserve, which is required to be
utilizedforspecifiedpurposes.
Ø
ØCredit of MAT and AMT paid shall be available
for set-off against the tax as per normal
provisionsinsubsequentyears.
Ø
25INDIA BUDGET 2015 - Highlights
Period Quantum
of Deduction
Tea/Coffee/Rubber/developmentallowance
Deduction is available to assessee engaged in
the business of growing and manufacturing
tea,coffeeorrubberinIndia.
For claiming the deduction, the amount has to
be deposited in a special account with
NABARD or any Deposit Account opened by
the assessee and approved by the Tea Board
or Coffee Board or Rubber Board within 6
months from the end of the financial year or
before the due date of furnishing the return of
income,whicheverisearlier.
The amount has to be utilized by the assessee
forspecifiedpurposes.
Ø
Ø
Ø
33AB Available for
every AY
Upto 40% of
profits or amount
deposited,
whichever is
less.
SiteRestorationFund–PetroleumorNaturalGas
Deduction is available to assessee engaged in
the business of prospecting for, or extraction or
production of petroleum or natural gas or both
in India and in relation to which the Central
Government has entered into an agreement
withsuchassessee.
For claiming the deduction, the amount has to
be deposited in a special account with SBI
opened by the assessee and approved by the
Ministry of Petroleum and Natural Gas before
theendofthe .
The amount has to be utilized by the assessee
forspecifiedpurposes.
Ø
Ø
Ø
financialyear
33ABA Available for
every AY
Upto 20% of
profits or amount
deposited,
whichever is
less.

Details of Exemption / DeductionSection
Amortization of expenditure on prospecting, etc. of
certainminerals
The amortization of expenditure is available
subject to fulfillment of certain conditions to the
resident assessee engaged in the operation of
prospecting, extraction or production of
specifiedminerals.
The expenditure incurred wholly and
exclusively on any operation relating to
prospecting for the minerals or development of
a mine or other natural deposit qualifies for
amortization.
Ø
Ø
Period Quantum
of Deduction
AdditionalDepreciation
General rate of depreciation for plant and machinery is 15% (other than certain
specifiedtypesofplantandmachinery).
An assessee engaged in the business of manufacture or production of any article or
thing or in the business of generation or generation and distribution of power can claim
the additional depreciation of 20% on the cost of new plant and machinery (other than
ships and aircraft) which are acquired and installed after 31 March 2005. Additional
depreciationshallbeallowedonlytotheextentof50%(i.e.10%)ifthemachineryisput
touseforaperiodlessthan180daysintheyearofitsacquisitionandinstallation.
It is proposed to allow higher additional depreciation @ 35% (instead of above
20%) in respect of the actual cost of eligible new machinery or plant acquired
andinstalledbyamanufacturingundertakingorenterprisewhichissetupinthe
notified backward area of the State ofAndhra Pradesh or the State of Telangana
on or after the 1 April 2015 and ending before the 1 April 2020. The eligible
machinery or plant is mentioned in existing proviso to section 32(1)(iia) of the IT
Act.
It is proposed to provide that, in case of eligible new plant and machinery
installed and used for less than 180 days by a manufacturing unit or a unit
engaged in generation and distribution of power, then, the remaining 50% (i.e.
10% or 17.5% as the case may be) of the additional depreciation is to be allowed
inimmediatenextyear.
Ø
Ø
Ø
Ø
32(1)
(iia)
Eligibility Criteria, Quantum and Period of DeductionSection
Investmentinnewplantormachinery
Where a company is engaged in the business of manufacture or production of an
article or thing, acquires and installs new assets exceeding Rs. 25,00,00,000, then
there shall be allowed a deduction of 15% of the actual cost of such new assets over
andabovethenormaldepreciationundersection32oftheITAct.
The said deduction is available for investment made in new plant and machinery upto
31March2017.
In case any new asset is sold or otherwise transferred within a period of 5 years, the
deduction allowed above shall be deemed to be the income chargeable under the
head ‘Profits and Gains of business or profession’ of the financial year in which such
new asset is sold or otherwise transferred (in addition to taxability of gains on transfer
ofsuchnewasset).
Ø
Ø
Ø
32AC
(1A)
(1B)
(2)
35E Equal
installments
over 10 years
‘1/10th of the
expenditure’ or
‘income’,
whichever is
less.

A company can also
directlyincurexpenditurein
respect of eligible project
andscheme
Not permitted
Assessee To whom payment should be made Direct Expenditure
Company
Others
Public Sector Company, or a local authority or
to an association or institution approved by
the National Committee for carrying out any
eligibleprojectorscheme
Sameasabove
Investment in new assets in notified backward areas of the State ofAndhra Pradesh
ortheStateofTelangana
Itisproposedtoprovideanadditionalinvestmentallowanceofanamountequal
to15%ofthecostofnewassetacquiredandinstalledbyanassessee,if:
i. It sets up an undertaking or enterprise for manufacture or production of any
article or thing on or after 1 April 2015 in any notified backward areas in
theStateofAndhraPradeshandtheStateofTelangana;and
ii. The new assets are acquired and installed for the purposes of the said
undertakingorenterpriseduringtheperiod1April2015to31March2020.
New assets have been defined as plant or machinery subject to fulfillment of
prescribedconditions.
The above deduction will be allowed over and above the existing deduction
undersection32ACoftheITAct.
In case any new asset is sold or otherwise transferred within a period of 5 years,
the deduction allowed above shall be deemed to be the income chargeable
underthehead‘ProfitsandGainsofbusinessorprofession’ofthefinancialyear
in which such new asset is sold or otherwise transferred. (in addition to
taxabilityofgainsontransferofsuchnewasset)
Thisrestrictionshallnotapplyinacaseofamalgamationordemerger.However,
the above 5 years condition shall continue to apply to the amalgamated
companyorresultingcompany,asthecasemaybe.
Ø
Ø
Ø
Ø
Ø
32AD
Expenditureoneligibleprojectsorscheme
Ø
welfare.
ØAnyassesseecanclaimdeductionasunder:
Deduction is available for expenditure incurred for promoting social and economic
35AC
Deductioninrespectofexpenditureonspecifiedbusinesses
Any expenditure of capital nature (other than expenditure incurred on the acquisition
of any land or goodwill or financial instrument) incurred, wholly and exclusively, during
the year for specified business shall be allowed as deduction subject to the specified
provisions.
Specified business and the year (in which the operations to be commenced) for
availingdeductionunderthissectionaretabulatedasunder:
Ø
Ø
35AD

From 1 April 2009 onwards*
From 1 April 2007 onwards
From 1April 2010 onwards**
From 1 April 2009 onwards*1 Settingupandoperatingacoldchainfacility
2 Setting up and operating a warehousing facility for
storingagriculturalproduce
3 Laying and operating a cross-country natural gas or
crude or petroleum oil pipeline network for
distribution, including storage facilities being an
integralpartofsuchnetwork
4 Building and operating a hotel of 2 star or above
category as classified by the Central Government
anywhereinIndia
5 Building and operating a hospital with atleast 100
bedsforpatientsanywhereinIndia
6 Developing and building a housing project under a
scheme for slum redevelopment or rehabilitation
framed by the Central or State Government, as the
case may be, and which is notified by the Board in
this behalf in accordance with the guidelines as may
beprescribed
7 The business of developing and building a housing
project under a scheme for affordable housing
framed by the Central Government or a State
Government,asthecasemaybe,andnotifiedbythe
Board in this behalf in accordance with the
guidelinesasmaybeprescribed
8 Production of fertilizers in India through a new plant
oranewlyinstalledcapacityinanexistingplant
9 Setting up and operating an inland container depot
or a container freight station notified or approved
undertheCustomsAct,1962
10 Bee-keepingandproductionofhoneyandbeeswax
11 Setting up and operating a warehousing facility for
storageofsugar
12 Laying and operating a slurry pipeline for
transportationofironore
13 Setting up and operating a semiconductor wafer
fabrication manufacturing unit, if such unit is notified
by the Board in accordance with the prescribed
guidelines
Sr.
No.
Specified Business Specified Year of
Commencement
* Specified business referred at Sr. No. 1, 2, 5, 7 and 8 in the above table commencing
operations on or after 1 April 2012 shall be eligible for deduction of 150% of capital
expenditureincurred.
** Where the assessee builds a hotel of 2 star or above category as classified by the
Central Government and subsequently, while continuing to own the hotel, transfers the
operation thereof to another person, the said assessee shall be deemed to be carrying on
the ‘specified business’of building and operating hotel as referred at Sr. No. 4 in the above
table,withretrospectiveeffectfromAY2011-12.

Ø
Ø
financial year
Ø
Ø
Any asset, in respect of which a deduction is claimed and allowed under this section,
shall be used only for the specified business for a period of 8 years beginning with the
financialyearinwhichsuchassetisacquiredorconstructed.
Where such asset is used for any purpose other than the specified business, then, the
total amount of deduction so claimed and allowed in any in respect of
such asset (after reducing the depreciation allowable under section 32 of the ITAct on
deduction allowed under section 35AD of the ITAct), shall be deemed to be income of
theassesseechargeableunderthehead‘Profitsandgainsofbusinessorprofession’.
While computing AMT, adjusted total income shall be increased by the deduction
claimed under section 35AD of the IT Act as reduced by the amount of depreciation
allowableundersection32oftheITActonsuchdeduction.
In case deduction has been availed under section 35AD of the IT Act on account of
capital expenditure incurred for the purpose of specified business in any assessment
year, no deduction under section 10AAof the ITAct or under the provisions of Chapter
VI-A or under any other provisions of the IT Act shall be available in the same or any
otherassessmentyearinrespectofsuchspecifiedbusiness.
Deductionforpaymenttowardsruraldevelopmentprogrammes
Deductionisallowedsubjecttofulfillmentofcertainconditionsforanysumspaidto:
i. Anassociationorinstitutionforcarryingoutanyprogrammeofrural development
ii. An association or institution for training of persons for implementation of rural
developmentprogramme
iii. NationalFundforRuralDevelopment
iv. NationalUrbanPovertyEradicationFund
Ø
35CCA
Weighteddeductionofexpenditureincurredonagricultureextensionproject
This section provides for weighted deduction of 150% of the expenditure incurred on
agricultural extension project. The conditions for eligibility of agricultural extension project
havebeenprovidedunderRule6AADandRule6AAEoftheITRules.
Further, where a deduction under this section is claimed and allowed for any
, in respect of any expenditure on agricultural extension project, no deduction shall be
allowed in respect of such expenditure under any other provisions of the ITAct for the same
oranyother .
assessment
year
assessmentyear
35CCC
Weighteddeductionofexpenditureincurredonskilldevelopmentproject
Any expenditure (not being expenditure in the nature of cost of any land or building)
incurredonskilldevelopmentprojectshallbeeligibleforweighteddeductionof150%inthe
hands of a company. The conditions of eligibility of skill development project have been
providedunderRule6AAFtoRule6AAHoftheITRules.
Further, where a deduction under this section is claimed and allowed for any
in respect of any expenditure on skill development project, no deduction shall be
allowedinrespectofsuchexpenditureunderanyotherprovisionsoftheITActforthesame
oranyother .
assessment
year
assessmentyear
35CCD
Amortizationofpreliminaryexpenses
Certain preliminary expenses incurred by the resident assessee before the
commencement of business or after commencement of business in case of extension
ofanindustrialundertakingorsettingupanewindustrialunit.
The deduction is allowed in 5 equal annual installments for amount of preliminary
expenditureincurredor5%ofcostofproject,whicheverisless.
Ø
Ø
35D

Details of DeductionSection Quantum of
deduction of
sum paid/
expenditure
incurred
Weighted deduction on various expenditure incurred on Scientific
Research
35(1)(i) Any expenditure (not being in nature of capital expenditure) laid or
expended on scientific research related to business carried on by the
assessee.
35(1)(ii) Anysumpaidtoanapprovedresearchassociation,(whichhasitsobjectof
undertaking scientific research) or to a university, college or other
institutiontobeusedforscientificresearch.
35(1)(iia) Any sum paid to an approved company to be used by it for scientific
research. Such approved company will not be entitled to claim weighted
deduction under section 35(2AB) of the ITAct. However, deduction to the
extent of 100% of the sum spent as revenue expenditure on scientific
research, which is available under section 35(1)(i) of the IT Act will
continuetobeallowed.
35(1)(iii) Any sum paid to approved research association (which has its object of
undertaking research) or university, college or other institution to be used
forresearchinsocialscienceorstatisticalresearch.
35(1)(iv) Any capital expenditure (other than expenditure on land and building)
incurred on scientific research related to the business carried on by the
assessee.
35(2AA) Any sum paid to a National Laboratory or a University or an Indian Institute
of Technology or a specified person with a specific direction that the said
sum shall be used for scientific research undertaken under a programme
approvedbytheprescribedauthority.
35(2AB) Any expenditure incurred up to 31 March 2017(other than expenditure on
cost of land and building), on in-house research and development facility,
as approved by the prescribed authority, incurred by the company,
engaged in the business of bio-technology or manufacture or production
ofarticleorthing(exceptthosespecifiedintheEleventhSchedule).
100%
175%
125%
125%
100%
200%
200%
Amortizationofamalgamationordemergerexpenses
Any expenditure incurred by the Indian company for the purposes of amalgamation or
demerger of an undertaking shall be eligible for amortization over 5 years beginning from
thefinancialyearinwhichtheamalgamationordemergertakesplace.
35DD
Amortizationofexpenditureincurredbywayofvoluntaryretirementscheme
Anyexpenditureincurredbywayofpaymentofanysumtoanemployeeinconnectionwith
his voluntary retirement is eligible for amortization over 5 years, subject to specified
conditions.
In case of conversion of private company or unlisted public company into a LLP,
unabsorbed expenditure incurred under voluntary retirement scheme by the private
companyorunlistedpubliccompanywillbeamortizedfortheremainingperiodbytheLLP.
35DDA

Details of DeductionSection Quantum of
deduction of
sum paid/
expenditure
incurred
It is proposed to provide that, deduction under the said section
shall be allowed only if the company enters into an agreement with
the prescribed authority for co-operation in such research and
development facility and fulfills prescribed conditions with regard
to maintenance and audit of accounts and also furnishes
prescribedreports.
Capital gains arising on transfer of plant, machinery, land, building or any rights in land /
building effected in course of or in consequence of the shifting of an industrial undertaking
situated in an urban area to any area (other than an urban area) shall be eligible for
exemption.Thisexemptionshallbeleastofthefollowing:
lAmountofcapitalgains;
lAmountofcapitalgainsutilizedwithinaperiodof1yearbeforeor3yearsafterthedate
of transfer of the above assets, for purchase of new plant and machinery, land and
buildingandforshiftingexpenses,subjecttospecifiedconditions.
54G
Capital gains arising on transfer of plant, machinery, land, building or any rights in land /
building effected in course of or in consequence of the shifting of an industrial undertaking
situated in an urban area to any SEZ shall be eligible for exemption. This exemption shall
beleastofthefollowing:
lAmountofcapitalgains;
lAmountofcapitalgainsutilizedwithinaperiodof1yearbeforeor3yearsafterthedate
of transfer of the above assets, for purchase of new plant and machinery, land and
buildingandforshiftingexpenses,subjecttospecifiedconditions.
54GA
Exemptions from Capital Gains in certain cases
Ø
Ø
LongtermcapitalgainsshallbeexemptinthehandsofanindividualoranHUFonsale
of a residential property (house or plot of land) in case of re-investment of the net
consideration in the equity of a newly started-up SME company in the manufacturing
sector and the SME company utilizes the said funds for purchase of new plant and
machinery,subjecttothecertainconditions.
The said relief would be available in case of any transfer of residential property made
onorbefore31March2017.
54GB
Ø
Ø
Capital gain on transfer of a long term capital asset shall be exempt from tax, if an
assessee invests, within a period of 6 months from the date of transfer of a long-term
capital asset, the capital gains in the specified assets. The specified asset must be
held for a period of 3 years from the date of its acquisition. This exemption shall be
leastofthefollowing:
lInvestment in specified assets viz. bonds issued by NHAI and the RECL. The
investmentisrestricteduptoRs.50,00,000perassesseeperfinancialyear.
lAmountofcapitalgains.
Further, the exemption in respect of capital gains upon aforesaid investments made
during the financial year in which the original asset or assets are transferred and in the
subsequentfinancialyearshallnotexceedRs.50,00,000.
54EC

Eligibility Criteria, Quantum and Period of Deduction / ExemptionsSection
Any income arising to an assessee, being a shareholder on account of buy back of shares
as referred in section 115QA (not being listed on a recognized stock exchange) by the
companyshallnotbeincludedinthetotalincomeofassessee.
10
(34A)
Capital gain arising from transfer of long term capital asset being an equity share in a
companyoraunitofanequityorientedfundorunitofabusinesstrust,onwhichsecurities
transaction tax is charged, is exempt from tax. However, this exemption is not available
forcomputationofMAT.
10(38)
Any dividend declared, distributed or paid by the specified foreign company to Indian
companyshallbetaxableataconcessionaltaxrateof15%.
115
BBD
In computing DDT liability, dividend declared by the domestic holding company to its
shareholdersshallbereducedtotheextentof:
i. Dividend received from the domestic subsidiary company during the year on which
DDThasalreadybeenpaidbysubsidiaryunderthissection.
ii. Dividend received from the specified foreign subsidiary during the year on which tax
ispayablebytheholdingcompanyundersection115BBDoftheITAct.
115-O
Company /
Any other
body
established
or
constituted
under any
Central or
State Act
100% For 10
consecutive
years out of first
15 years
(20 years for
road, bridge, rail
system, highway
project, water
supply project,
water treatment
system, irrigation
project, sanitation
and sewerage
system or solid
waste
management
system).
Deductions of Profits derived by Newly Established Industrial
Undertakings / Infrastructure Projects / Facilities / Developers of SEZs /
Bankingunits,etc.
80-IA / 80- IB /
80- IC / 80- IAB
/ 80- ID / 80- IE
/ 80JJAA/80LA
Nature of Activity and Location Type of
Organization
Quantum of
Deduction
Number of
Years
Sr.
No.
1. SpecifiedInfrastructureProjects
[Section80-IA(4)(i)]
Enterprise being company or consortium of
companies registered in India or any
authority or board or a corporation or any
otherbodyestablishedorconstitutedunder
any Central or State Act, for carrying on
business of (i) developing or (ii) operating
and maintaining or (iii) developing,
operating and maintaining of any
infrastructure facility (such as road
including toll road, bridge, rail system,
highway project, water supply project,
water treatment system, irrigation project,
sanitation and sewage system or solid
waste management system, airport, port,
inland waterways and inland ports or
navigational channel in the sea)
commencing its operations on or after 1
April 1995. Widening of an existing road by
constructing additional lanes as a part of
highway project is also regarded as a new
infrastructure facility eligible for deduction
as per Circular No. 4/2010 dated 18 May
2010.
10(34)/
10(35)
Dividend referred to in section 115-O and income received in respect of units of mutual
fundorsharesshallnotbeincludedinthetotalincomeofassessee.

Deduction shall not be available to a
person executing above referred activities
asaworkscontract.
TelecommunicationServiceProviders
[Section80-IA(4)(ii)]
Any undertaking which starts providing
telecommunication services, whether basic
or cellular, including radio paging, domestic
satellite service or network of trunking,
broadbandnetworkandinternetserviceson
or after 1 April 1995 but before 31 March
2005.
Deduction shall not be available to a person
executing the above referred services as a
workscontract.
2. All 100%
30%
First 5 years
Next 5 years
The above 10
years shall be
consecutive AYs
out of first 15
years
Nature of Activity and Location
Type of
Organization
Quantum of
Deduction
Number of
Years
Sr.
No.
DevelopmentofIndustrialPark
[Section80-IA(4)(iii)]
Any undertaking which begins to develop or
develops and operates or maintains and
operates an industrial park which has
commenced operations during 1 April 1997
to31March2011.
Deduction shall not be available to person
executing the above referred services as a
workscontract.
3. All 100% 10 years out of
first 15 years
4.(a) All 100% Any 10
consecutive
years out of first
15 years
PowerUndertakings
[Section80-IA(4)(iv)]
Undertaking set up in any part of India
for the generation or generation and
distribution, of power, which has
commenced operations during 1 April
1993to31March2017.
Undertaking which starts transmission
or distribution by laying a network of
new transmission or distribution lines
between 1 April 1999 and 31 March
2017.
Undertaking which undertakes
substantial renovation and
modernization of the existing network
of transmission or distribution lines
between 1 April 2004 and 31 March
2017.
Deduction shall not be available to a
person executing the above referred
activitiesasaworkscontract.
Ø
Ø
Ø
Ø

Type of
Organization
Quantum of
Deduction
Number of
Years
Sr.
No.
Undertakings for revival of Power
GeneratingUnits
[Section80-IA(4)(v)]
Undertaking owned by Indian Company
(formed before 30 November 2005 and
notified before 31 December 2005) set up
for reconstruction or revival of a power
generating unit, which has commenced
operationsinpowerbefore31March2011.
Deduction shall not be available to person
executing the above referred activities as a
workscontract.
4.(b) Indian
Company
100% Any 10
consecutive
years out of first
15 years
DeveloperofSEZ
[Section80-IAB]
Any assessee being developer of a SEZ
notified by the Central Government after 1
April 2005 can claim deduction under
section80-IAB.
5. All 100% 10 years out of
first 15 years.
Scientific and Industrial Research
Company
[Section80-IB(8A)]
Any company registered in India with its
main object being scientific and industrial
research and development which is for the
time being approved by the DSIR at any
time after 31 March 2000 but before 1 April
2007.
6. Company 100% For first 10 years
Productionofmineraloilandnaturalgas
[Section80-IB(9)]
Any undertaking which is engaged in
refining of mineral oil and begins such
refining on or after 1 October 1998 but
not later than 31 March 2012 subject to
specifiedconditions.
The tax holiday is also available in
respect of profits arising from
commercial production of natural gas
from blocks which are licensed under
the VIII Round of bidding for award of
exploration contracts under the New
Exploration Licensing Policy
announced by the Government of
India and IV Round for the Coal Bed
Methane and begins commercial
production of natural gas on or after 1
April2009.
Ø
Ø
7. All 100% First 7 years

Sr.
No.
Type of
Organization
Quantum of
Deduction
Number of
Years
INDIA BUDGET 2015 - Highlights
Undertaking engaged in processing
/preservation / transportation of specified
fooditems
[Section80-IB(11A)]
An undertaking deriving profit from the
integrated business of handling,
storage and transportation of food
grains subject to such business
beginning its operations on or after 1
April2001
The benefit is extended to
undertakings engaged in the business
of processing, preservation and
packagingoffruitsandvegetables.
Further, the benefit is extended to the
undertakings engaged in the business
of meat and meat products or poultry
or marine or dairy products which
begin to operate such business on or
after1April2009.
Ø
Ø
Ø
8. Company 100%
30%
First 5 years
Next 5 years
Others 100%
25%
First 5 years
Next 5 years
RSM Astute Consulting 35
Operating and Maintaining Hospital
[Section80-IB(11C)]
Any undertaking engaged in the
business of operating and maintaining
a hospital in India other than specified
excludedareas.
The undertaking shall be eligible for
the deduction if such hospital is
constructed in accordance with the
local regulations in force; and has at
least100bedsforpatients.
The said tax benefit is available to a
hospital which is constructed and has
started or starts functioning at any time
during the period beginning 1 April
2008andendingon31March2013.
Ø
Ø
Ø
Undertakingsinspecialcategorystates
[Section80-IC]
Undertakings and enterprises, which
begins to manufacture or produce any
article or thing which is not specified in
Thirteenth Schedule or undertakings
and enterprises, which manufactures
or produces any article or thing which
is not specified in thirteenth Schedule
and undertake substantial expansion
ofexistingundertakings.
Ø
10.

Sr.
No.
Type of
Organization
Quantum of Number of
Years
Others 100%
25%
First 5 years
Next 5 years
All 100% First 10 years
Company 100%
30%
First 5 years
Next 5 years
}
Convention Centre and Hotels in notified
areas
[Section80-ID]
ØAny undertaking engaged in business
of convention centers or hotels in
specified area of the National Capital
Territory subject to fulfillment of certain
conditions:
a. Engaged in the business of hotel
locatedinspecifiedarea;or
b. Engaged in the business of
building, owning and operating a
convention centre located in
specified area, which has started
its operations from 1 April 2007 to
31July2010.
ØThe aforesaid deduction has been
extended to any undertaking engaged
in the business of hotel located in
specified districts having 'World
Heritage Sites' if such hotel is
constructed and has started
functioning during the period
ØUndertakings and enterprises, which
begin to manufacture or produce any
article or thing which is specified in
fourteenth Schedule or commences
any operation specified in that
Schedule or undertakings and
enterprises, which manufactures or
produces any article or thing which is
specified in fourteenth Schedule or
commences any operation specified
in that Schedule and undertake
substantialexpansion.
i. If located in Sikkim, from 23 December
2002to31March2007.
ii. If located in North Eastern States*,
from 24 December 1997 to 31 March
2007.
iii. If located in Himachal Pradesh and
Uttaranchal,from7January2003to31
March2012.
* States of Assam, Tripura, Meghalaya,
Mizoram, Nagaland, Manipur and
ArunachalPradesh
Deduction

Sr.
No.
Type of
Organization
Years
UndertakingsinNorthEasternStates
[Section80-IE]
ØNew undertakings and enterprises,
which begin to manufacture or
produce any eligible article or thing or
provide any services or undertake
substantial expansion or carry on any
eligible business in any of the North
Eastern states beginning from 1 April
2007to31March2017.
ØThe eligible businesses for this
purpose are hotel (not below 2 star
category), adventure and leisure
sports including ropeways, providing
medical and health services in the
nature of nursing home with a
minimum capacity of 25 beds; running
an old-age home; operating vocational
training institute for hotel
management, catering and food craft,
entrepreneurship development,
nursing and para-medical, civil
aviation related training, fashion
designing and industrial training;
running information technology
related training centre; manufacturing
of information technology hardware
andbio-technology.
beginning 1 April 2008 and ending on
31March2013.
ØThe benefit is available to 2 star, 3 star
or4starhotels.
DeductionofAdditionalWages
[Section80JJAA]
ØDeduction of an amount equal to 30%
of additional wages paid to the new
regular workmen shall be available
t o a l l a s s e s s e e s h a v i n g
manufacturing units deriving profits
from manufacture of goods in its
factory.
ØIt is proposed to amend the
definition of additional wages to
mean wages paid to new regular
workmen in excess of 50 workmen
(instead of earlier limit of 100
workmen) employed during the
financialyear.
13. All 30% of
additional
wages paid
to the new
regular
workmen
3 AYs including
the AY relevant
to the FY in
which such
employment is
provided
Deduction

Offshore banking unit in SEZ and
InternationalFinancialServicesCentre
[Section80LA]
Incomefrom:
ØOffshorebankingunitinSEZor
ØThe business referred to in section
6(1) of the Banking Regulation Act,
1949or
ØAny unit of the International Financial
Services Center from its approved
business.
14 . Scheduled
Bank or any
bank
incorporated
by or under
the law of a
country
outside India
or a unit of an
International
Financial
Services
Center.
100% First 5 years
(beginning with
the year in which
prescribed
permissions are
obtained).
50% Next 5 years
ØIt is also provided that the
deduction under this section shall
not be available if the factory is
acquired by the assessee by way of
transferfromanyotherpersonoras
a result of any business re-
organization.
Sr.
No.
Type of
Organization
Years
Deduction

Significant conditions for eligibility for deduction under various sections
mentioned above
ØFor the purpose of sections 80-IA, 80-IB and 80-IC, an eligible industrial
undertakingisone,whichfulfillsallofthefollowingconditions:
lIt manufactures or produces any article or thing (other than any non-priority
article or thing as specified in the Eleventh Schedule) or operates one or
more cold storage plant or plants in any part of India. However, restriction
regarding manufacture of non-priority article specified in Eleventh
schedule is not applicable to small-scale industrial undertakings and
industrial undertakings located in backward states (applicable in case of
section80-IB);
lItemploys(a)10ormoreworkersinamanufacturingprocesscarriedonwith
the aid of power or (b) 20 or more workers in a manufacturing process
carriedonwithouttheaidofpower(applicableincaseofsection80-IB);
lIt is not formed by splitting up, or reconstruction, of a business already in
existenceorbytransfertoanewbusinessofmachinerypreviouslyusedfor
anypurpose(exceptundercertaincircumstances);
lThe benefit of section 80-IA shall not be available to an amalgamated or
demergedentityafter1April2007.
ØThe profits and gains of an eligible business for the purpose of determining the
quantum of deduction is to be computed as if such eligible business were the only
source of income of the assessee during the financial year relevant to the
assessmentyearforwhichthedeductionistobemade.
ØAneligibleenterpriseengagedindevelopment,operationandmaintenanceofany
infrastructure facility should have entered into an agreement with the Central
Government / State Government / local authority / other statutory body for
developingoroperatingandmaintainingordeveloping,operatingandmaintaining
anewinfrastructurefacility.
ØFor the enterprise where, housing or other activities are an integral part of the
highway project, then the exemption is available to profits and gains derived from
such project subject to condition that the profit has been transferred to a special
reserve account and the same is actually utilized for the highway project excluding
housing and other activities before the expiry of 3 years following the year in which
such amount was transferred to the reserve account and the amount remaining
unutilized shall be chargeable to tax as income of the year in which transfer to
reserveaccounttookplace.
ØWhere any amount of profits and gains of an industrial undertaking or of a hotel in
the case of an assessee is claimed and allowed under this section for any
assessment year, deduction to the extent of such profits and gains shall not be
allowed under any other provision of the IT Act and shall in no case exceed the
profitsandgainsoftheundertakingorhotel,asthecasemaybe.

ØAny undertaking claiming deduction under this section must furnish a report of
auditintheprescribedformdulysignedandverifiedbyanaccountant.
ØNo deduction under 80-IA, 80-IB, 80-IAB, 80-IC, 80-ID, 80-IE will be allowed
unless the assessee files return of income within the due date specified under
section139(1)oftheITAct.
ØWithretrospectiveeffectfromFY2002-03:
lIf deduction in respect of profits and gains is claimed and allowed under the
various provisions of section 10AA of the IT Act or under any provisions of
Chapter VI-A under the heading 'C-Deductions in respect of certain
incomes' in any assessment year, no deduction in respect of same shall be
allowedunderanyotherprovisionsoftheITActforsuchassessmentyear;
lThe aggregate of the deductions under the various provisions referred
above, shall not exceed the profits and gains of the undertaking or unit or
enterpriseoreligiblebusiness,asthecasemaybe;
lNodeductionsunderthevariousprovisionsreferredabove,shallbeallowed
ifthedeductionhasnotbeenclaimedinthereturnofincome.
ØIn case of a person other than company who has claimed deduction under any
section (other than section 80P of the IT Act) included in Chapter VI-A under the
heading 'C-Deductions in respect of certain incomes' or under section 10AAof the
IT Act, shall be required to pay AMT @ 21.3416% [(tax rate 18.50% plus
surcharge 12%) plus education cess 3% thereon] (having adjusted total income
exceedingRs.1,00,00,000) or19.055%(inothercases).However,theprovisions
of AMT shall not apply to an Individual or an HUF or an AOP or a BOI (whether
incorporatedornot)oranartificialjuridicalpersonreferredtoinsection2(31)(vii),if
theadjustedtotalincomeofsuchpersondoesnotexceedRs.20,00,000.
ØWhere a deduction under section 10AA or any provisions of Chapter VI-A under
the heading 'C-Deductions in respect of certain incomes' is claimed and allowed in
respect of profits and gains of any of the specified business referred in section
35AD(8)(c), no deduction of capital expenditure shall be allowed under section
35AD of the ITAct in relation to such specified business for the same or any other
assessmentyear.

6.1 BusinessEntities
6.1.1 Liberalisation of accelerated deduction for employment of new
workmen
6.1.2 DefermentofprovisionsrelatingtoGAAR
The existing provisions contained in
section 80JJAA of the IT Act, provide for
deduction to an Indian company, deriving
profits from manufacture of goods in a
factory. The quantum of deduction allowed
is equal to 30% of additional wages paid to
new regular workmen employed by the
assessee in such factory, in the previous
year, for 3 assessment years, including the assessment year relevant to the
previous year in which such employment is provided. Further, clause (i) to
Explanation to section 80JJAA of the IT Act defines ‘Additional wages’ to
mean wages paid to new regular workmen in excess of 100 workmen
employedduringthepreviousyear.
It is proposed to amend the section so as to extend the benefit to all
assessees having manufacturing units rather than restricting it to corporate
assessees only. Further, in order to enable the smaller units to claim this
incentive, it is proposed to extend the benefit under the section to units
employing50insteadof100regularworkmen.
Further, under the existing provisions, the benefit of section 80JJAAof the IT
Act is not available if the factory is hived off or transferred from another
existing entity or acquired by the assessee company as a result of
amalgamation with another company. It is proposed to substitute this clause
for denial of deduction under section 80JJAAof the ITAct for factory acquired
by the assessee by way of transfer from any other person or as a result of
businessre-organisation.
As per existing provisions of IT Act, GAAR provisions shall be applicable to
theincomeofFY2015-16(AY2016-17)andsubsequentyears.
It is proposed that implementation of GAAR be deferred by 2 years and
GAAR provisions be made applicable to the income of FY2017-18 (AY2018-
19)andsubsequentyears.
CHAPTER 6 : DIRECT TAXES - SIGNIFICANT CHANGES

Investments made up to 31 March 2017 are proposed to be protected from
applicabilityofGAARbyamendmentintherelevantRulesinthisregard.
As per existing provision of section 115JB of the IT Act, a company which is
member of anAOPis liable to MATon the share of income ofAOP, since such
income is not excluded from the book profit while computing the MAT liability
inthehandsofacompanyasmemberofAOP.
It is proposed that the share of member of AOP in the income of the AOP, on
which no tax is payable in accordance with the provisions of section 86 of the
IT Act, should be excluded while computing the MAT liability. The
expenditure, if any, debited to the profit and loss account, corresponding to
suchincomearealsoproposedtobeaddedbacktothebookprofit.
It is further proposed that income from transactions in securities (other than
short term capital gains arising on transactions on which STT is not
chargeable) arising to a FII, shall be excluded from chargeability of MAT and
theprofitcorrespondingtosuchincomeshallbereducedfromthebookprofit.
The expenditure, if any, debited to the profit and loss account, corresponding
tosuchincomeisalsoproposedtobeaddedbacktothebookprofit.
As per existing provisions, capital gains arising to the sponsor at the time of
exchange of shares in SPVs, being the unlisted company through which
incomegeneratingassetsareheldindirectlybythebusinesstrusts,withunits
ofthebusinesstrust,thetaxationofgainsisdeferred.Thetaxonsuchgainsis
levied at the time of disposal of units by the sponsor. The deferral of capital
gains provided to the sponsor of business trust places such a sponsor at a
disadvantageoustaxpositionvis-à-visdirectlistingofsharesoftheSPV.
IncasethesponsorholdingsharesoftheSPVdecidestoexitthroughtheIPO
route, then the benefit of concessional tax regime relating to capital gains
arising on transfer of shares subject to levy of STTis available to him.The tax
on short term capital gains in such case is levied @15% (plus applicable
surcharge and cess) and the long term capital gains is exempt under section
10(38) of the IT Act. However, the benefit of concessional regime is not
available to the sponsor at the time it offloads units of business trust acquired
in exchange of its shareholding in the SPV through Initial Offer at the time of
listingofbusinesstrustonstockexchange.
6.1.3 RationalizationofprovisionofMATincaseofFII/AOP
6.1.4 TaxationregimeforREITs

Inordertoprovideparity,itisproposedthat:
(i) the sponsor would get the same tax treatment on offloading of units under an
Initial Offer on listing of units as it would have been available had he offloaded
theunderlyingshareholdingthroughanIPO;
(ii) the Finance (No.2)Act, 2014 be amended to provide that STT shall be levied
on sale of such units of business trust which are acquired in lieu of shares of
SPV, under an Initial Offer at the time of listing of units of business trust on
similarlinesasinthecaseofsaleofunlistedequitysharesunderanIPO;
(iii) the benefit of concessional tax regime @15% (plus applicable surcharge and
cess) on short term capital gains and exemption on long term capital gains
under section 10(38) of the ITAct shall be available to the sponsor on sale of
unitsreceivedinlieuofsharesofSPVsubjecttolevyofSTT.
Further,in case ofabusiness trust, being REITs, theincome is predominantly
in the nature of rental income. This rental income arises from the assets held
directly by REIT or held by it through SPV. The rental income received at the
level of SPV gets passed through by way of interest or dividend to the REIT,
the rental income directly received by the REIT is taxable at REIT level and
does not get pass through status. In order to provide pass through status to
therentalincomearisingtoREITfromrealestatepropertydirectlyheldbyit,it
isproposedtoprovidethat
(i) any income of a business trust, being a REIT, by way of renting or leasing or
lettingoutanyrealestateassetowneddirectlybysuchbusinesstrustshallbe
exempt;
(ii) the distributed income or any part thereof, received by a unit holder from the
REIT, which is in the nature of income by way of renting or leasing or letting
out any real estate asset owned directly by such REIT, shall be deemed to be
incomeofsuchunitholderandshallbechargedtotax;
(iii) REIT shall deduct TDS @10% on rental income distributed to resident unit
holder; and in case of distribution to non-resident unit holder; the tax shall be
deductedatrateinforceasapplicable.
No deduction shall be made under section 194-I of the IT Act where the
income by way of rent is credited or paid to a business trust, being a REIT, in
respectofanyrealestateassethelddirectlybysuchREIT.
6.1.5 Conditions for determining residential status in respect of foreign
companies

Undertheexistingprovisionsofsection6(3)oftheITAct,acompanyissaidto
be resident in India in any previous year, if it is an Indian company; or during
thatyear,thecontrolandmanagementofitsaffairsissituatedwhollyinIndia.
It is proposed to amend the provisions of section 6 of ITAct to provide that a
person being a company shall be said to be resident in India in any previous
year, if it is an Indian company; or its place of effective management, at any
timeinthatyear,isinIndia.
Further, it is proposed to define the place of effective management to mean a
place where key management and commercial decisions that are necessary
for the conduct of business of an entity as a whole are, in substance made. It
is further proposed that in due course, a set of guiding principles to be
followed in determination of POEM would be issued for the benefit of the
taxpayersaswellastaxadministration.
Under existing provisions of section 32(1)(iia) of the IT Act, additional
depreciation of 20% of the cost of new plant or machinery acquired and
installed is allowed over and above the general depreciation allowance. Non-
availability of 100% of additional depreciation for acquisition and installation
of new plant or machinery in the second half of the year may motivate the
assessee to defer such investment to the next year for availing full 100% of
additionaldepreciationinthenextyear.
It is proposed to provide balance 50% of the additional depreciation on new
plant or machinery acquired and used for less than 180 days, which has not
been allowed in the year of acquisition and installation of such plant or
machinery,intheimmediatelysucceeding year.
To promote industrialization and economic growth in the states of Andhra
PradeshandTelangana,itisproposedtoprovidefollowing taxincentives:
AdditionalInvestmentAllowance
It is proposed to insert a new section 32AD in the IT Act to provide for an
additionalinvestmentallowanceofanamountequalto15%ofthecostofnew
assetacquiredandinstalledbyanassessee,if
• he sets up an undertaking or enterprise for manufacture or production
of any article or thing on or after 1 April 2015 in any notified backward
areasintheStateofAndhraPradeshandtheStateofTelangana;and
6.1.6 Allowanceofbalance50%additionaldepreciation
6.1.7 Tax incentives in the form of additional investment and depreciation
allowancefortheStateofAndhraPradeshandtheStateofTelangana

• the new assets are acquired and installed for the purposes of the said
undertakingorenterpriseduringtheperiodbeginningfrom1April2015
to31March2020.
It is proposed that the deduction shall be available over and above the
deductionavailableundersection32ACoftheITAct.
It is also proposed to provide suitable safeguards for restricting transfer of the
plant or machinery for a period of 5 years to ensure that the manufacturing
units which are set up by availing this proposed incentive actually contribute
to economic growth of these backward areas. However, this restriction shall
not apply to the amalgamating or demerged company or the predecessor in a
case of amalgamation or demerger or business reorganisation but shall
continue to apply to the amalgamated company or resulting company or
successor,asthecasemaybe.
AdditionalDepreciation
Under the existing provision of section 32(1)(iia) of the IT Act, additional
depreciation of 20% is allowed in respect of the cost of new plant or
machinery acquired and installed by certain assessees over and above the
deduction allowed for general depreciation under section 32(1)(ii) of the IT
Act.
In order to incentivise acquisition and installation of plant and machinery for
setting up of manufacturing units, it is proposed to allow higher additional
depreciation@35%(insteadof20%)inrespectofactualcostofmachineryor
plant (other than a ship and aircraft) acquired and installed by a
manufacturing undertaking or enterprise which is set up in the notified
backwardareaoftheStateofAndhraPradeshortheStateofTelangana.
It is proposed that this higher additional depreciation shall be available in
respect of acquisition and installation of any new machinery or plant for the
purposesofthesaidundertakingorenterpriseduringtheperiodbeginningon
1 April 2015 and ending before 1 April 2020. The eligible machinery or plant
for this purpose shall not include the machinery or plant which are currently
not eligible for additional depreciation as per the existing provision of section
32(1)(iia)oftheITAct.
Itisalsoproposedtomakeconsequentialamendmentsinthesecondproviso
to section 32(1) of the IT Act for applying the existing restriction of the
allowancetotheextentof50%forassetsusedforthepurposeofbusinessfor
less than 180 days in the year of acquisition and installation. However, the
balance 50% of the allowance is also proposed to be allowed in the

immediatelysucceedingfinancialyear.
As per section 47(vib) of the IT Act, any capital asset transferred by the
demerged company to the resulting company in the scheme of demerger is
notregardedastransferiftheresultingcompanyisanIndiancompany.
In such cases, the cost of such asset in the hands of resulting company
shouldbecostofsuchassetinthehandsofdemergedcompanyasincreased
by the cost of improvement, if any, incurred by the demerged company.
Further, the period of holding of such asset in the hands of resulting company
should include the period for which the asset was held by the demerged
company. Under the existing provisions of the IT Act, there is no express
provisiontothiseffect.
It is proposed to amend section 49(1)(iii)(e) of the IT Act to include transfer
pursuant to demerger and the cost of acquisition of an asset acquired by
resulting company shall be the cost for which the demerged company
acquired the capital asset as increased by the cost of improvement incurred
by the demerged company. Consequentially, the period of holding of such
asset in the hands of resulting company shall include the period for which the
assetwasheldbythedemergedcompany.
Section 194A(3) of the ITAct provides a general exemption from making tax
deduction from payment of interest by all co-operative societies including co-
operative banks, to its members. It is proposed to amend the provisions of
section 194A of the IT Act to expressly provide that the exemption from
makingtaxdeductionfrompaymentofinterestbyallco-operativesocietiesto
its members under section 194A(3)(v) of the IT Act shall not apply to the
payment of interest on time deposits by the co-operative banks to its
members.
The existing provision of TDS on payment of interest by banking company or
co-operative bank applies only to the interest payment on time deposits
excluding recurring deposit. It is proposed to amend the definition of ‘time
deposits’soastoincluderecurringdepositswithinitsscopeforthepurposeof
deductionoftaxundersection194AoftheITAct
As per the existing provisions of section 194A(3) of the ITAct, interest income
for the purpose of deduction of tax by the banking company or the co-
6.1.8 Costofacquisitionofthecapitalassetsincaseofdemerger
6.1.9 Rationalisation of provisions relating to TDS on interest (other than
interestonsecurities)

RSM India publication - India Budget 2015 Highlights

RSM India publication - India Budget 2015 Highlights

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RSM India publication - India Budget 2015 Highlights