Abhishek Jain

The Finance (No. 2) Bill 2014 is introduced in the Lok Sabha today, 10.07.2014, together with the Memorandum explaining the provisions of the Bill. The Major Provisions of the Finance Bill in respect of Direct Tax is as below:-

1. Personal Income-tax exemption limit raised by Rs. 50,000/- that is, from Rs. 2 lakh to Rs. 2.5 lakh in the case of individual taxpayers, below the age of 60 years. Exemption limit raised from Rs. 2.5 lakh to Rs. 3 lakh in the case of senior citizens. This is very good initiative by the NDA Govt. since public is already suffering from the Inflation, so I think this will provide some relaxation to Middle class persons.

2. It will be more satisfactory step by the Finance Minister if he changes the Surcharge to 0% in case of individual. However there is no change in the rate of surcharge either for the corporates or the individuals, HUFs, firms etc.

3. The education cess to continue at 3 percent.

4. Investment limit under section 80C of the Income-tax Act raised from Rs. 1 lakh to Rs. 1.5 lakh which is in line with the increase in the Limit of Deposits under PPF account. Further it will provide some more benefit to the Middle class persons by saving additional 5000Rs. It is to be noted that sec. 80CCE is also amended to make it in line with sec. 80C.

5. Deduction limit on account of interest on loan in respect of self occupied house property raised from Rs.1.5 lakh to Rs.2 lakh. This is move of Finance minister to encourage the real estate business. It may be noted that a deduction of 1lac Rs. u/s80EE will be continued to be available to the assessee.

6. Investment allowance at the rate of 15 percent to a manufacturing company that invests more than Rs. 25 crore in any year in new plant and machinery. The benefit to be available for three years i.e. for investments upto 31.03.2017.

7. It was a point of litigation that what is the meaning of the “a residential house” u/s 54(1)? But now in section 54 of the Income-tax Act, in sub-section (1), for the words “constructed, a residential house”, the words “constructed, one residential house in India” shall be substituted with effect from the 1st day of April, 2015. Similar Amendment is also made u/s 54F.

8. From a long time it was in practice that if the assessee receives any Advance for sale of any capital assets and then he is not able to sell it, then such amount is to be deducted from the Cost of Assets while calculating the Indexed Cost of Acquisition. However now In section 56 of the Income-tax Act, in sub-section (2), after clause (viii), the following clause shall be inserted with effect from the 1st day of April, 2015, namely:—

“(ix) any sum of money received as an advance or otherwise in the course of negotiations for transfer of a capital asset, if,––

(a)  Such sum is forfeited; and

(b)  The negotiations do not result in transfer of such capital asset.”

So it is very clear that such amount is taxable under “Other Sources Head.

9. In section 269SS of the Income-tax Act, in the opening portion, after the words “cheque or account payee bank draft”, the words “or use of electronic clearing system through a bank account” shall be inserted with effect from the 1st day of April, 2015. Similar amendment is also made u/s 269T.

10. To ensure the growth of Slurry Pipelines business & Transportation of Iron ore, Finance minister have extended the investment linked deduction to two new sectors, namely, slurry pipelines for the transportation of iron ore, and semi-conductor wafer fabrication manufacturing units.

11. Power sector is also considered while making the budget and 10 year tax holiday extended to the undertakings which begin generation, distribution and transmission of power by 31.03.2017.

12. A new Chapter-XII-FA is inserted for the Provisions of the Business.

13. Income arising to foreign portfolio investors from transaction in securities to be treated as capital gains.

14. The eligible date of borrowing in foreign currency extended from 30.06.2015 to 30.06.2017 for a concessional tax rate of 5 percent on interest payments. Tax incentive extended to all types of bonds instead of only infrastructure bonds.

15. To make transfer pricing provisions more easy & practical, Finance Minister has allowed use of multiple year data for comparability analysis under transfer pricing regulations.

16. To remove tax arbitrage, rate of tax on long term capital gains increased from 10 percent to 20 percent on transfer of units of Mutual Funds, other than equity oriented funds.

17. It is clarified by the Finance Minister that income and dividend distribution tax to be levied on gross amount instead of amount paid net of taxes.

18. In case of non deduction of tax on payments, 30% of such payments will be disallowed instead of 100 percent. It’s a very good initiative by the Finance Minister since there are already many provisions for penalty & prosecution in case of Non-deduction or Short Deduction of TDS. New provision will provide a major relief to the Corporates.

19. 60 more Ayakar Seva Kendras to be opened during the current financial year to promote excellence in service delivery.

20. Net Effect of the direct tax proposals to result in revenue loss of Rs.22,200 crore.

There are some more amendments but I have not considered them here. With this we can see that there are many good news and many bed news also for the general public but overall it can be said that Hon’ble Finance Minister have come up with so many gifts to the “Aam Aadmi” and we hope that proposed amendments will be beneficial for a common man both in terms of “Compliance of Law” and “Saving in Taxes”.

(Author can be reached atcaabhi13@gmail.com)

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