Union Budget 2015: Here is a gist of important changes applicable for you.

Time is just flying! Another  new year, another new budget. The annual ritual brings mixed bag of reactions across the cross section of the society. Most of you would have already read about the changes proposed in this budget, but still for the benefit of all we present a gist of important changes.

General Pubic (or people at large)

• Next time when you venture into a property transaction (immovable property), beware! You are not allowed to pay or receive money in excess of Rs.20,000 in cash.  In case, you violate this rule, you will have to pay a penalty to an amount equal to the amount of transaction. Suppose, you pay Rs.3,00,000 in cash, your penalty will be Rs.3,00,000 (Why is it done? In order to reduce cash transactions or unearth black money or to get the information about the quantum of cash transactions) 

• Quoting of PAN is mandatory for all transactions valued above Rs.1 Lakh (why is it done? In order to check whether the people are offering the gains from such transactions to tax. If not, the software installed by income tax department can capture such transactions and throw up a Notice. This action of the government will expand the tax base) 

• Buying property from Non Resident Indians– When a resident Indian purchases a property from an NRI, he is obliged to deduct tax (TDS) u/s 195. The procedure of TDS deduction, payment to government and issue of certificate etc., were in line with any other corporate TDS provisions. This was causing hardship to the buyers and hence they have simplified the procedure wherein the buyer can pay taxes quoting PAN of the seller (no need to follow the regular TDS procedures) 

• Concealment of Income and wrong disclosure of income – will attract imprisonment provisions. 

• Wealth Tax is abolished (though it was applicable to many people, no one was complying to it! Instead of enforcing the law, the government has done away with it.) 

• Tax free bonds – will be introduced soon. (Nothing new about it – such schemes were there in the past. If the rate of interest is good, people can invest in these funds) 

• GST – The ambitious date is reiterated in the budget. (whether it will be implemented across the country by 2016 has to be seen) 

Individual Taxpayers –

• Tax Slabs – No change

• Deduction U/s 80C – No change (it remains at Rs.1,50,000). However, one new investment avenue is added under this section – Sukanya Samriddhi Scheme. The payment and interest earned thereon is exempt from tax.

• Deduction u/s 80CCD – Deduction towards contribution to new pension scheme is increased by Rs.50,000. This is in addition to deduction u/s 80C.

• Deduction u/s 80D – Deduction towards health insurance premium is increased from Rs.15000 to Rs.25000. For senior citizens it is increased from Rs.20000 to Rs.30000.

• Deduction u/s 80G – No change in the rules. However, two new funds are brought under this section. In case you donate to Clean Ganga and Swachh Bharat Kosh fund, you will be eligible to get tax deduction.

• Super Senior Citizens – those who are above the age of  80 years, will get a standard deduction of Rs.30000 in lieu of medical insurance premium (u/s 80D)

Salaried Employees

• Conveyance Allowance – This tax exempt allowance is increased from the present level of Rs.800 to Rs.1600

• Reimbursement of Expenses – If you have allowance such as Medical, Leave Travel Concession, etc. you can claim them as tax exempt income against production of relevant bills to your employer (company). However, some of the courts have given a decision that the production of bills is not required and the employer can grant exemptions based on declaration of the employees. Maybe in order to bring more clarity, the government will prescribe a form/document which has to be filled by the employee, produce relevant bills to the employer. So, the onus of responsibility of exempting the claim is shifted from employee to employer. 

• Contribution to EPF – It is mentioned that Employee’s contribution to EPF below an income threshold will be optional without reducing employer’s contribution. (More details are awaited)

House Property Income

• No change is proposed.

Capital Gain

• No change is proposed.

Business or Professional Income

• No change in the corporate tax for the coming financial year starting 1^st April 2015. It will continue to be at 30%.

• The change will take place from financial year starting 1^st April 2016. (for 2016-17, the corporate tax will be 29%) (Why it is announced now? Only FM should tell! May be he wanted to convey a message to business community that the government is serious in addressing the issues of the industry and committed to lower tax rates. So, at the moment it is just a tokenism)

• Domestic Transfer Pricing rules will be applicable to companies having transaction value of over Rs.20 Crore (instead of Rs.5 Crores)

• Income Tax on Royalty and Technical Fee is at 10% (reduced from 25% -mostly will help software companies)

Income from Other Sources

• No change is proposed

Service Tax

• The rate is enhanced to 14% (why such a steep hike? Once GST comes in 2016, the tax rate will go up further to, say 18% and hence the government is preparing the people for such a steep hike!!)

• From when the new rate is applicable? After the Finance Bill gets the assent of the President.

• What about Education Cess of 3%? At the moment, it is understood that 14% includes the Cess. But in future, the government will notify a cess of 2% towards Swachh Bharat. This information maybe out soon.

• CENVAT Credit – The time limit for taking CENVAT credit on inputs and input services is being increased from six months to one year.

• CENVAT Credit – can be taken on accrual basis. As of now, credit can be taken only after making payment to the service provider. (This will help the companies to have better cash flows)

• New services such as entertainment, award functions etc. will attract service tax.

• Reverse Charge Mechanism for Manpower Service at 100% (instead of 75%). (This is to reduce the headache of manpower supply agencies)

Excise Duty

• The basic excise duty is increased to 12.5%

• Digital Documents such as digitally signed invoices and records will be considered as valid and acceptable to the government.

Other provisions and changes in the Budget will be covered in the subsequent articles. Hope this article helps.

Download Guide to Finance Bill 2015 : Budget 2015

Thought for the day

Do not save what is left after spending, but spend what is left after systematic saving.

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