CBDT can notify rules for giving foreign tax credit

Enabling the Board to notify rules for giving foreign tax credit

Sub-section (1) of section 91 of the Income-tax Act provides for relief in respect of income-tax on the income which is taxed in India as well as in the country with which there is no Double Taxation Avoidance Agreement (DTAA). It provides that an Indian resident is entitled to a deduction from the Indian income-tax of a sum calculated on such doubly taxed income, at the Indian rate of tax or the rate of tax of said country, whichever is lower. In cases of countries with which India has entered into an agreement for the purposes of avoidance of double taxation under section 90 or section 90A, a relief in respect of income-tax on doubly taxed income is available as per the respective DTAAs.

Increase in Service Tax rate effective date and Other Clarification Budget:2015

Union Budget – 2015 Clarifications regarding increase in Service Tax Rate

Amid huge expectations and challenges facing the economy, the Hon’ble Finance Minister Shri Arun Jaitley has presented his 1st Full-year Union Budget for the year 2015-16 on 28th February, 2015. In his Budget Speech, he has proposed to increase the effective rate of service tax from 12.36% to 14%. This proposal has created doubts in the minds of some assessee’s and professionals as well. The objective of this article is to identify various issues/queries relating to proposed rate of service tax and try to clarify the same in simple language. To begin with, I quote the relevant Clause 121 of the Budget Speech as below:-

“121. Introduction of GST is eagerly awaited by Trade and Industry. To facilitate a smooth transition to levy of tax on services by both the Centre and the States, it is proposed to increase the present rate of service tax plus education cesses from 12.36% to a consolidated rate of 14%.”

1. Do I have to charge new rate of service tax from 01-03-2015 onwards like we do in case of changes in rates of central excise?

No, you don’t have to charge new rate of service tax from 01-03-2015 onwards as the new rate has not yet come into effect. Till then, the existing rate of 12% (service tax) + 2% (Education Cess on tax) + 1% (SHE Cess on tax) i.e. effective rate of 12.36% shall continue.

Budget 2015: Times guide to personal tax

Mar 1, 2015, 06.25 AM IST

Proposal: It is proposed to abolish wealth tax from financial year 2015-16.
Impact: This will lower the compliance burden on taxpayers who will not have to value their taxable assets and file a separate wealth tax return. It will also ease the administrative burden on the tax department. However, the assets will now have to be disclosed in the income tax return. 

P: Rate of surcharge on income exceeding Rs 1 crore is to be increased to 12% from 10%.


I: This will increase maximum marginal rate of tax to 34.61% from 33.99% for the super rich.
P: Exemption limit for transport allowance is to be increased to Rs 1,600 per month from Rs 800 per month.

I: This will enable tax savings of up to Rs 3,322.
P: Deduction for medical insurance premium paid for self and family is proposed to be increased to Rs 25,000 from Rs 15,000. Similar deduction for premium paid for parents is also proposed to be increased to Rs 25,000 from Rs 15,000. Where premium is paid for senior citizens (aged 60 years and above), the deduction is proposed to be increased from Rs 20,000 to Rs 30,000. For uninsured very senior citizens (aged 80 years and above), the deduction within the above ceiling of Rs 30,000 is available for medical expenses incurred.

I: If all of the above are availed of, it will enable tax savings of up to Rs 6,922.
P: Deduction for contributions to the New Pension Scheme is currently capped at Rs 1 lakh. It is proposed to remove such cap and allow deduction up to the overall ceiling of Rs 1.5 lakh (as available for deduction in various savings instruments). Further, an additional deduction of Rs 50,000 for contributions to the NPS is proposed.

I: Taxpayer can claim deductions for contributions to the New Pension Scheme up to the overall ceiling of Rs 1.5 lakh. Further, an additional deduction of Rs 50,000 will enable tax savings of up to Rs 17,304.

P: Cap for the deduction for contributions to prescribed annuity/pension plan such as that of Life Insurance Corporation has gone up from Rs 1 lakh to Rs 1.5 lakh.

I: This will enable a taxpayer to claim deduction for contributions to such plans up to the overall ceiling of Rs 1.5 lakh.

P: Deduction under Section 80C is proposed to be introduced retrospectively from FY 2014-15 for subscriptions made towards Sukanya Samriddhi Scheme, relating to education of the girl child. Further, any payment received from such a scheme is proposed to be exempt from tax.

I: This will enable the parent/legal guardian of girl child to not only claim deduction on investment but also save tax on payments received from the scheme. 

 

P: Deduction under Section 80G is proposed to be introduced retrospectively from FY 2014-15 for donation made to Swachh Bharat Kosh and Clean Ganga Fund to the extent of 100% of the donation. Similar deduction is available for donations made to National Fund for Control of Drug Abuse from 2015-16.

I: This will enable tax saving on the full amount of donation made to these funds.

P: It is proposed to make the employer responsible for obtaining evidence of deductions/exemptions/set-off of certain losses of employees for computing the amount of tax deductible at source.



I: This will increase the administrative burden for employers. 

 

P: It is proposed to deduct tax @ 10% on premature taxable withdrawal from the provident fund where such payment exceeds Rs 30,000. Where the employee has not quoted his PAN, the deduction of tax will be required to be made at the applicable maximum marginal rate.

I: This will enable tax authorities to ensure tax compliance on such premature withdrawals from the provident fund. 

 

P: It is proposed that no person will accept from any person any loan/deposit/advance, in relation to transfer of an immovable property, in cash for Rs 20,000 or more. Also, it is proposed that no person will repay any loan/deposit/advance, in relation to transfer of an immovable property, in cash for Rs 20,000 or more.

I: This move is intended to curb generation of black money by way of dealings in cash in immovable property transactions.

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Enabling of filing of Form 15G/15H for payment made under life insurance policy

The Finance (No.2) Act, 2014, inserted section 194DA in the Act with effect from 1.10.2014 to provide for deduction of tax at source at the rate of 2% from payments made under life insurance policy, which are chargeable to tax. It has been further provided that no deduction shall be made if the aggregate amount of payment during a financial year is less than Rs. 1,00,000. 

In spite of providing high threshold for deduction of tax under this section, there may be cases where the tax payable on recipient’s total income, including the payment made under life insurance, will be nil. The existing provisions of section 197A of the Act inter alia provide that tax shall not be deducted, if the recipient of the certain payment on which tax is deductible furnishes to the payer a self-declaration in prescribed Form No.15G/15H declaring that the tax on his estimated total income of the relevant previous year would be nil. 

It is, therefore, proposed to amend the provisions of section 197A for making the recipients of payments referred to in section 194DA also eligible for filing self-declaration in Form No.15G/15H for non-deduction of tax at source in accordance with the provisions of section 197A.

This amendment will take effect from 1st June, 2015.

Budget 2015: Smoking, eating out, air travel to be costlier

While increase in service tax rate to 14 per cent would make a whole lot of things more expensive, he spared the common man from price hikes on many commonly used day-to-day items by keeping the duties unchanged.

Following is a list of what will be cheaper and costlier:

EXPENSIVE

* Cigarettes and other tobacco products

* Completely built imported commercial vehicles

* Cement

* Aerated, flavoured drinks and packaged water

* Plastic bags and sacks

* Business and executive class air travel

* Visit to amusement and theme park

* Music concerts

* Liquor, chit fund and lottery

CHEAPER


* Leather footwear priced above Rs 1,000 per pair

* Locally made mobile phones, LED/LCD panels, LED lights and LED Lamps

* Solar Water heater

* Pacemakers, ambulance and ambulance services

* Computer tablets

* Agarbattis

* Microwave ovens

* Refrigerator compressors

* Peanut butter, packaged fruits and vegetables

* Visit to museum, zoo and national park.

BUDGET 2015 SPEECH -FM

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Section 80DDB-raised limit & only a prescription from a specialist doctor

Raising the limit of deduction under section 80DDB

Under the existing provisions of section 80DDB of the Act, an assessee, resident in India is allowed a deduction of a sum not exceeding forty thousand rupees, being the amount actually paid, for the medical treatment of certain chronic and protracted diseases such as Cancer, full blown AIDS, Thalassaemia, Haemophilia etc. This deduction is allowed up to sixty thousand rupees where the expenditure is in respect of a senior citizen i.e. a person who is of the age of sixty years or more at any time during the relevant previous year.

The above deduction is available to an individual for medical expenditure incurred on himself or a dependant relative. It is also available to a Hindu undivided family (HUF) for such expenditure incurred on its members. Dependant in case of an individual means the spouse, children, parents, brother or sister of an individual and in case of an HUF means a member of the HUF ,wholly or mainly dependant on such individual or HUF for his support and maintenance.

Under the existing provisions of this section, a certificate in the prescribed form, from a neurologist, an oncologist, a urologist, a haematologist, an immunologist or such other specialist working in a Government hospital is required. It has been represented that the requirement of a certificate from a doctor working in a Government hospital causes undue hardship to the persons intending to claim the aforesaid deduction .Government hospitals at many places do not have doctors specialising in the above branches of medicine. For this and other reasons, it may be difficult for the taxpayer to obtain a certificate from a Government hospital.

In view of the above, it is proposed to amend section 80DDB so as to provide that the assessee will be required to obtain a prescription from a specialist doctor for the purpose of availing this deduction.

Further, it is also proposed to amend section 80DDB to provide for a higher limit of deduction of upto eighty thousand rupees, for the expenditure incurred in respect of the medical treatment of a “very senior citizen”. 

A “very senior citizen” is proposed to be defined as an individual resident in India who is of the age of eighty years or more at any time during the relevant previous year.

These amendments will take effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent assessment years.

Wealth-tax abolished

Wealth-tax under Wealth-tax Act, 1957 abolished wef Fy 2015-16

Wealth-tax Act, 1957 (‘the WT Act’) was introduced w.e.f. 01.04.1957 on the recommendation of Prof. Nicholas Kaldor for achieving twin major objectives of reducing inequalities and helping the enforcement of Income-tax Act through cross checks.

Accordingly, all the assets of the assessees were taken into account for computation of net-wealth. The levy of wealth-tax was thoroughly revised on the recommendation of Tax Reform Committee headed by Raja J. Chelliah vide Finance Act, 1992 with effect from 01.04.1993. The Chelliah Committee had recommended abolition of wealth-tax in respect of all items of wealth other than those which can be regarded as unproductive forms of wealth or other items whose possession could legitimately be discouraged in the social interest.

80D Limit Increased

80D Limit Increased from 15000 to 25000-Budget 2015 Deduction given for medical exp. of very senior citizen

Amendment in section 80D relating to deduction in respect of health insurance premia

The existing provisions contained in section 80D, inter alia, provide for deduction of 

a) upto fifteen thousand rupees to an assessee, being an individual in respect of health insurance premia, paid by any mode, other than cash, to effect or to keep in force an insurance on the health of the assessee or his family or any contribution made to the Central Government Health Scheme or any other notified scheme or any payment made on account of preventive health check up of the assessee or his family; and

b) an additional deduction of fifteen thousand rupees is provided to an individual assessee to effect or to keep in force insurance on the health of the parent or parents of the assessee.

A similar deduction is also available to a Hindu undivided family (HUF) in respect of health insurance premia, paid by any mode, other than cash, to effect or to keep in force insurance on the health of any member of the HUF. The section also presently provides for a deduction of twenty thousand rupees in both the cases if the person insured is a senior citizen of sixty years of age or above.

The quantum of deduction allowed under Section 80D to individuals and HUF in respect of premium paid for health insurance had been fixed vide Finance Act, 2008 at Rs.15000/- and Rs.20,000/- (for senior citizens). In view of continuous rise in the cost of medical expenditure, it is proposed to amend section 80D so as to raise the limit of deduction from fifteen thousand rupees to twenty five thousand rupees. It is further proposed to raise the limit of deduction for senior citizens from twenty thousand rupees to thirty thousand rupees.

Further, very senior citizens are often unable to get health insurance coverage and are therefore unable to take tax benefit under section 80D. Accordingly, as a welfare measure towards very senior citizens ,it is also proposed to provide that any payment made on account of medical expenditure in respect of a very senior citizen, if no payment has been made to keep in force an insurance on the health of such person, as does not exceed thirty thousand rupees shall be allowed as deduction under section 80D. 

The aggregate deduction available to any individual in respect of health insurance premia and the medical expenditure incurred would however be limited to thirty thousand rupees. Similarly aggregate deduction for health insurance premia and medical expenditure incurred in respect of parents would be limited to thirty thousand rupees.

Example:

(i) For Individual and his family Rs.

                                                     Health insurance premia 21,000

(ii) For parents

                                                   Health insurance of Mother : 18,000

                 Medical expenditure on father (very senior citizen) 15,000

          Deduction eligible u/s 80D Rs. 21000 + Rs. 30000 = Rs. 51,000

It is also proposed to define a ‘very senior citizen’ to mean an individual resident in India who is of the age of eighty years 

or more at any time during the relevant previous year.

These amendments will take effect from the 1st April, 2016 and will, accordingly, apply in relation to the assessment year

2016-17 and subsequent assessment years.