Highlights of Union Budget 2014

Direct Income-tax Proposals

1.    No change in income-tax rates – ie present tax rates of 10%, 20% and 30% will continue to apply

2.   Minimum exemption limit for all individuals (except super senior citizen ie aged 80 years and above) increased by Rs 50,000. Accordingly, the slab rates for FY 2014-15 will be as under:

 

For all individuals below age of 60 yrs:

 

Income slab

Tax rates

Nil – Rs 250,000 Nil
Rs 250,001 – Rs 500,000 10%
Rs 500,001 – Rs 1,000,000 20%
Above Rs 1,000,000 30%

 

For senior citizens ie aged of 60 to 79 yrs:

Income slab

Tax rates

Nil – Rs 300,000 Nil
Rs 300,001 – Rs 500,000 10%
Rs 500,001 – Rs 1,000,000 20%
Above Rs 1,000,000 30%

 

For super senior citizens ie aged of 80 yrs and above:

Income slab

Tax rates

Nil – Rs 500,000 Nil
Rs 500,001 – Rs 1,000,000 20%
Above Rs 1,000,000 30%

 

–    Deduction from total income for investments under 80C ie LIC, PPF, PF, School fees, Principal repayment of housing loans, etc. increased from Rs 100,000 to Rs 150,000

–    Maximum investment in PPF (Public Provident Fund) increased from Rs 100,000 to Rs 150,000

–    Deduction from total income for Interest paid on housing loan for Self Occupied properties (ie properties which are not let out for rent) increased from Rs 150,000 to Rs 200,00 (Deduction for Interest on let out properties is available fully, without any ceiling limit)

Given the aforesaid changes, a taxpayer will get relief of minimum Rs 10,000 from his total tax liability for FY 2014-15. If, the taxpayer is paying interest on housing loan, an additional tax relief of Rs 5,000 will be available.

–   A stable and predictable taxation regime will prevail which will be investor friendly

–   Legislative and administrative changes will be adopted to sort out pending tax demands of more than Rs 4 lacs crore under dispute and litigation

–   Tax relief to be granted by way of investment allowance @ 15% to Manufacturing Companies investing more than Rs 25 crores in any year in new Plant & Machinery. Such allowance to be available for investments upto 31.03.2017 – This is a major boost for manufacturing industries

–   Tax holidays upto 10 years extended to undertakings which commence generation, distribution and transmission of power by 31.03.2017 – This will encourage set up of power generation Companies thereby reducing the power crisis in India

–    Rate of tax on long term capital gains increased from 10% to 20% on transfer of units of Mutual Funds, other than equity oriented funds (Long term capital gains on equity oriented funds ie ELSS continue to remain tax free) – This will reduce the tax arbitrage that investors adopted presently, where tax on long term capital gains on assets was 20% whereas on aforesaid mutual funds was only 10%. A uniform rate of taxation shall be now applicable

–    In case of non-deduction of tax on payments, 30% of such payments will be disallowed instead of 100 percent – This will provide a huge sigh of relief for taxpayers upon their default in deducting taxes on expenses incurred by them during the year

–    Positive amendments made in Transfer Pricing provisions, thereby strengthening transactions of Indian Companies with its foreign Subsidiaries. Importance attached to Advance Pricing Agreements (APA’s)

–    Proposals of various Committees to be reviewed for implementation of DTC

Indirect tax Proposals

–   Several products to get cheap on account of reduction in duties. The list includes – color televisions, LCD & LED TVs below 19 inches, solar panels, diamonds, footwear costing below Rs 1,000 but more than Rs 500, sports gloves

–   Items that will get costlier include – cigarettes, pan masala, tobacco, gutkha, aerated cold drinks

–   Service tax on Sale of space or time for advertisements in broadcast media extended to cover sales on other segments like mobile advertising (excluded presently) – However, this would be still covered under the negative list and hence exempt from service tax.

–   Services provided by radio-taxis brought under service tax

–   Cenvat credit for services of rent-a-cab and tour operators which is presently not allowed, to be now allowed to promote tourism – This will provide huge relief to all tour operators who were presently unable to claim cenvat credit for the service tax they paid upon arranging tours. Therefore, a fall in the cost of tours can be expected since the cost benefits earned by the tour operators may be passed on to the customers

–   GST (Goods & Service Tax Act) to be brought into effect by end of this financial year

Small Savings

–   A special small savings instrument to cater to the requirements of educating and marriage of the Girl Child to be introduced

–   Kissan Vikas Patra (KVP) to be re-introduced – A reliable source of investment for senior citizens

–   National Savings Certificate (NSC) with insurance cover to be initiated – Insurance benefits can be obtained at reduced cost

Other Features

–   FDI in Defense increased from 26% to 49% through approval route

–   FDI in Insurance increased from 26% to 49% through approval route

–   A concept of “Smart Cities” identified and Rs 7,060 cr has been allotted for developing 100 smart cities

–   5 new IIMs & IITs. New IIMs in Maharashtra, Bihar, Odisha, Andhra Pradesh and Himachal Pradesh

–   Heavy allocation of funds for developing roads

–   Introduction of one single operating demat account to energize capital markets

–   Banks to be encouraged to extend long term loans to infrastructure sector with flexible structuring

–   Several initiatives to be taken for cleaning of Ganga. Even a separate NRI Fund to be set up for this purpose

–   Sports to be promoted in the state of Jammu & Kashmir

–   All sectors have been allotted something in the budget – displaying the vision of the new Government of overall development of India

– Prince Doshi

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Prince Doshi  is a qualified Chartered Accountant and a B.Com graduate from Narsee Monjee College of Commerce and Economics.  He has a post qualification experience working as an Associate for BMR & Associates, a leading tax consultancy firm.  Presently, he is into his own Chartered Accountancy practice specialising in the field of income-tax consultancy, sales tax, service tax and audit compliance.

All articles by CA Prince Doshi

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