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E-Flash Amendments Proposed by Finance Bill, 2015.
March, 09th 2015
          E-Flash
Amendments Proposed by Finance Bill, 2015




               The Institute of Chartered Accountants of India
                       (Set up by an Act of Parliament)
         `ICAI Bhawan', Post Box Number 7100. Indraprastha Marg, New Delhi - 110 002
                                        www.icai.org
                The Institute of Chartered Accountants of India




Contents
1. Message from the President Message                                                                                            03
2. Message from the Vice-President                                                                                               03
3. Chairmen Speak (from Direct Tax Committee; Indirect Taxes Committee;
   Committee on International Taxation; and Committee on Public Finance & Government Accounting)                                 04
4. State of the Economy: Union Budget 2015-16 Highlights                                                                         05
5. Amendments Proposed by Finance Bill, 2015 in Direct Taxes                                                                     08
6. Amendments Proposed by Finance Bill, 2015 in Indirect Taxes                                                                   11
7. Amendments Proposed by Finance Bill, 2015 in International Taxation                                                           19




© The Institute of Chartered Accountants of India

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form, or by
means, electronic, mechanical, photocopying, recording, or otherwise without prior permission, in writing, from the publisher
                The Institute of Chartered Accountants of India



Message from the President
                              The full-fledged yearly budget was presented by Hon'ble
                              Finance Minister Shri Arun Jaitley on 28th February 2015. The
                              much anticipated budget is considered to lay the roadmap
                              for the ruling Government's focus on manufacturing in India
                              through its initiative "Make in India". It is quite evident that
                              budget has announced far reaching reforms especially on
                              the tax administration front.

                                   The Institute of Chartered Accountants of India (ICAI) has
                              always been proactive in disseminating vital information to its
                              members and other stakeholders. Continuing with its efforts
                              in this direction, the ICAI has come up with this e-publication
                              on Changes proposed by Union Budget 2015-16 which aptly
                              provides crisp highlights of the Union Budget 2015-16.

    I heartily appreciate the efforts put in by CA. Atul Gupta, Chairman and CA. Shyam Lal
Agarwal, Vice-Chairman, Indirect Taxes Committee (IDTC), CA. Tarun Jamnadas Ghia,
Chairman, Direct Taxes Committee (DTC), CA. Nihar N. Jambusaria, Chairman and CA.
Sanjiv Kumar Chaudhary, Vice-Chairman, Committee of International Taxation (CITAX),
CA. Vijay Garg, Chairman, Committee on Public Finance and Government Accounting
(CPF&GA), CA. Sanjay Agarwal, Vice-Chairman, (DTC & CPF&GA) and other members of
respective committees in bringing out this publication in a short span of time. I am sure
this publication would prove useful and beneficial for members in their endeavours.


Best Wishes

CA. Manoj Fadnis
President, ICAI



Message from the Vice-President
The Union Budget 2015-16, presented on 28th February 2015
by Shri Arun Jaitley, Hon'ble Finance Minister, is indeed a
very progressive budget and sets the right agenda for the
years to come i.e., to accelerate growth with focus on ease
of doing business, corporate tax rationalization, predictive
tax regime and adopting more technology. It rightly aims to
address public expectations as well as help India garner its
inclusive growth status.

    A gamut of changes are introduced by the Union Budget
2015-16, paving a way for major changes expected to take
place like introduction of GST, infrastructure development,
smart cities, make in India, skill India, digital India, etc. The
budget is directed towards economic stability, improved
governance and stable growth & development. What needs
to be noted is that it intends to cater to the needs of all the sections of the society.

   All the four Committees-Indirect Taxes Committee (IDTC), Direct Taxes Committee
(DTC), Committee on International Taxation (CITax) and Committee on Public Finance and
Government Accounting (CPFGA) of the Institute of Chartered Accountants of India (ICAI)
have put in tremendous efforts to bring this e-publication and I sincerely appreciate their
hard work for the same. I also compliment Chairmen of all the above Committees namely
CA. Atul Kumar Gupta, CA. Tarun Jamnadas Ghia, CA. Nihar N. Jambusaria and CA. Vijay
Garg respectively for all their untiring efforts and contribution.

    This e-publication systematically brings out the crux of the Finance Bill, 2015. I wish
the members/stakeholders to have an enriching knowledge update with this initiative of
ICAI.

Warm regards
CA. M. Devaraja Reddy
Vice- President, ICAI




                                                                                           3
              The Institute of Chartered Accountants of India




Chairmen Speak

                   The Government's much awaited reform-oriented budget targets a higher growth in order to boost the
                   national economy in the days to come. It focuses on sustainable growth and development fixing the growth
                   rate between 8% and 8.5% and aiming to achieve durable double-digit economic growth very soon, while
                   the fiscal and revenue deficit target has been set at 3.9% and 2.8% of the GDP respectively for 2015-16.
                       In order to create more jobs, the budget aims at making India a global manufacturing hub through
                   Make in India programmes. The impetus to infrastructure, agriculture and education sectors is laudable.
                   Other significant initiatives like universal social security system for all, comprehensive law to deal with
                   black money, need to increase public investment in infrastructure by introducing National Investment and
                   Infrastructure Fund, improving the quality of life through Swachch Bharat initiative.
                       I sincerely hope that this e-Flash will apprise our readers with a broader view of the
                   Union Budget 2015-16.

                   CA. Vijay Garg
                   Chairman
                   Committee on Public Finance & Government Accounting


The drift of this budget is an effective abolishment of black money by introducing stringent laws, while
ensuring more transparency in the system. Highlights of the budget include more rigid punishments for the
income concealers, getting rid of wealth tax and replacing that with an additional surcharge on super rich,
reduction in corporate tax, increase in threshold limit of transfer pricing, introduction of direct tax regime
(internationally competitive on rates without exemptions), implementation of GST in April 2016, etc. It aims at
achieving the growth of 8% to 8.5%.

CA. Tarun Jamnadas Ghia
Chairman, Direct Taxes Committee


                  The Union Budget 2015-16 has been presented which addresses the need of all inclusive development
                  and sustainable economic growth. The budget is pragmatic enough to strike a chord with the masses
                  by targeting the development for one and all.It is quite evident that budget has announced far reaching
                  reforms especially on the tax administration front.
                      This publication is developed with an objective to acquaint the readers with amendments in taxation
                  brought in by Union Budget 2015-16.

                  CA. Atul Gupta
                  Chairman, Indirect Taxes Committee


The Union Budget 2015-16 presented on 28th February, 2015 is widely considered to be Industry-Friendly
and pre-reform was the first glimpse into the mindset of Shri Narendra Modi regime. This Budget has
made Commitment for the next generation of tax reforms, stability of tax regime and fiscal consolidation.
It paves the way for a strong and vibrant economy. I am confident that this progressive and growth oriented
budget would facilitate the emergence of a resurgent India.

CA. Nihar N. Jambusaria
Chairman
Committee on International Taxation




 4
                                                        The Institute of Chartered Accountants of India



State of the Economy
Union Budget 2015-16 Highlights
Committee on Public finance and Government Accounting

The Government in its first full-year Budget has claimed to take up several steps to
energise Indian Economy. The Union Budget for 2015-16 has attempted to strike
a balance between supporting investment, boosting social sector spending and
introducing investor and market friendly measures. It contains a series of incrementally
positive steps, with the focus firmly on reviving investments in infrastructure, improving
the ease of doing business and augmenting funds in the hands of the middle class.
The setting up of a Public Debt Office and specific inflation targeting framework are
also steps in the right direction.

The Budget 2015-16 has been presented when Indian Economy has embarked upon
a high growth trajectory when the global economy is facing a downturn. With Growth
Rate expected to be 7.4%, Inflation touching negative level (in terms of Whole-Sale-
Price Index i.e. WPI), Current Account Deficit (CAD) moving towards less than 1.3% of
GDP and maintaining fiscal deficit of 4.1 % of GDP in 2014-15, the Indian Economy is
expected to achieve dream double digit growth in near future.

By the year 2022 which will be the Amrut Mahotsav, the 75th year, of India's
independence.
The Government envisions to,
· Give Housing for allclean drinking water, a toilet, and be connected to a road
· Give basic facilities of 24 hours power supply clean drinking water, a toilet, and be
   connected to a road to every household.
· Means for livelihood to every household.
· Substantial reduction of poverty.
· Electrification, by 2020

Key Highlights of the Union Budget 2015-16
· Budget 2015-16 marks the beginning of co-operative federalism and empowerment
  of the states.
· GDP growth in 2015-16, projected to be between 8 to 8.5%.
· Government firm on journey to achieve fiscal target of 3% of GDP. Accordingly,
  journey for fiscal deficit target of 3% will be achieved in 3 years rather than 2 years.
  The fiscal deficit targets are 3.9%, 3.5% and 3.0% in FY 2015-16, 2016-17 & 2017-
  18 respectively.
· Need to view public finances from a National perspective and not just the perspective
  of the Central Government. Aggregate public expenditure of the Governments, as a
  whole can be expected to rise substantially.
· Non-Plan expenditure estimates for the Financial Year are estimated at R13,12,200
  crore.
· Plan expenditure is estimated to be R4,65,277 crore, which is very near to the R.E.
  of 2014-15.
· Gross Tax receipts are estimated to be R14,49,490 crore.
· Devolution to the States is estimated to be R5,23,958.
· Share of Central Government will be R9,19,842.
· Fiscal deficit will be 3.9 per cent of GDP and Revenue Deficit will be 2.8 per cent of
  GDP.
· CPI inflation projected at 5% by the end of the year, consequently, easing of
  monetary policy.
· Monetary Policy Framework Agreement with RBI, to keep inflation below 6%.


                                                                        Budget Highlights - State of the economy

                                                                                                                   5
           The Institute of Chartered Accountants of India


                         · Public Debt Management Agency (PDMA) bringing both external and domestic
                           borrowings under one roof to be set up this year.
                         · Proposed tax free infrastructure bonds for projects in rail, road and irrigation
                           sectors.
                         · Gold monetisation scheme to replace present gold deposit and gold metal loan
                           schemes. Commence work on developing an Indian gold coin, which will carry the
                           Ashok Chakra on its face.
                         · Most growth forecasts have upgraded Indian economic growth while downgrading
                           global economic growth.
                         · Game changing reforms on the anvil:
                            Goods and Service Tax (GST)
                            Jan Dhan, Aadhar and Mobile (JAM) - for direct benefit transfer.
                         · Direct Transfer of Benefits to be extended further with a view to increase the
                           number of beneficiaries from 1 crore to 10.3 crore.
                         · Three Key achievements:
                            Financial Inclusion­2.5 crores families financially mainstreamed in 100 days.
                            Transparent Coal Block auctions to augment resources of the States.
                            Swachh Bharat is not only a programme to improve hygiene and cleanliness but
                               has become a movement to regenerate India
                         · To make India, the manufacturing hub of the World through Skill India and the Make
                           in India Programmes.
                         · To meet these challenges public sector needs to step in to catalyse investment,
                           make in india programme to create jobs in manufacturing, continue support to
                           programmes with important national priorities such as agriculture, education,
                           health, MGNREGA, rural infrastructure including roads.
                         · Need to create a National Agriculture Market for the benefit farmers, which will also
                           have the incidental benefit of moderating price rises. Government to work with the
                           States, in NITI, for the creation of a Unified National Agriculture Market.
                         · Comprehensive Bankruptcy Code of global standards to be brought in fiscal 2015-
                           16 towards ease of doing business.
                         · Sharp increase in outlays of roads and railways. Capital expenditure of public
                           sector units to also go up.
                         · National Investment and Infrastructure Fund (NIIF), to be established with an
                           annual flow of R20,000 crores to it.
                         · PPP mode of infrastructure development to be revisited and revitalised.
                         · Self-Employment and Talent Utilization (SETU) to be established as Techno-
                           financial, incubation and facilitation programme to support all aspects of start-up
                           business. R1000 crore to be set aside as initial amount in NITI.
                         · India is one of the youngest nations in the world with more than 54% of the total
                           population below 25 years of age. Our young people have to be both educated and
                           employable for the jobs of the 21st Century.
                         · Forward Markets commission to be merged with SEBI.
                         · India Financial Code to be introduced soon in Parliament for consideration.
                         · A student Financial Aid Authority to administer and monitor the front-end all
                           scholarship as well Educational Loan Schemes, through the Pradhan Mantri Vidya
                           Lakshmi Karyakram.
                         · An autonomous Bank Board Bureau to be set up to improve the governance of
                           public sector bank.
                         · Proposal to reduce corporate tax from 30% to 25% over the next four years,
                           starting from next financial year.
                         · PML Act, 2002 and FEMA to be amended to enable administration of new Act on
                           black money.
                         · Rental income of REITs from their own assets to have pass through facility.
                         · PAN being made mandatory for any purchase or sale exceeding Rupees 1 lakh.
                         ·       General Anti Avoidance Rule (GAAR) to be deferred by two years.





    Budget Highlights - State of the economy

6
                                                                       The Institute of Chartered Accountants of India


 · Wealth-tax replaced with additional surcharge of 2 per cent on super rich with a
   taxable income of over R1 crore annually.
 · Tax Administration Reform Commission (TARC) recommendations to be
   appropriately implemented during the course of the year.
 · Service-tax plus education cesses increased from 12.36% to 14% to facilitate
   transition to GST.
 · 100% deduction for contributions, other than by way of CSR contribution, to
   Swachh Bharat Kosh and Clean Ganga Fund.

 In line with expectations, the RE for 2014-15 indicate that the fiscal deficit would be
 restricted at the budgeted 4.1% of GDP. The BE for 2015-16 indicates continued fiscal
 consolidation, albeit with a limited reduction in the fiscal deficit to 3.9% of GDP. The
 quality of the fiscal deficit is expected to remain stagnant, with the revenue deficit
 accounting for around 71% of the total fiscal deficit in both 2014-15 RE and 2015-16
 BE. Some Indicators are given below:

                             Government of India's Fiscal Balances
                                                            Rbillion                         Growth
                                               2013-14      2014-15       2015-16     2014-15      2015-16
                                                Actual         RE            BE          RE          BE
 Revenue Receipts                               10,147       11263         11416        11%          1%
 Tax Revenue $                                   8159        9085           9198        11%          1%
 Non Tax Revenues                                1989         2178          2217       10%           2%
 Revenue Expenditure                            13718        14888         15360        9%           3%
 Revenue deficit                                 3570         3625          3945
 % of GDP                                        3.1%        2.9%          2.8%
 Capital Receipts (Non Debt)                      419          422          803         1%          90%
 Capital Expenditure                             1877         1924          2414        3%          25%
 Fiscal Deficit                                  5029         5126          5556
 % of GDP                                        4.4%         4.1%         3.9%
 Source: GoI Budget Documents; CGA; ICRA Research
 $ Net of Refunds, Net of States' share in Central Taxes


              GoI's Revenue and Fiscal Deficit as a Percentage of GDP

7%
                                                                  n Revenue Deficit   n Fiscal Deficit
6%
5%

4%
3%
2%

1%
0%
      - 08         -   09        -10          -11
                                                      2011
                                                          -12       -13         -14      RE     -16 B
                                                                                                      E
  2007        2008          2009         2010                   2012        2013 2014-15   2015

 Source: GoI Budget Documents; CGA, Ministry of Finance, GoI; ICRA Research


 Overall, the budget seems credible, especially pertaining to revenue growth. Gross
 tax revenues are estimated to grow by 15.8%, boosted by the hike in indirect taxes,
 increase in surcharge on direct taxes and the impact of the excise hikes on petrol
 and diesel instituted since November 2014. However, growth of net tax revenues
 is subdued on account of the sharp step up in devolution of Central taxes to State
 Governments.



                                                                                        Budget Highlights - State of the economy

                                                                                                                                   7
           The Institute of Chartered Accountants of India



                         Amendments Proposed by Finance
                         Bill, 2015 in Direct Taxes
                         Direct Taxes Committee

                         Tax Rates
                          No change in the basic exemption limit and the tax rates of individuals

                          Corporate tax rates proposed to be reduced from 30% to 25% over the next four
                          years, starting from next financial year.

                          The existing rate of tax on Income by way of Royalty and Fees for technical services
                          in case of non-residents @25% proposed to be reduced to 10%.

                          Additional surcharge @ 2% being levied on income exceeding R1 crore.
                          This surcharge would be levied in place of Wealth-tax which is proposed to
                          be abolished.

                         Deductions from Gross Total Income
                          Exempt-Exempt-Exempt (EEE) tax benefit proposed for assessee having a girl child
                           and investing under the Sukanya Samriddhi Account Scheme. The investments
                           made in the Scheme will be eligible for deduction under section 80C of the Act,
                           the interest accruing on deposits in such account will be exempt from income tax
                           and the withdrawal from the said scheme in accordance with the rules of the said
                           scheme will be exempt from tax.

                          In view of continuous rise in the costof medical expenditure, section 80D is
                          proposed to be amended to raise the limit of deduction from R15,000 to R25,000.
                          Further, the limit of deduction for senior citizens is also proposed to be increased
                          from R20,000 to R30,000.

                          As a welfare measure towards very senior citizens, a deduction under section
                          80D is proposed for any payment made on account of medical expenditure in
                          respect of a very senior citizen, subject to a limit R30,000.

                          The limit for deduction under section 80DDB is proposed to be increased to
                          R80,000 in respect of amount paid for medical treatment of very senior citizen.

                          Section 80DD and section 80U is proposed to be amended to increase the limit
                          from R50,000 to R75,000 and from R1 lakh to R1.25 lakh, as the case may be.

                          In order to promote social security, deduction section 80CCC(1) which provides for
                          deduction of amount paid or deposited to effect or keep in force a contract for any
                          annuity plan of LIC or any other insurer for receiving pension from a fund set up
                          under a pension schemeis proposed to beamended to raise the limit of deduction
                          from R1 lakh to R1.5 lakh, within the overall limit providedin section 80CCE.

                          Section 80G is proposed to be amended to provide for 100% deduction in respect
                          of donations made tothe National Fund for Control of Drug Abuse.

                          With a view to encourage and enhance people's participation in the national effort
                          to improve sanitation facilities and rejuvenation of river Ganga, section 80G is
                          proposed to be amended so as to provide 100% deduction for donations made by
                          any donor to the Swachh Bharat Kosh and to Clean Ganga Fund.


    Budget Highlights - Direct Taxes

8
                                                    The Institute of Chartered Accountants of India


Measures to curb black money
 In order to curb generation of black money by way of dealings in cash in immovable
  property transactions, section 269SS is proposed to be amended so as to provide
  that no person shall accept from any person, any loan or deposit or any sum of
  money, whether as advance or otherwise, in relation to transfer of an immovable
  property otherwise than by an account payee cheque or account payee bank draft
  or by electronic clearing system through a bank account, if the amount of such loan
  or deposit or such specified sum is twenty thousand rupees or more.

 Similarly, section 269T also is proposed to be amended so as to provide that no
 person shall repay any loan or deposit made with it or any specified advance
 received by it in relation to transfer of an immovable property whether or not
 the transfer takes place, otherwise than by an account payee cheque or account
 payee bank draft or by electronic clearing system through a bank account, if the
 amount or aggregate amount of loans or deposits or specified advances is twenty
 thousand rupees or more.

General Anti Avoidance Rule (GAAR)
 The implementation of General Anti Avoidance Rule (GAAR) is proposed to be
  deferred by two years. Accordingly, it would be applicable for the financial year
  2017-18 (A.Y. 2018-19) and subsequent years. Further, it is also proposed that the
  investments made upto 31.03.2017 shall not be subject to GAAR.

Additional Investment Allowance and provisions in respect of additional
depreciation
 A new section 32AD is proposed to be inserted to provide for an additional
  investment allowance of an amount equal to 15% of the cost of new asset acquired
  and installed by an assessee, if--

   (a) he sets up an undertaking or enterprise for manufacture or production of any
       article or thing on or after 1st April, 2015in any notified backward areas in the
       State of Andhra Pradesh and the State of Telangana; and

   (b) the new assets are acquired and installed for the purposes of the said
      undertaking or enterprise during the periodbeginning from the 1st April, 2015 to
      31st March, 2020.
   This deduction shall be available over and above the existing deduction available
   under section 32AC of the Act.

 Further, in order to incentivise acquisition and installation of plant and machinery
 for setting up of manufacturing units in the notified backward area in the State
 of Andhra Pradesh or the State of Telangana, it is proposed to allow higher
 additional depreciation at the rate of 35% (instead of 20%) in respect of the
 actual cost of new machinery or plant (other than a ship and aircraft) acquired
 and installed by a manufacturing undertaking or enterprise which is set up in the
 notified backward area of the State of Andhra Pradesh or the State of Telangana
 on or after the 1st day of April, 2015.

 To remove the discrimination in the matter of allowing additional depreciation under
 section 32(1)(iia) on plant or machinery used for less than 180 days and used for 180
 days or more, it is proposed to provide that the 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, shall be allowed in the immediately succeeding previous year.



                                                                              Budget Highlights - Direct Taxes

                                                                                                                 9
            The Institute of Chartered Accountants of India


                          Definition of charitable purpose
                           The definition for charitable purpose provided under section 2(15) is proposed to
                            be amended to include the activity of Yoga as a special category of activity to be
                            considered as charitable purpose on the lines of education.

                           The definition is proposed to be further amended to provide that the advancement
                           of any other object of general public utility shall not be a charitable purpose,
                           if it involves the carrying on of any activity in the nature of trade, commerce or
                           business, or any activity of rendering any service in relation to any trade, commerce
                           or business, for a cess or fee or any other consideration, irrespective of the nature
                           of use or application, or retention, of the income from such activity, unless,-

                             (i) such activity is undertaken in the course of actual carrying out of such
                                 advancement of any other object of generalpublic utility; and

                             (ii) the aggregate receipts from such activity or activities, during the previous year,
                                  do not exceed 20% of thetotal receipts, of the trust or institution undertaking
                                  such activity or activities, for the previous year .

                          Cost of acquisition in the hands of resulting company
                           There is no express provision under the Income-tax Act, with regard to value to
                            be considered as cost of acquisition of a capital asset in the hands of resulting
                            company on transfer of capital assets acquired on demerger. Accordingly, section
                            49is proposed to be amended to provide that the cost of acquisition of an asset
                            acquired by resulting company shall be the cost for which the demergedcompany
                            acquiredthe capitalasset as increased by the cost of improvement incurred by
                            the demerged company.

                          Direct Taxes Code
                           Since the jurisprudence under the Income-tax Act is well evolved and a large
                             number of provisions of the proposed DTC have already been included in the
                             Income-tax Act, 1961 and the remaining are proposed to be included through the
                             Finance Bill, 2015, the Government has expressed its resolve of not going ahead
                             with the DTC.




     Budget Highlights - Direct Taxes

10
                                                      The Institute of Chartered Accountants of India



Amendments Proposed by Finance
Bill, 2015 in Indirect Taxes
Indirect Taxes Committee

CENTRAL EXCISE
Rate of excise duty
Education Cess and Secondary & Higher Education Cess leviable on excisable goods
fully exempted. Further, standard ad valorem rate of excise duty increased from 12%
to 12.5%. These changes have come into force with immediate effect.

       Amendments to be effective from the date on which Finance Bill receives
                            the assent of the President

Amendments in the Central Excise Act, 1944
1. Section 11A proposed to be amended to provide as follows:
   (i) category of cases where extended period of time applies but the transactions
        are recorded in the specified record, to be removed from the statute,
   (ii) provision relating to relevant date also amended to provide definition of relevant
        date in respect of cases where a return is not filed on the due date and where
        only interest is required to be recovered,
   (iii) provisions of section 11A not to apply to cases where the non-payment or short
        payment of duty is reflected in the periodic returns filed and that in such cases
        recovery of duty shall be made in such manner as may be prescribed in the
        rules.
2. Section 11AC proposed to be substituted so as to rationalize the penalty in the
   following manner:
   (i) in cases not involving fraud or collusion or wilful mis-statement or suppression
        of facts or contravention of any provision of the Central Excise Act or rules with
        the intent to evade payment of excise duty-
        a) in addition to the duty as determined under section 11A(10), a penalty not
            exceeding 10% of the duty so determined or R5000, whichever is higher,
            shall be payable;
        b) if duty and interest payable thereon under section 11AA is paid either before
            issue of show cause notice or within 30 days of issue of show cause notice,
            no penalty shall be payable and all proceedings in respect of said duty and
            interest shall be deemed to be concluded;
        c) if duty as determined under section 11A(10) and interest payable thereon
            under section 11AA is paid within 30 days of the date of communication
            of order of the Central Excise Officer who has determined such duty,
            the amount of penalty shall be equal to 25% of the penalty so imposed,
            provided that such reduced penalty is also paid within 30 days of the date of
            communication of such order.
   (ii) in cases involving fraud or collusion or wilful mis-statement of suppression of
        facts or contravention of any provision of the Central Excise Act or rules with the
        intent to evade payment of excise duty-
        a) in addition to the duty as determined under section 11A(10), a penalty equal
                                                                                                  CENTRAL EXCISE         11
            to the duty so determined shall be payable.
                                                                                                  CUSTOMS                13
        b) if duty and interest payable thereon under section 11AA is paid within 30
                                                                                                  COMMON AMENDMENTS 13
            days of communication of show cause notice, the amount of penalty payable             UNDER CENTRAL
            shall be 15% of the duty demanded, provided that such reduced penalty                 EXCISE AND CUSTOMS
            is also paid within 30 days of communication of show cause notice and all             SERVICE TAX            13
            proceedings in respect of said duty, interest and penalty shall be deemed to
            be concluded;


                                                                               Budget Highlights - Indirect Taxes

                                                                                                                    11
                 The Institute of Chartered Accountants of India


                                       c) if duty as determined under section 11A(10) and interest payable thereon
                                           under section 11AA is paid within 30 days of the date of communication
                                           of order of the Central Excise Officer who has determined such duty,
CENTRAL EXCISE      11                     the amount of penalty shall be equal to 25% of the duty so determined,
CUSTOMS             13                     provided that such reduced penalty is also paid within 30 days of the date of
COMMON AMENDMENTS 13
                                           communication of such order; and
UNDER CENTRAL
EXCISE AND CUSTOMS
                                  (iii)If the duty amount gets modified in any appellate proceeding, then the penalty
SERVICE TAX         13                 amount mentioned in (ii) (a) above and interest shall also stand modified
                                       accordingly. Where the duty amount is increased in the appellate proceedings,
                                       the benefit of reduced penalty as specified shall be admissible if duty, interest
                                       and reduced penalty in relation to such increased amount is paid within 30 days
                                       of such appellate order.
                               3. Section 32B proposed to be amended so as to enable Vice Chairman or Member of
                                  the Settlement Commission to officiate as Chairman, in the absence of Chairman
                                  of the Settlement Commission.
                               4. Penalty provided under sub-sections (4) and (5) of section 37 proposed to be
                                  enhanced from `2000 to `5000.
                               5. An explanation proposed to be inserted to section 3A(3) to provide that "factor"
                                  relevant to production, in the said sub-section, includes "factors" relevant to
                                  production. This enables the Central Government to specify more than one factor
                                  relevant to the production of such goods. This amendment will come into effect
                                  immediately.

                                                    Amendments effective from 1st March, 2015

                               Amendments in the CENVAT Credit Rules, 2004
                               1. Time limit for taking CENVAT credit on inputs and input services enhanced from
                                  the present 6 months to one year [Rule 4].
                               2. Time limit for return of capital goods from a job worker enhanced from the present
                                  6 months to two years [Rule 4].
                               3. Provision relating to reversal for CENVAT credit, presently applicable to exempted
                                  goods and services, made applicable to non-excisable goods also [Rule 6]
                               4. CENVAT credit taken, but NOT utilized, also to be recovered [Rule 14].

                               Amendments in the Central Excise Rules, 2002
                               Digitally signed invoices may be issued and records may be preserved in electronic
                               form by a manufacturer [Rules 10 and 11].
                               
                               Simultaneous amendments in Central Excise Rules, 2002 and CENVAT Credit Rules,
                               2004
                               1. Direct dispatch of goods to registered dealer's/registered importer's customers
                                  allowed without first bringing them to the dealer's/importer's registered premises
                                  subject to the conditions specified therein.
                               2. Direct dispatch of inputs and capital goods to job worker allowed without first
                                  bringing them to the manufacturer's /output service provider's premises subject to
                                  the conditions specified therein.
                               3.Application of certain provisions of these rules, presently applicable to the
                                  registered dealers, to apply to the registered importers also.

                               Other amendment
                               Registration process simplified to ensure that registration is granted within
                               2 working days of the receipt of a duly completed application form. Verification of
                               documents and premises, as the case may be, shall be carried out after the grant of the
                               registration.



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CUSTOMS

       Amendments to be effective from the date on which Finance Bill receives
                            the assent of the President                                            CENTRAL EXCISE         11
                                                                                                   CUSTOMS                13
Amendments in the Customs Act, 1962                                                                COMMON AMENDMENTS 13
1. Section 28 to be amended to provide as follows:                                                 UNDER CENTRAL
   (i) in cases not involving fraud or collusion or wilful mis-statement or suppression            EXCISE AND CUSTOMS
        of facts or contravention of any provision of the Act or rules with the intent to          SERVICE TAX            13

        evade payment of duty, no penalty shall be imposed if the amount of duty along
        with interest, is paid in full within 30 days from the date of receipt of the notice
        and the proceedings in respect of such person or other persons to whom the
        notice is served shall be deemed to be concluded;
   (ii) in cases involving fraud or collusion or wilful mis-statement or suppression of
        facts or contravention of any provision of the Act or rules with the intent to
        evade payment of duty, the amount of penalty payable to be reduced to 15%
        (instead of the present 25%) if the amount of duty in full or in part, as may be
        accepted, along with interest and such reduced penalty, is paid within 30 days
        from the date of receipt of the notice.
2. Section 112 providing penalty for improper importation of goods, etc/section 114
   providing penalty for attempt to export goods improperly, etc. proposed to be
   amended to provide that any person who, in relation to any dutiable goods, other
   than prohibited goods, does or omits to do any act which would render such goods
   liable to confiscation under section 111/ section 113 respectively, or abets the
   doing or omission of such an act, shall, subject to the provisions of section 114A,
   be liable to a penalty not exceeding 10% of the duty sought to be evaded OR `5000,
   whichever is greater.
 However, in cases of short levy or non-levy or short payment or non-payment
   and erroneous refund of duty for reasons of collusion or any willful mis-statement
   or suppression of facts, if the duty as determined under section 28(8) and the
   interest payable thereon under section 28AA is paid within 30 days from the date
   of communication of the order of the proper officer determining such duty, the
   amount of penalty liable to be paid under this section shall be 25% of the penalty
   so determined.

COMMON AMENDMENTS UNDER CENTRAL EXCISE AND CUSTOMS

1. The scheme of Advance Ruling extended to "resident firm" in Central Excise and
   Customs (effective from 1st March, 2015).
2. Proviso to section 31(c) of the Central Excise Act, 1944/ proviso to section 127A(b)
   of the Customs Act, 1962 proposed to be amended to provide that when any
   proceeding is referred back, whether in appeal or revision or otherwise, by any court,
   Appellate Tribunal Authority or any other authority to the adjudicating authority for a
   fresh adjudication or decision, then such case shall not be entitled for Settlement (to
   be effective from the date the Finance Bill received President's assent).
3. Certain provisions relating to Settlement Commission, which are now redundant,
   are proposed to be omitted (to be effective from the date the Finance Bill received
   President's assent).

SERVICE TAX

Amendments to be effective from a date to be notified after Finance Bill receives the
assent of the President
1. Service Tax Rate
 The rate of Service Tax is being increased from 12% plus Education Cesses i.e.
   12.36% to 14%. The `Education Cess' and `Secondary and Higher Education Cess'

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                 The Institute of Chartered Accountants of India


                                   shall be subsumed in the revised rate of Service Tax. Accordingly, an amendment
                                   is being made in section 66B, sections 95 and section 140 of the Finance Act. The
                                   `EC' and SHEC will continue to be levied in Service Tax till the time revised rate
                                   comes into effect.

                               2. Swachh Bharat Cess
                                Central Government has been empowered to impose a Swachh Bharat Cess on
                                  all or any of the taxable services at a rate of 2% on the value of such taxable
                                  services. This cess shall be levied from such date as may be notified by the Central
                                  Government after the enactment of the Finance Bill, 2015.

                               Amendments made with immediate effect
                               3. Existing exemption, vide notification No. 42/12-ST dated 29.6.2012, to the services
                                  provided by a commission agent located outside India to an exporter located in
                                  India is being rescinded with immediate effect. This is done on account of the
                                  amendments made in law in the previous budget making the place of provision of
                                  a service provided by such agents as outside the taxable territory.
                               4. The facility of Advance Ruling is being extended to all resident firms by specifying
                                  such firms under section 96A (b)(iii) of the Finance Act, 1994.


                               A. Amendment to Negative List: to be effective from a date to be notified after Finance
                               Bill receives the assent of the President
                               1.Negative list entry covering "Entry to Entertainment Events and Access to
                                  Amusement Facilities" has been omitted. Its implications are as follows:
                                  a) Service Tax shall be levied on the service provided by way of access to
                                     amusement facility providing fun or recreation by means of rides, gaming
                                     devices or bowling alleys in amusement parks, amusement arcades, water
                                     parks and theme parks.
                                  b) Service tax to be levied on service by way of admission to entertainment event
                                     of concerts, pageants, musical performances concerts, award functions and
                                     sporting events other than the recognized sporting event, if the amount charged
                                     is more than Rs. 500 for right to admission to such an event.
                                  c) Service by way of admission to entertainment event, namely, exhibition of
                                     cinematographic film, circus, recognized sporting event, dance, theatrical
                                     performance including drama and ballet is exempted from Service Tax from
                                     notification No. 25/12-ST( Mega exemption Notification)
                               2. Earlier Negative List covered services by way of any process amounting to
                                  manufacture or production of goods which includes carrying out any processes
                                  for production or manufacture of alcoholic liquor for human consumption. Now
                                  Service Tax shall be levied on contract manufacturing/job work for production of
                                  potable liquor for human consumption.
                               3.Earlier Negative List covered services provided by the Government or a local
                                  authority excluding certain services, as specified, which included "support
                                  service" provided by the Government or local authority to a business entity. Now all
                                  services provided by the Government or local authority to a business entity, except
                                  the services that are specifically exempted, or covered by any another entry in the
                                  Negative List, shall be liable to service tax.
CENTRAL EXCISE      11
CUSTOMS             13
                               B. Amendments in Service Tax Rules
COMMON AMENDMENTS 13           1.With effect from 01st March 2015, in respect of any service provided under
UNDER CENTRAL                    aggregator model, the aggregator, or any of his representative office located in
EXCISE AND CUSTOMS               India or an agent of aggregator, is being made liable to pay Service Tax if the
SERVICE TAX         13           service is so provided using the brand name of the aggregator in any manner. In






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   this regard appropriate amendments have been made in rule 2 of the Service Tax
   Rules, 1994 and notification No. 30/2012-ST dated 20.6.2012.
2.With effect from 01st March 2015, rule 4 has been amended to provide that
   the CBEC shall, by way of an order will specify the conditions, safeguards and
   procedure for registration in service tax. In this regard Order No. 1/15-ST, dated
   28.2.2015 has been issued, prescribing documentation, time limits and procedure
   for registration. It has also been prescribed that henceforth registration for single
   premises shall be granted within two days of filing the application.
3. Rule 4, 4A and 5A: provision for issuing digitally signed invoices is being added
   along with the option of maintaining of records in electronic form and their
   authentication by means of digital signatures. The conditions and procedure in this
   regard shall be specified by the CBEC. The changes are applicable with immediate
   effect.
4. Rule 6 (6A): provided for recovery of service tax self-assessed and declared in the
   return under section 87 is being omitted consequent to the amendment in section
   73 for enabling such recovery. This change will come into effect from the date of
   enactment of the Finance Bill, 2015.
5. In respect of services given in below table the service provider has been allowed
   to pay service tax at an alternative rate subject to the conditions as prescribed
   under rule 6 (7), 6(7A), 6(7B) and 6(7C) of the Service Tax Rules, 1994. Consequent
   to the upward revision in Service Tax rate, the said alternative rates is revised
   proportionately as per the table given below:
    S. No. Name of Service    Old Rate                       New Rate
    1.     Air Travel         0.6%                           0.7%
           Agent(Domestic
           Bookings)
           Air Travel Agent   1.2%                           1.4%
           (International
           Bookings)
    2.     Life Insurance     3 % and 1.5 %                  3.5 % and 1.75 %
           Service                                           respectively.
    3.     Money Changer      (a) 0.12 per cent. of the      (a) 0.14 per cent. of the
           Service            gross amount of currency       gross amount of currency
                              exchanged for an amount        exchanged for an amount
                              upto rupees 100,000,           upto rupees 100,000, subject
                              subject to the minimum         to the minimum amount of
                              amount of rupees 30; and       rupees 35; and

                              (b) rupees 120 and 0.06 per    (b) rupees 140 and 0.07 per
                              cent. of the gross amount of   cent. of the gross amount of
                              currency exchanged for an      currency exchanged for an
                              amount of rupees exceeding     amount of rupees exceeding
                              rupees 100,000 and upto        rupees 100,000 and upto
                              rupees 10,00,000; and          rupees 10,00,000; and

                              (c) rupees 660 and 0.012 per   (c) rupees 770 and 0.014 per
                              cent. of the gross amount of   cent. of the gross amount of
                              currency exchanged for an      currency exchanged for an
                              amount of rupees exceeding     amount of rupees exceeding
                              10,00,000, subject to          10,00,000, subject to
                              maximum amount of rupees       maximum amount of rupees
                              5000                           5000
    3.     lottery            R7,000/- & R10,000/-           R8,200/- & R12,800/-                  CENTRAL EXCISE         11
           distributor and                                   respectively.                         CUSTOMS                13
           selling agent                                                                           COMMON AMENDMENTS 13
                                                                                                   UNDER CENTRAL
The above changes will become effective from a date to be notified after Finance Bill              EXCISE AND CUSTOMS
receives the assent of the President                                                               SERVICE TAX            13




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                 The Institute of Chartered Accountants of India


                               Amendments applicable w.e.f. 1st April 2015

                               A. Amendment to Mega Exemption Notification
CENTRAL EXCISE      11         1. Rationalization of Existing Exemptions
CUSTOMS             13             (a)Exemption presently available on specified services of construction, repair,
COMMON AMENDMENTS 13
                                       maintenance, renovation or alteration service provided to the Government, a
UNDER CENTRAL
EXCISE AND CUSTOMS                     local authority, or governmental authority ( vide S. No. 12 of the notification No.
SERVICE TAX         13                 25/12-ST ) shall be limited only to:-
                                       (a) a historical monument, archaeological site or remains of national importance,
                                           archaeological excavation or antiquity;
                                       (b) canal, dam or other irrigation work; and
                                       (c) pipeline, conduit or plant for (i) water supply (ii) water treatment, or (iii)
                                           sewerage treatment or disposal.
                                        Exemption to other services presently covered under S. No. 12 of notification
                                           No. 25/12-ST is being withdrawn.
                                   (b)Exemption to construction, erection, commissioning or installation of original
                                       works pertaining to an airport or port provide vide entry 14 is being withdrawn.
                                       However the other exemptions covered under entry 14 will continue unaltered.
                                   (c Exemption to services provided by a performing artist in folk or classical art
                                       form of (i) music, or (ii) dance, or (iii) theatre, will be limited only to such cases
                                       where amount charged is upto R1,00,000 for a performance.
                                   (d)Exemption to transportation of food stuff by rail, or vessels or road will be limited
                                       to food grains including rice and pulses, flour, milk and salt. Transportation of
                                       agricultural produce is separately exempt, and this exemption would continue.
                                   (e) Exemptions are being withdrawn on the following services:
                                       a.services provided by a mutual fund agent to a mutual fund or assets
                                           management company,
                                       b. distributor to a mutual fund or AMC,
                                       c. selling or marketing agent of lottery ticket to a distributor.
                                    Service Tax on these services shall be levied on reverse charge basis.
                               (f) Consequent to imposition of Service Tax levy on service by way of manufacture of
                                   alcoholic liquor for human consumption, an amendment is being made in the entry
                                   at S. No. 30 of notification No. 25/12-ST to exclude carrying out of intermediate
                                   production process of alcoholic liquor for human consumption on job work from
                                   this entry. The change shall come into effect from a date to be notified after the
                                   enactment of the Finance Bill, 2015.
                               (g) Exemption is being withdrawn on the following service,-
                               a. Departmentally run public telephone;
                               b. Guaranteed public telephone operating only local calls;
                               c. Service by way of making telephone calls from free telephone at airport and
                                   hospital where no bill is issued.

                               2. New exemptions introduced
                                  (a)Exemption to any service provided by way of transportation of a patient to and
                                      from a clinical establishment by a clinical establishment. All ambulance services
                                      are covered within the scope of this exemption.
                                  (b)Exemption to Life insurance service provided by way of Varishtha Pension Bima
                                      Yojna.
                                  (c) Exemption to Service provided by a Common Effluent Treatment Plant operator
                                      for treatment of effluent.
                                  (d)Exemption to Services by way of pre-conditioning, pre-cooling, ripening,
                                      waxing, retail packing, labelling of fruits and vegetables.
                                  (e) Exemption to Service provided by way of admission to a museum, zoo, national
                                      park, wild life sanctuary and a tiger reserve. These services when provided by
                                      Government or local authority are covered under Negative List.


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   (f) Exemption to Service provided by way of exhibition of movie by the exhibitor
       (theatre owner) to the distributor or an association of persons consisting of such
       exhibitor as one of it's members.
   (g)Exemption to Goods transport agency service provided for transport of export               CENTRAL EXCISE         11

       goods by road from the place of removal to an inland container depot, a                   CUSTOMS                13
                                                                                                 COMMON AMENDMENTS 13
       container freight station, a port or airport vide notification No. 31/12-ST dated
                                                                                                 UNDER CENTRAL
       20.6.2012.                                                                                EXCISE AND CUSTOMS
   (h)Exemption to service by way of right to admission to,-                                     SERVICE TAX            13
       i. exhibition of cinematographic film, circus, dance, or theatrical performances
            including drama or ballet.
       ii. recognized sporting events.
       iii. concerts, pageants, award functions, musical performances or sporting
            events not covered by S. No. ii, where the consideration for such admission
            is upto R500 per person.
    These exemptions are in lieu of activities covered by the Negative List which are
       withdrawn. The change shall come into effect from a date to be notified after the
       enactment of the Finance Bill, 2015.

B. Abatement Notification amended
1. The taxable portion of service of transportation by rail, road and vessel shall be
   30% subject to a uniform condition of non-availment of CENVAT Credit on inputs,
   capital goods and input services.
2. The taxable portion of value of air transport of passenger for higher classes shall
   be 60% as against economy class for which Service Tax is payable on 40% of the
   value.
3. Abatement is withdrawn for services provided in relation to chit and Service Tax
   is payable by chit fund foremen on the full consideration received by way of fee,
   commission or any such amount with a facility to avail CENVAT Credit on the same.

C. Reverse charge/Partial reverse charge
1. In relation to manpower supply and security services provided by an individual,
   HUF, or partnership firm to a body corporate, only service receiver to pay service
   tax as against present system of partial reverse charge.
2. Service Tax in respect of mutual fund agent and mutual fund distributor services
   shall be paid by the assets management company or by the mutual fund receiving
   such services.
3. Distributor of Lottery is required to pay Service Tax in respect of agents of lottery.

D. CENVAT CREDIT RULES
1. Earlier CENVAT credit to service receiver under partial reverse charge was eligible
   only if payment of service has been made to service provider. Now with effect
   from 1.4.2015 Rule 4(7) has been amended to allow CENVAT Credit of Service Tax
   paid under partial reverse charge by the service receiver without linking it to the
   payment to the service provider.

E. Other Amendments which shall get incorporated in the said Act on the day the
Finance Bill, 2015 is enacted.
1. Consideration for a taxable service shall include all reimbursable expenditure or
   cost incurred and charged by the service provider and amount retained by the
   distributor or selling agent of lottery from gross sale amount of lottery ticket or the
   discount received.
2. Section 73 is being amended in the following manner:
   (a)A new sub-section (1B) is being inserted to provide that recovery of the Service
      Tax amount self-assessed and declared in the return but not paid shall be made



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                 The Institute of Chartered Accountants of India


                                      under section 87, without service of any notice under sub-section (1) of section
                                      73; and
                                  (b)sub-section (4A) that provides for reduced penalty if true and complete details
                                      of transaction were available on specified records, is being omitted.
                               3. Section 76 is being amended to rationalize the provisions relating to penalties,
                                  in cases not involving fraud or collusion or wilful misstatement or suppression of
                                  facts or contravention of any provision of the Act or rules with the intent to evade
                                  payment of Service Tax, in the following manner,-
                                  (a)penalty not to exceed ten per cent. of Service Tax amount involved in such
                                      cases;
                                  (b)no penalty is to be paid if Service Tax and interest is paid within 30 days of
                                      issuance of notice under section 73 (1);
                                  (c) a reduced penalty equal to 25% of the penalty imposed by the Central Excise
                                      officer by way of an order is to be paid if the Service Tax, interest and reduced
                                      penalty is paid within 30 days of such order; and
                                  (d)if the Service Tax amount gets reduced in any appellate proceeding, then the
                                      penalty amount shall also stand modified accordingly, and benefit of reduced
                                      penalty ( 25% of penalty imposed) shall be admissible if service tax, interest
                                      and reduced penalty is paid within 30 days of such appellate order.
                               4. Section 78 is being amended to rationalize penalty, in cases involving fraud or
                                  collusion or wilful mis-statement of suppression of facts or contravention of any
                                  provision of the Act or rules with the intent to evade payment of Service Tax, in the
                                  following manner,-
                                  (a) penalty shall be hundred per cent of Service Tax amount involved in such cases;
                                  (b)a reduced penalty equal to 15% of the Service Tax amount is to be paid if
                                      Service Tax, interest and reduced penalty is paid within 30 days of service of
                                      notice in this regard;
                                  (c) a reduced penalty equal to 25% of the Service Tax amount, determined by the
                                      Central Excise officer by an order, is to be paid if the Service Tax, interest and
                                      reduced penalty is paid within 30 days of such order; and
                                  (d)if the Service Tax amount gets reduced in any appellate proceeding, then the
                                      penalty amount shall also stand modified accordingly, and benefit of reduced
                                      penalty (25%) shall be admissible if Service Tax, interest and reduced penalty is
                                      paid within 30 days of such appellate order.
                               5. A new section 78 B is being inserted to prescribe, by way of a transition provision,
                                  that,-
                                  (a)amended provisions of sections 76 and 78 shall apply to cases where either
                                      no notice is served, or notice is served under subsection (1) of section 73 or
                                      proviso thereto but no order has been issued under sub-section (2) of section
                                      73, before the date of enactment of the Finance Bill, 2015; and
                                  (b)in respect of cases covered by sub-section (4A) of section 73, if no notice is
                                      served, or notice is served under sub-section (1) of section 73 or proviso thereto
                                      but no order has been issued under sub-section (2) of section 73, before the
                                      date of enactment of the Finance Bill, 2015, penalty shall not exceed 50% of the
                                      Service Tax amount.
                               6. Section 80, that provided for waiver of penalty in certain circumstances, is being
                                  omitted.
                               7. Section 86 is being amended to prescribe that remedy against the order passed by
                                  Commissioner (Appeal), in a matter involving rebate of Service Tax, shall lie in terms
CENTRAL EXCISE      11
CUSTOMS             13
                                  of section 35EE of the Central Excise Act. It is also being provided that all appeals
COMMON AMENDMENTS 13              filed in Tribunal after the date the Finance Act, 2012 came into effect and pending
UNDER CENTRAL                     on the date when the Finance Bill, 2015 receives assent of the President shall be
EXCISE AND CUSTOMS                transferred and dealt in accordance with section 35EE of the Central Excise Act.
SERVICE TAX         13




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Amendments Proposed by Finance
Bill, 2015 in International Taxation
Committee on International Taxation



Fund Managers in India not to constitute business connection of offshore
funds
 It is proposed that mere presence of a fund manager in India would not
   constitute PE of the offshore funds, as this is resulting in adverse tax consequences
   currently.
 In order to facilitate location of fund managers of off-shore funds in India a specific
   regime has been proposed in the Act in line with international best practices with
   the objective that, subject to fulfilment of certain conditions by the fund and the fund
   manager,-
   (i) the tax liability in respect of income arising to the Fund from investment in India
        would be neutral to the fact as to whether the investment is made directly by the
        fund or through engagement of Fund manager located in India; and
   (ii) that income of the fund from the investments outside India would not be taxable
        in India solely on the basis that the Fund management activity in respect
        of such investments have been undertaken through a fund manager located in
        India.
 In the case of an eligible investment fund, the fund management activity carried out
   through an eligible fund manager acting on behalf of such fund shall not constitute
   business connection in India of the said fund.

Reduction in rate of tax on Income by way of Royalty and Fees for technical
services in case of non-residents-Proposed Reduction in Royalty / FTS rate
to 10% from 25%
 It is proposed to reduce the rate of tax provided under section 115A on royalty and FTS
   payments made to non-residents from 25% to 10%.

Clarity relating to Indirect transfer provisions-Further clarification to
Explanation 5 in section 9(1)(i)
Currently The Explanation 5 in section 9(1)(i) clarified that an asset or capital asset, being
any share or interest in a company or entity registered or incorporated outside India shall
be deemed to be situated in India if the share or interest derives, directly or indirectly, its
value substantially from the assets located in India.
    The share or interest of a foreign company or entity shall be deemed to derive its value
substantially from the assets (whether tangible or intangible) located in India, if on the
specified date, the value of Indian assets,-
    a) exceeds the amount of ten Crore rupees ; and
    b) Represents at least fifty per cent. of the value of all the assets owned by the
         company or entity.
    Value of an asset shall mean the fair market value of such asset without reduction of
liabilities, if any, in respect of the asset.
    The specified date of valuation shall be the date on which the accounting period of the
company or entity, as the case may be, ends preceding the date of transfer.

Raising the threshold for specified domestic transaction-Increase in limit of
specified domestic transaction from 5 Crores to 20 Crores rupees
 It is proposed to amend section 92BA by increasing the limit of specified domestic
  transactions entered into by the assessee from 5 Crores to 20 Crores rupees.


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            The Institute of Chartered Accountants of India


                          Enabling the Board to notify rules for giving foreign tax credit-Rules will be
                          prescribed to claim foreign tax credit u/s 90, 90A and 91
                           CBDT may make rules to provide the procedure for granting relief or deduction, as the
                             case may be, of any income-tax paid in any country or specified territory outside India,
                             under section 90, or under section 90A, or under section 91, against the income-tax
                             payable under the Act. This amendment will take effect from 1st day of June, 2015.

                          Clarity regarding source rule in respect of interest received by the non-
                          resident in certain cases
                           In the case of a non-resident, being a person engaged in the business of banking,
                             the PE in India of such non-resident shall be obligated to deduct tax at source on any
                             interest payable to either the head office or any other branch or PE, etc. of the non-
                             resident outside India. Further, non-deduction would result in disallowance of interest
                             claimed as expenditure by the PE and may also attract levy of interest and penalty in
                             accordance with relevant provisions of the Act.

                          Amendment to the conditions for determining residency status in respect of
                          Companies
                           POEM is proposed to be introduced for determining the residential status of company
                            which is in line with DTAA

                           It is proposed to amend the provisions of section 6 to provide that a person being a
                           company shall be said to be resident in India in any previous year, if-
                           (i) it is an Indian company; or
                           (ii) Its place of effective management, at any time in that year, is in India. (Earlier the
                                provision was -during that year, the control and management of its affairs is situated
                                wholly in India)
                           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 the business of an entity as a whole are, in substance made.

                          Rationalisation of provisions relating to Tax Deduction at Source (TDS) and
                          Tax Collection at Source (TCS)-Penalty of 1 lakh proposed for providing
                          incorrect information or non-providing of information as per 195(6)
                           It is proposed to amend the provisions of section 195 of the Act to provide that the
                             person responsible for paying any sum, whether chargeable to tax or not, to a non-
                             resident individual or foreign company, shall be required to furnish the information
                             of the prescribed sum in such form and manner as may be prescribed.
                           It is further proposed to insert a new provision in the Act to provide that in case of non-
                             furnishing of information or furnishing of incorrect information under sub-section (6) of
                             section 195(6) of the Act, a penalty of one lakh rupees shall be levied.
                           It is also proposed to amend the provisions of section 273B of the Act to provide that
                             no penalty shall be imposable under this new provision if it is proved that there
                             was reasonable cause for non-furnishing or incorrect furnishing of information
                             under sub-section (6) of section 195 of the Act. These amendments will take effect
                             from 1st June, 2015.

                          Power of the Central Board of Direct Taxes to prescribe the manner and
                          procedure for computing period of stay in India
                           It is proposed to amend the Act to provide that in the case of an Individual, being a
                             citizen of India and a member of the crew of a foreign bound ship leaving India, the
                             period or periods of stay in India shall, in respect of such voyage, be determined in the
                             manner and subject to such conditions as may be prescribed. This amendment will
                             take effect retrospectively from 1st April, 2015.



     Budget Highlights - International Taxation

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