Corporate Updates – 02-03-2015


The ICSI-NIRC is organizing a niro along with an indicative time slot convenient to you between 10 am to 5 pm. An early response from your end will be highly solicited.


The Hon’ble Finance Minister Shri. Arun Jaitley on 28.02.2015 presented Union Budget for the year 2015-16. We are pleased to present the highlights of the budget presented by Finance Minister Arun Jaitley.

Direct Taxes

· No change in the income-tax rate and education cess.

· For corporates, over the next four years, the corporate tax rate will reduce from 30% to 25%.

· Surcharge increased for domestic companies From 5% to 7% where income is above INR 10 million and form 10% to 12% where income is above INR 100 million and this additional surcharge shall not apply to non-resident corporate taxpayers.

· Wealth tax is abolished and replaced by an additional surcharge of 2%, in cases where the income of the resident individual taxpayer exceeds INR 10 million.

· General Anti Avoidance Rules (‘GAAR’) provisions deferred by two years and are now effective from 1April 2017. Explanatory Memorandum provides that GAAR provisions should apply prospectively to investment made on or after 1 April 2017.

· Currently, a foreign company is treated as resident of India, if during the year, control and management of affairs is wholly situated in India. The concept of ‘control and management’ is being replaced by ‘place of effective management’ A foreign company will now be regarded as a tax resident of India, if its place of effective management is in India , at any time during the year, is in India . A penalty @ 2% of the value of transaction could be levied if the Indian entity fails to furnish information relating to offshore transaction having the effect of directly or indirectly transferring its right of management or control.

· In the case of transfer of a capital asset in a demerger, the cost of acquisition of such asset in the hands of the resulting company shall be the cost for which the demerged company acquired the asset as increased by the cost of improvement incurred by the demerged company.

· To promote the inflow of technology, the rate of tax is reduced from 25% to 10% on royalties and fees for technical services received by non-resident tax payers.

· Threshold for applicability of domestic transfer pricing has been increased from INR 50 Million to INR 200 million.

· The person responsible for making payment to a non-resident is now required to provide information about such payment to Indian Revenue authorities, even if such payment is not chargeable to tax in India.

· Direct Taxes Code may not be enacted

· The limit for deduction towards contribution to National Pension Scheme has been increased to INR 150,000. The limit of deduction of health insurance premium increased from INR 15,000 to INR 25,000 and for senior citizens the limit is increased from INR 20,000 to INR 30,000.

· A comprehensive new law to deal with the issue of black money is to be introduced in Parliament. Under the new law, in the event of concealment of income / assets or inadequate disclosures of foreign assets, a taxpayer could be prosecuted for a period up to ten years and could also be subject to a penalty at the rate of 300% of tax sought to be evaded.

· Amendments proposed under the Prevention of Money Laundering Act to penalise and prosecute persons making false declaration/documents in the transaction of any business relating to customs; and to enable powers to attach and confiscate equivalent asset in India where assets located abroad cannot be forfeited.

· The intent to consider concealment of income or evasion of tax in relation to a foreign asset a predicate offence; suitable provisions to be introduced under the Prevention of Money Laundering Act.

· A proposal to give powers to the Central Government to regulate equity capital flows; RBI to solely manage debt instruments. All existing capital account regulations to continue until modified or rescinded by the Government.

· The government to introduce a Sovereign Gold Bond, as an alternative to purchasing metal gold.

Indirect Taxes

· Affirmed the introduction of GST from 1 April 2016.

· Service tax rates proposed to be increased to 14% from 12.36% and education cess and secondary and higher education cess withdrawn.

· Swachh Bharat Cess @ 2% on the value of taxable services proposed to be introduced.

· Advance ruling benefit extended to resident firms, LLPs, sole proprietors and one person company.

· Manpower supply and securities services are fully taxable under a reverse charge.

· Permitted maintenance of digital invoices and records.

· All reimbursements of costs may be included in the value of taxable services.

· Provisions relating to penalty amended.

· Single premise registration proposed to be granted in two days

· Time limit for taking CENVAT credit on inputs and input services increased from six months to one year.

· CENVAT credit of service tax paid under a partial reverse charge can be taken on payment of service tax even where the value is not paid.

· CENVAT credit deemed to be used on the last day of the month.

· The manner of determining utilisation of CENVAT credit has been introduced :

First from opening balance

Then from admissible credit used during the month

Lastly from inadmissible credit used during the month


· In order to operationalise the International Financial Services Centre (IFSC) at Gujarat, a notification under FEMA 1999, shall be issued by the RBI in March 2015, making regulations relating to setting up of financial institutions in the IFSC zone.

· Proposal to introduce measures that will incentivise credit or debit card transactions, and disincentivise cash transactions.

· Proposal to bank the un-bank and fund the un-fund by establishing MUDRA bank to re-finance micro-finance institutions.

· The inclusion of an Indian postal network to the formal financial system thereby increasing the access of people to these systems.

· Monetisation by the banks of gold deposits placed by the jewellers.

· There is an intention to set up an autonomous Bank Board Bureau to improve the Governance of Public Sector banks. Such a Bank Board Bureau will search and select PSB heads and assist them in developing differentiated strategies/ capital raising.

· RBI registered NBFCs having an asset size of INR 5000 mn and above will be considered to be a ‘Financial Institution’ under the Securitisation And Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

· Interest payable by an Indian branch to its head office or other offshore branches is taxable in India, and is deemed to be a separate and an independent person from its head office or offshore branches for taxation purposes.

· Interest payable on recurring deposits exceeding INR 10,000 covered within the TDS ambit with effect from 1 June 2016.

· Computation of interest income for the purposes of deduction of tax should be made with reference to the income credited or paid by the banking company which has adopted core banking solutions, and not branch wise.


· Mantri Suraksha Bima Yojana to provide accidental death cover of INR 200,000 for a premium of INR 12 per year.

· Pradhan Mantri Jeevan Jyoti Bima Yojana to provide both natural and accidental death cover of INR 200,000 at a premium of INR 330 per year for the age group of 18-50.

· ‘Atal Pension Yojana’ is to be launched where new accounts could be opened by 31 December 2015, to provide a defined pension. The government will contribute 50% of the beneficiaries’ premium amount for a period of five years, up to INR 1,000 each year.

· Deduction limit for any amount paid under an annuity plan of an insurance company, increased from INR 100,000 to INR 150,000.

· The recipients of any proceeds under non-qualifying life insurance policies can now furnish a self-declaration to the life insurance company for non-deduction of tax. This provision would apply from 1 June 2015.

· In respect of amounts paid to a scheme of an insurance company for maintenance of a disabled dependent, deduction is now allowed for INR 75,000 in place of INR 50,000. Where the dependent person suffers from a severe disability, a deduction is now allowed for INR.

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