14. TDS on premature deposits from provident fund
Effect: I find no reason in this move when such withdrawals are anyway not subject to tax. Premature withdrawals from PF will now be subject to TDS @ 10% (at maximum marginal rate if employee does not furnish PAN) if the withdrawal amount exceeds Rs. 30,000.The only explanation I can see in this proposal is that it will ensure better tax compliance, though it is again going to burden the employers with more compliance.
15. Increase in cap for deduction on contribution to prescribed annuity / pension plans
Effect: This proposal of increasing the cap for such contributions from Rs. 1 lakh to Rs. 1.50 lakhs would enable assessees not to look for other avenues of investments within the overall ceiling of Rs. 1.50 lakhs under section 80C.
16. Additional deduction for contribution to the New Pension Scheme
Effect: This proposal of providing another tax saving investment avenue under section 80CCD for contribution to the NPS up to Rs. 50,000 will benefit individual assessees by way of further tax savings.
17. Deduction for contribution to the Sukanya Samriddhi Scheme
Effect: An opportunity to earn tax sops on philanthropic activities, contribution made to this scheme, relating to the education of the girl child is a welcome move, proposed to be introduced retrospectively effective from financial year 2014-15 under Section 80C. A great initiative in allowing even the payment received from such schemes to be totally tax free. Now parents of a girl child can rejoice that they not only get tax deduction for investments made under this scheme, but also would not be required to pay any tax of payments received under this scheme.
18. Deduction for donations made to certain funds
Effect: The proposal to include donations made to Swachh Bharat Kosh and Clean Ganga Fund under the ambit of section 80G is a welcome move, which again is made effective retrospective from financial year 2014-15. Donations made to the National Fund for Control of Drug Abuse also being included from financial year 2015-16. The great news is that you get 100% deduction for donations to these funds.
19. Furnishing of details for payments to non-residents without TDS
Effect: Making payments to non-residents and claiming foreign tax credit has been made a little more cumbersome with now the assessees required to furnish various details of the same. The required details are yet to be prescribed, but the message is loud and clear that non-compliance will attract stringent penalty.
20. Increase in the surcharge on Dividend Distribution Tax
Effect: The proposal to increase the surcharge on DDT and on the tax on income distributed by mutual funds from 10% to 12% will make the declaration of dividend dearer to the companies and thereby reduce the income received by the shareholder or the unit holder.
21. Increase in surcharge on the tax on buy-back of shares
Effect: This proposal will make corporates think again before venturing to buy back its shares by increasing their tax liability on the same effectively from 22.66% to 23.07%.
22. Reduction of rate of TDS on royalty and fees for technical services to foreign entities
Effect: This proposal to reduce the rate of TDS from 25% to 10% is a welcome move since many DTAA already had 10% rate prescribed and hence it was logical to get the rates under the Income Tax Act also at par with these tax treaties. The effective TDS rate due to this amendment would reduce from 27.04% to 10.82%.
23. Threshold limit for domestic transfer pricing enhanced
Effect: The proposal to enhance the threshold limit from the existing Rs. 5 crores to Rs. 20 crores would result in lesser compliance by smaller domestic companies.
24. Scope of levy of interest for default in payment of advance tax extended
Effect: The proposal to extend the scope of the levy of this interest to even income declared before the settlement commission will result in increasing the tax burden in cases where application has already been filed before the settlement commission for earlier years.
25. Favourable tax orders can now be revised by higher authorities
Effect: The proposal to allow favourable tax orders passed by the assessing officers to be revised by the CIT (Commissioner of Income Tax) will come in as a shock to many assessees who can end up finding orders passed in their favour being later amended.
26. Concealment penalty to be imposed even if tax is paid
Effect: This proposed amendment to impose concealment penalty even to cases where the disallowance or additions are made under the normal provisions and the requisite tax thereon has already been paid under MAT or otherwise does not auger well with the various case laws of the courts and hence will be a big burden on the assessees.
27. Future proposal to levy 2% Swachh Bharat Cess on services
Effect: Though not directly relating to any provisions under the Income Tax Act, I find it pertinently important to include this here since this proposed future suggestion may result in pushing up the service tax rate from 14% to 16% thereby increasing the cost of these services to the common man.
CA Sanjay Thampy
FCA, Grad. CWA, CS, DBM
For Kerala Biz News
About the Author: Sanjay is a Chartered Accountant based in Mumbai and can be reached at sthampyca@gmail.com