Insights on Finance Bill 2015 and Economic Rankings in India

HOTEL AND RESTAURANT ASSOCIATION WESTERN INDIA Presentation on 3rdMarch, 2015 ON FINANCE BILL, 2015 D.M. HARISH & CO., ADVOCATES

By MR. ANIL HARISH, Partner D.M. Harish & Co., Advocates 305-09, Neelkanth, 98 Marine Drive, Mumbai 400 002 Email: dmhco@dmharish.com Tel: 022-22817272, 43342000

Finance Ministers Speech 2014 2015 Only Overseas Black Money. Bill to be introduced. We must address the problem of black money Not yet done. High Level Committee to be to be formed to interact with Trade and Industry on a regular basis. 100 Smart Cities Urban Renewal Develop housing, Safe Drinking Water, Solid Waste Management, Digital Connectivity Swachh Bharat Abhiyaan. Repeated. Housing for all by 2022 e-Biz Platform by 31.12.2014 Started. 25 Cultural World Heritage Sites to be restored. Tourism Visas on Arrival 43 countries done, to go up to 150 countries. D.M. HARISH & CO., 3 ADVOCATES

IFC World Bank Rankings - India (2014 & 2015) Criteria 2014 156 140 183 2015 158 142 184 Starting a business Ease of doing business Dealing with Construction Permits Enforcing Contracts Registering Property Paying Taxes Trading across borders 186 115 154 122 186 121 156 126 D.M. HARISH & CO., ADVOCATES 4

Ease of doing business in India (Overall) India 2008 (120) 2009 (122) 2010 (133) 2011 (134) 2012 (132) 2013 (132) 2014 (140) 2015 (142) 100 110 120 India 130 140 150 D.M. HARISH & CO., ADVOCATES 5

e-BIZ Portal through which a person would be able to apply and manage all licenses, clearances, registrations, filings etc. Not required to go to various departments individually. Finance Minister s speech (para 52) I have myself launched the e-Biz Portal which integrates 14 regulatory permissions at one source. Good States are embracing and joining this platform. At present www.ebiz.gov.in offers services such as entrepreneurs willing to engage in manufacturing activities to obtain Industrial License, which is required for certain sectors falling under the aegis of compulsory licensing as per the Industries Development and Regulation Act, 1951. Application Form for issue in Importer Exporter Code(IEC) Number Name availability, DIN, Certificate of Incorporation Employer registration with Employee Provident Fund Organisation D.M. HARISH & CO., ADVOCATES 6

Wealth Tax No Wealth Tax from Assessment Year 2016-17. However, information about personal assets to be given in Income-tax Returns. A table for the same appears in ITR-3 [Return to be filled in by Individuals/HUFs being partners in firms and not carrying out business or profession under any proprietorship] and in ITR-4 [For Individuals/HUFs having income from a proprietory business or profession] D.M. HARISH & CO., ADVOCATES 7

Asset and Liability at the end of the year (other than those included in Part A BS of the return of the Firm in which partner) (Applicable in a case where total income exceeds Rs. 25 lakh) In case total income exceeds 25lakh, AL Schedule is mandatory.The values in all the fields have to be zero or above. income is Rs 25 lakh or below, the schedule AL is optional Particulars of Asset 1. Immovable Asset a Land b Building 2. Movable Asset a Financial Asset Schedule AL In case total A Amount (Cost) (Rs.) 1a 1b DETAILS OF ASSET AND LIABILTY Deposits in Bank (including balance in any account) Shares and securities Insurance policies Loans and Advances given Cash in hand Jewellery, bullion etc. Archaeological collections, drawings, painting, sculpture or any work of art Vehicles, yachts, boats and aircrafts Total Liability in relation to Assets at A i 2ai 2aii 2aiii 2aiv 2av 2b ii iii iv v b c 2c 2d 3 B d 3 0 B D.M. HARISH & CO., ADVOCATES 8

Black Money Bill D.M. HARISH & CO., ADVOCATES 9

Black Money Bill Bill to be introduced in Parliament to achieve the objective of curbing black money. Punishment : Inadequate disclosure or evasion related to foreign assets Imprisonment upto 10 Years, and/or Penalty may also be levied at 300% of the tax due. Such offence will be Non compoundable offence. Rigorous imprisonment upto 7 years For non filing of returns or filing of returns with inadequate disclosure of foreign assets. Offender will not be permitted to approach Settlement Commission D.M. HARISH & CO., ADVOCATES 10

Black Money Bill Who will be liable for penalty and prosecution ? Individuals, Banks, Entities, Financial Institutions Other Points: Date of opening of foreign account would be mandatorily required to be specified by the assessee in the return of income. One time opportunity may be given to the Black money holder to pay taxes and repatriate their funds. This facility is likely to be announced upon introduction of comprehensive legislation in the session of Parliament. D.M. HARISH & CO., ADVOCATES 11

Post Budget Revenue Secretary, Mr. Shaktikanta Das One-time compliance opportunity Will not affect students and professionals Penalties and other charges payable but no prosecution in this compliance period. Other Steps: Such as Hotel Payments over Rs.5,000/- by credit or debit cards. D.M. HARISH & CO., ADVOCATES

Prevention of Money Laundering Act, 2002 (u) "proceeds of crime" means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property OR WHERE SUCH PROPERTY IS TAKEN OR HELD OUTSIDE THE COUNTRY, THEN THE PROPERTY EQUIVALENT IN VALUE HELD WITHIN THE COUNTRY; Special Court has replaced Adjudicating Authourity Additional power of Special Court : The Special Court may order the Central Government to restore confiscated property to a claimant with a legitimate interest in the property & has suffered a quantifiable loss. The claim should be by person acting good faith and should have taken reasonable precautions. D.M. HARISH & CO., ADVOCATES 13

Real Estate Benami Transactions A separate bill viz. Benami Transactions (Prohibition) Bill will be introduced to deal with black money associated with Benami Transactions in real estate. It will allow for confiscation of benami property and provide for prosecution, blocking a major avenue for generation of black money. D.M. HARISH & CO., ADVOCATES 14

Section 269SS - Advance of more than Rs.20,000/- in cash for purchase of property Penalty on seller of 100% Section 269T repayment of such advances in Cash Penalty on seller of 100% Quoting of PAN is being made mandatory for any purchase or sale exceeding Rs.1,00,000/- D.M. HARISH & CO., ADVOCATES 15

Gold Monetization Scheme Interest will be earned by depositors. Jewellers can obtain loans. Sovereign Gold Bonds will carry interest and be redeemable in cash in terms of the face value of the gold. D.M. HARISH & CO., ADVOCATES 16

FEMA New Section 37A: Seizure of Indian assets or funds equivalent to foreign exchange Section 6 to be amended to provide that Central Government and Reserve Bank of India may prescribe permissible capital account transactions (not involving debt instruments) and limits &conditions for the same. D.M. HARISH & CO., ADVOCATES 17

Section 6 Foreign Company will be Resident of India if its place of effective management, at any time in that year, is in India place of effective management means 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. D.M. HARISH & CO., ADVOCATES 18

Section 195 Payment to Non-Resident Payer has now to give information to Income-tax Department. Section 271-I Penalty of Rs.1,00,000/- for failure to furnish information. D.M. HARISH & CO., ADVOCATES 19

Section 115A Withholding tax on Royalty or Technical Know-how fees 10% as against 25%. D.M. HARISH & CO., ADVOCATES 20

REITs SEBI Regulations for REITs have been framed. Section 10(23FCA) Any income of a REIT by way of renting or leasing or letting out any real estate asset owned directly shall be exempt in the hand of the REIT. But taxable in the hand of the investor. Section 194-I No TDS on Rental Income paid to REIT. D.M. HARISH & CO., ADVOCATES 21

Section 32 Depreciation If asset is used for less than 180 days then 50% of normal rate of depreciation is given. Now remaining 50% shall be allowed in the next financial year eg. Cost Rs.100 & Depreciation 20% & asset used for less than 180 days D.M. HARISH & CO., ADVOCATES 22

Section 32 (i) (ii) D.M. HARISH & CO., ADVOCATES 23

Section 80JJAA Additional deduction of 30% of salary, for new workmen in a factory, if it has more than 50 workmen (as compared to 100 earlier). Presently only for Company; Proposed for all assessees. (Available for 3 years, if workers are there for more than 300 days in the year.) D.M. HARISH & CO., ADVOCATES 24

Section 92BA Domestic Transfer Pricing Shall apply if such transactions are of more than Rs.20,00,00,000/- as against Rs.5,00,00,000/- D.M. HARISH & CO., ADVOCATES 25

Section 95 GAAR postponed to Assessment Year 2018-19. Direct Taxes Code dropped. D.M. HARISH & CO., ADVOCATES 26

Section 2(15) Yoga treated as a Charitable Purpose Trust may earn income from (i) Business activity undertaken in the normal course (ii) Aggregate receipt from such activity is 20% of total D.M. HARISH & CO., ADVOCATES 27

Section 11 Charitable Trusts Application for accumulation has to made in such form and manner as may be prescribed before the due date of filing of the return. Further, the return has to be filed in time, and money has to be invested in approved form u/s 11(5) D.M. HARISH & CO., ADVOCATES 28

Section 158AA If a question of law arises in the case of an assessee and which is identical with a case pending before the Supreme Court then instead of filing an Appeal to the appellate tribunal the CIT may direct that an application be filed before tribunal to keep matter in abeyance. If assessee agrees. If assessee does not agree, Appeal will be filed. If assessee does agree later, when Supreme Court decision comes, the Department may file the Appeal. D.M. HARISH & CO., ADVOCATES 29

TDS On Salaries Section 192 Deductor to obtain all proofs of deduction claimed. On Payments to Contractors Section 194C TDS will be deductible on payments to transporters who have more than 10 goods carriages, unless they give a certificate. D.M. HARISH & CO., ADVOCATES 30

Section 255 Single member bench of ITAT may be constituted for additions of upto Rs.15,00,000/- (instead of upto Rs.5,00,000/-) D.M. HARISH & CO., ADVOCATES 31

Section 263 Revision by Commissioner AO s order shall be deemed to be erroneous if: a) passed without making enquiries or verification which should have been made. b) order is passed allowing any relief without enquiring into the claim. c) the order has not been made in accordance with any directions of the CBDT u/s. 119 d) the order has not been made in accordance with any Supreme Court or jurisdictional High Court decision, which is contrary to assessee s stand. D.M. HARISH & CO., ADVOCATES 32

The Vodafone Issue Section 9 - Transfer of shares of Overseas Company will be taxable in India if it derives its value substantially from assets tangible & intangible located in India. i. Value of Indian assets exceeds Rs.10 crore and ii. Represents atleast 50% of value of all assets of the Company Explanation 7 However, if Transferor does not have the right of management or control or does not hold voting rights or interest exceeding 5%, such transfer will not be taxable in India D.M. HARISH & CO., ADVOCATES 33

Rates of Tax Maximum Rate of Income-tax Because of 2% increase in surcharge on higher incomes, has gone up to 34.608% Service Tax Gone up to 14% Swachh Bharat Cess Enabling Provision for levy of 2% additional cess on taxable services. D.M. HARISH & CO., ADVOCATES 34

Proposed Rates For Companies, rate will be brought down to 25% over the next 4 years. Not for Individuals or Partnership firms or Limited Liability Partnerships. D.M. HARISH & CO., ADVOCATES 35

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Disclaimer The material contained herein is not exhaustive and contains certain generalisations. D.M. HARISH & CO., ADVOCATES 37

THANK YOU D.M. HARISH & CO., ADVOCATES