Amendments by Finance Act-2014 PDF

AMENDMENTS
BOOKLET
CA VINOD KUMAR MAVILLA
Amendments made by the Finance Act, 2014

INCOME TAX
RATES OF TAX
(1) Individual / Hindu Undivided Family (HUF) / Association of Persons (AOP) / Body
of Individuals (BOI) / Artificial Juridical Person.
where the total income does not exceed Rs.
2,50,000
Nil;
where the total income exceeds Rs. 2,50,000 but 10% of the amount by which the total income
does not exceed Rs. 5,00,000
exceeds Rs. 2,50,000
where the total income exceeds Rs.5,00,000 but Rs.25,000 plus 20% of the amount by which the
does not exceed Rs.10,00,000
total income exceeds Rs.5,00,000;
where the total income exceeds Rs.10,00,000
Amendment
Rs.1,25,000 plus 30% of the amount by which

the total income exceeds Rs.10,00,000.
Basic exemption limit increased from 2,00,000 to 2,50,000
For senior citizens (being resident individuals of the age of 60 years or more but
less than 80 years)
Nil;Year
Financial
3,00,000
where the total income exceeds Rs.3,00,000 but
10% of the amount by which the total income

exceeds Rs.3,00,000;
where the total income exceeds Rs.5,00,000 but

Rs.20,000 plus 20% of the amount by which the

total income exceeds Rs.5,00,000;
Rs.1,20,000 plus 30% of the amount by which the

total income exceeds Rs.10,00,000.
Amendment
Basic exemption limit increased from 2,50,000 to 3,00,000
For resident individuals of the age of 80 years or more at any time during the
previous year
No Amendment
5,00,000
Nil;
Financial
Year
but 20%
of the amount by which the total income
exceeds Rs.5,00,000;
GURUKUL FOR CA & CMA
Rs.1,00,000 plus 30% of the amount by which the

total income exceeds Rs.10,00,000.
01
Income Tax
(2) Firm/LLP
02
No Amendment
On the whole of the total income
30%
(3) Local authority
No Amendment
On the whole of the total income
30%
(4) Co-operative Society
No Amendment
Where the total income does not exceed Rs.

10,000
10% of the total income
Where the total income exceeds Rs.10,000 but

does not exceed Rs.20,000

total income exceeds Rs.10,000
Where the total income exceeds Rs.20,000

total income exceeds Rs.20,000
(5) Company
No Amendment
In the case of a domestic company
30% of the total income
In the case of a company other than a domestic

company
40% on the total income
Income from house property

Increase in deduction for interest on loan borrowed for
acquisition or construction of self-occupied house property
[Section 24(b)]
BEFORE AMENDMENT
AFTER AMENDMENT
Maximum amount of deduction on account of

interest on capital borrowed for acquisition and
construction of self-occupied property to Rs
1,50,000.
Maximum amount of deduction on account of

interest on capital borrowed for acquisition and
construction of self-occupied property to Rs
2,00,000.
Reason: Taking into consideration the appreciation in the value of house property and the
increased cost of finance
Income Tax
03
Answer
Mr. Rajesh purchased a residential house property for self-occupation at a cost of Rs.30 lakh
on 1.6.2013, in respect of which he took a housing loan of Rs.24 lakh from Punjab National
Bank@11% p.a. on the same date. Compute the eligible deduction in respect of interest on
housing loan for A.Y.2014-15 and A.Y.2015-16 under the provisions of the Income-tax Act,
1961, assuming that the entire loan was outstanding as on 31.3.2015 and he does not own
any other house property.
Particulars
Rs.
For A.Y.2014-15
(i)
Deduction under section 24(b) Rs.2,20,000

[Rs. 24,00,000 11% 10/12] Restricted to
(ii)
Deduction under section 80EE (Rs.2,20,000

Rs.1,50,000)
1,50,000
70,000
For A.Y.2015-16
(I)
Deduction under section 24(b) Rs.2,64,000 [Rs.

24,00,000 11%] Restricted to
2,00,000
(ii)
Deduction under section 80EE (Rs.1,00,000

Rs.70,000, allowed as deduction in P.Y.2013-14)
30,000
Note - In this case, Mr. Rajesh is entitled to deduction under section 80EE, in addition to
deduction under section 24(b) since
(1) the loan is sanctioned by Bank of India, being a financial institution, during the period
between 1.4.2013 and 31.3.2014;
(2) the loan amount sanctioned is less than Rs. 25 lakh;
(3) the value of the house property is less than Rs. 40 lakh;
(4) he does not own any other residential house property.
Profits and gains of business or profession

1.
Manufacturing companies investing more than Rs 25 crore in new plant and

machinery in any previous year during the period from 1.4.2014 to 31.3.2017
entitled to investment allowance@15% [Section 32AC]
In the case of a
domestic company
Manufacturing companies investing more than Rs100 crore in

acquisition and installation of new plant and machinery during the
period from 1.4.2013 to 31.3.2015 entitled to deduction@15% under
section 32AC(1).
AFTER
AMENDMENT
Manufacturing companies investing more than Rs 25 crore in new

plant and machinery in any previous year during the period from
1.4.2014 to 31.3.2017 entitled to deduction@15% under section
32AC(1A).
Income Tax
04
REASON
1. This year, considering that growth of the manufacturing sector is

critical for employment generation and development of an
economy, the deduction available under section 32AC has been
extended for investment made in plant and machinery up to
31.03.2017.
2. in order to rationalize the existing provisions of section 32AC and
also to make medium size investments in plant and machinery
eligible for deduction, new
sub-section (1A) has been
inserted(amount of investment reduced to 25crore from
100crore.)
CLARIFICATION
Companies which are eligible to claim deduction under the

existing combined threshold limit of more than Rs100 crore for
investment made in previous years 2013-14 and 2014-15 shall
continue to be eligible to claim deduction under section 32AC(1), even
if its investment in the year 2014-15 is below the new threshold limit of
investment of Rs 25 crore
Compute the admissible deduction under section 32AC for A.Y.2014-15 & A.Y.2015-16 in
each of the following cases Manufacturing company
Investment in new plant and machinery

(Rs. in crores)
P.Y.2013-14
A Ltd.
B Ltd.
C Ltd.
D Ltd.
E Ltd.
F Ltd.
G Ltd.
Answer
Manufacturing
company
80
70
60
75
105
70
70
Investment in new plant and

machinery (Rs. in crores)
P.Y.2013-14
A Ltd.
B Ltd.
C Ltd.
D Ltd.
E Ltd.
F Ltd.
G Ltd.
P.Y.2014-15
80
70
60
75
105
70
70
P.Y.2014-15
22
25
30
25
15
30
40
22
25
30
25
15
30
40
Deduction under section 32AC

(Rs. in crores)
A.Y.2014-15
Nil
Nil
Nil
Nil
15.75
Nil
Nil
Under
subsection
A.Y.2015-16
15.30
Nil
4.5
Nil
2.25
4.5
16.5
(1)
(1A)
(1)
(1A)
(1)
Income Tax
05
2. Expansion of scope of specified business eligible for investment linked

deduction under section 35AD
BEFORE
AMENDMENT
Specified businesses are eligible for availing the investment-linked

deduction under section 35AD(11 specified businesses)
AFTER
AMENDMENT
The Finance Act, 2014 has included two new businesses as

specified business for the purposes of the investment-linked
deduction under section 35AD so as.
(date of commencement of operations-on or after 1st
April, 2014.)
1. laying and operating a slurry pipeline for the transportation of
iron ore;
2. setting up and operating a semiconductor wafer fabrication
manufacturing unit, if such unit is notified by the Board in
accordance with the prescribed guidelines.
REASON
to promote investment in these sectors
3. Capital asset in respect of which deduction under section 35AD has been
claimed to be used for specified business for a period of eight years
BEFORE
AMENDMENT
Under section 35AD, the time period for which capital assets
on which deduction has been claimed and allowed, have to be used for
the specified business, has not been specifically provided.
AFTER
AMENDMENT
1. Section 35AD(7A) provides that any asset in respect of which a

deduction is claimed and allowed under section 35AD shall be
used only for the specified business for a period of eight years
beginning with the previous year in which such asset is
acquired or constructed.
2. Sub-section (7B) has been inserted to provide that if such
asset is used for any purpose other than the specified
business, the total amount of deduction so claimed and
allowed in any previous year in respect of such asset, as
reduced by the amount of depreciation allowable in
accordance with the provisions of section 32 as if no deduction
had been allowed under section 35AD, shall be deemed to be
income of the assessee chargeable under the head
Profits and gains of business or profession of the
previous year in which the asset is so used.
Income Tax
REASON
06
1. In order to ensure that the capital asset on which investment linked

deduction has been claimed is used for the purposes of the
specified business, sub-section (7A) has been inserted in section
35AD.
2. If any asset on which a deduction under section 35AD has been
claimed and allowed, is demolished, destroyed, discarded or
transferred, the sum received or receivable for the same is
chargeable to tax under clause (vii) of section 28. This does not take
into account a case where asset on which deduction under section
35AD has been claimed is used for any purpose other than the
specified business by way of a mode other than that specified
above.
ABC Ltd. is a company having two units Unit A carries on specified business of setting up
and operating a warehousing facility for storage of sugar; Unit B carries on nonspecified
business of operating a warehousing facility for storage of edible oil. Unit A commenced
operations on 1.4.2013 and it claimed deduction of Rs.100 lacs incurred on purchase of two
buildings for Rs.50 lacs each (for operating a warehousing facility for storage of sugar) under
section 35AD for A.Y.2014-15. However, in February, 2015, Unit A transferred one of its
buildings to Unit B.
Examine the tax implications of such transfer in the hands of ABC Ltd.
Answer
Since the capital asset, in respect of which deduction of Rs.50 lacs was claimed under section
35AD, has been transferred by Unit A carrying on specified business to Unit B carrying on nonspecified business in the P.Y.2014-15, the deeming provision under section 35AD(7B) is
attracted during the A.Y.2015-16.
Particulars
Rs.
Deduction allowed under section 35AD for A.Y.2014-15
50,00,000
Less: Depreciation allowable u/s 32 for A.Y.2014-15 [10% of Rs. 50 lacs]
5,00,000
Deemed income under section 35AD(7B)
45,00,000
4. Assessees claiming investment linked deduction under section 35AD not eligible
to claim exemption under section 10AA
BEFORE
AMENDMENT
Where any assessee has claimed investment linked deduction

under section 35AD, it would not be eligible to claim profit linked
deduction under Chapter VIA for the same or any other assessment
year.
AFTER
AMENDMENT
Where any assessee has claimed investment linked deduction

under section 35AD, it would not be eligible to claim profit linked
deduction under Chapter VIA or under section 10AA for the same or
any other assessment year.
Income Tax
REASON
5.
07
Section 10AA also provides for profit linked deduction in

respect of units set-up in Special Economic Zones. However, so far,
there was no bar restricting an assessee claiming investment linked
deduction under section 35AD from claiming profit linked deduction
under section 10AA.
Disallowance of CSR expenditure under section 37
BEFORE
AMENDMENT
Under section 37(1) of the Income-tax Act, 1961, only

expenditure, not covered under sections 30 to 36, and incurred wholly
and exclusively for the purposes of the business is allowed as a
deduction while computing taxable business income. The issue
under consideration is whether CSR expenditure is allowable as
deduction under section 37.
AFTER
AMENDMENT
It has now been clarified that for the purposes of section 37(1),
any expenditure incurred by an assessee on the activities relating to
corporate social responsibility referred to in section 135 of the
Companies Act, 2013 shall not be deemed to have been incurred for
the purpose of business and hence, shall not be allowed as deduction
under section 37.
REASON
The rationale behind the disallowance is that CSR

expenditure, being an application of income, is not incurred
wholly and exclusively for the purposesof carrying on business.
6. Remittance of TDS on payments to non-residents permitted to be made on or before

the due date of filing of return of income for avoiding disallowance of related
expenditure under section 40(a)(i) during the previous year
BEFORE
AMENDMENT
1. Interest, royalty, fee for technical services or other sum

chargeable under the Act which is payable to a non-resident is
not allowable as deduction while computing business income if
tax on such payments has not been deducted during the
previous year, or after deduction, was not paid within the time
prescribed under section 200(1).
2. Provision for disallowance of business expenditure in respect
of certain payments made to the residents under 40(a)(ia)
permits remittance of tax deducted at source on or before the
due date for filing of return of income under section 139(1), for
claim of deduction during the relevant previous year in which
the sum is payable.
AFTER
AMENDMENT
Section 40(a)(i) has been amended to provide that the

deductor shall be allowed to claim deduction for payments made to
non residents in the previous year of payment, if tax is deducted during
the previous year and the same is paid on or before the due date
specified for filing of return under section 139(1).
REASON
In order to provide similar extended time limit for remittance of

tax deducted from payments made to non-residents. (now time limit
for section 40(a)(i) and 40(a)(ia) are same )
Income Tax
08
7. Expansion of scope of section 40(a)(ia) to cover all expenditure/payments on which

tax is deductible under Chapter XVII-B and restriction of quantum of disallowance
thereunder to 30% of sum paid.
BEFORE
AMENDMENT
Disallowance is attracted while computing business income in

respect of certain payments such as interest, commission,
brokerage, rent, royalty, fee for technical services and contract
payments made to a resident, if tax on such payments was not
deducted, or after deduction, was not paid within the due date of filing
return specified under section 139(1)
AFTER
AMENDMENT
Disallowance under section 40(a)(ia) has been extended to all

expenditure on which tax is deductible under Chapter XVII-B.
REASON
1. Chapter XVII-B mandates deduction of tax from certain other

payments such as salary, directors fee not specifically
covered under section 40(a)(ia). In respect of these
payments, non-deduction or non-remittance of tax within the
prescribed time does not attract disallowance under section
40(a)(ia) while computing income under the head Profits and
gains from business or profession.
2. In order to rectify this inconsistency and improve TDS
compliance in respect of all payments to residents.
BEFORE
AMENDMENT
Disallowance of 100% of expenditure under section 40(a)(ia)
AFTER
AMENDMENT
An amendment has been made to restrict the disallowance for

Nondeduction of tax or non-remittance of TDS on payments made to
residents on or before the specified due date to 30% of the sum
payable to a resident.
REASON
In order to alleviate the undue hardship caused to assessees

on account of disallowance of 100% of expenditure under section
40(a)(ia)
XYZ Ltd. made the following payments in the month of March 2015 to residents without
deduction of tax at source. What would be the tax consequence for A.Y.2015-16, assuming
that the resident payees in all the cases mentioned below, have not paid the tax, if any, which
was required to be deducted by XYZ Ltd.?
Particulars
Rs.
1.
Salary to its employees
15,00,000
2.
Non-compete fees to Mr. X
70,000
3.
Directors remuneration
25,000
Income Tax
09
Would your answer change if XYZ Ltd. has deducted tax on the above in April, 2015 from
subsequent payments made to these persons and remitted the same in July, 2015?
Answer
Non-deduction of tax at source on any payment on which tax is deductible as per the
provisions of Chapter XVII-B would attract disallowance under section 40(a)(ia). Therefore,
non-deduction of tax at source on salary payment on which tax is deductibleunder section 192
and non-compete fees and directors remuneration on which tax is deductible under section
194J, would attract disallowance@30% of sum paid under section 40(a)(ia). Therefore, the
amount to be disallowed under section 40(a)(ia) while computing business income for
A.Y.2015-16 is as follows
Particulars
Amount paid in Rs.
Disallowance
u/s 40(a)(ia) @
30% of sum paid
1.
Salary
[tax is deductible under section 192]
2.
Non-compete fees to Mr. X

[tax is deductible under section 194J]
70,000
21,000
3.
Directors remuneration [tax is

deductible under section 194J without
any threshold limit]
25,000
7,500
15,00,000
Disallowance under section 40(a)(ia)
4,50,000
4,78,500
If the tax is deducted and paid in the next year i.e., P.Y.2015-16, the amount of Rs. 4,78,500
would be allowed as deduction while computing the business income of A.Y.2016-17.
8. Uniform amount of presumptive income from each goods carriage, whether heavy
goods carriage or other than heavy goods carriage [Section 44AE]
BEFORE
AMENDMENT
The amount of presumptive income (per month or part of a month

during which the goods carriage was owned by the taxpayer) was
as follows:
Heavy Goods Vehicle (HGV)
Rs 5,000
Other than HGV
Rs 4,500
AFTER
AMENDMENT
A uniform amount of Rs 7,500 per month (or part of a month)

would be deemed as the income from each goods carriage, whether
HGV or other than HGV, under section 44AE.
REASON
To simplify the presumptive taxation scheme by providing for a

uniform amount of presumptive income per month (or part of a month)
for all types of goods carriage without any distinction between HGV
and vehicle other than HGV.
Income Tax
10
Mr. X commenced the business of operating goods vehicles on 1.4.2014. He purchased the
following vehicles during the P.Y.2014-15. Compute his income under section 44AE for
A.Y.2015-16.
Type of Vehicle
Number
Date of
purchase
1.
Light Goods Vehicles
2
1
10.4.2014
15.3.2015
2.
Medium Goods Vehicles
3
1
16.7.2014
2.1.2015
3.
Heavy Goods Vehicles
2
1
29.8.2014
23.2.2015
Would your answer change if the two light goods vehicles purchased in April, 2014 were put to
use only in July, 2014?
Answer
Since Mr. X does not own more than 10 vehicles at any time during the previous year 2014-15,
he is eligible to opt for presumptive taxation scheme under section 44AE. Rs. 7,500 per month
or part of month for which each goods carriage is owned by him would be deemed as his
profits and gains from such goods carriage.
(1)
(2)
(3)
(4)
Number of
Vehicles
Date of purchase
No. of months for

which vehicle is
owned
No. of months
No. of vehicles
[(1) (3)]
10.4.2014
12
24
15.3.2015
16.7.2014
27
2.1.2015
29.8.2014
16
23.2.2015
Total
73
10
Therefore, presumptive income of Mr. X under section 44AE for A.Y.2015-16 is Rs.5,47,500,
being 73 Rs. 7,500.
The answer would remain the same even if the two vehicles purchased in April, 2014 were put
to use only in July, 2014, since the presumptive income of Rs.7,500 per month has to be
calculated per month or part of the month for which the vehicle is owned by Mr. X.
Income Tax
11
Capital Gains
1. Income arising from transfer of security by a foreign portfolio investor (FPI)
characterized as capital gains [Section 2(14)]
BEFORE
AMENDMENT
AFTER
AMENDMENT
Section 2(14) defines capital asset to include property of any

kind held by an assessee, whether or not connected with his business
or profession, but does not include any stock-in-trade or personal
assets as provided in the definition.
1.
2.
The definition of capital asset under section 2(14) would now

include
(a) property of any kind held by an assessee, whether
or not connected with his business or profession;
(b) any securities held by Foreign Institutional Investor which
has invested in such securities in accordance with the
regulations made under the SEBI Act, 1992.
The exclusion of stock-in-trade from the definition of capital
asset is only in respect of sub-clause
(a) above and not sub-clause (b).
2. Period of holding of units of debt oriented mutual fund and unlisted securities, to
qualify as a long-term capital asset, increased from more than 12 months to more
than 36 months [Section 2(42A)]
BEFORE
AMENDMENT
In the case of a share held in a company or any other security

listed in a recognised stock exchange in India or a unit of the Unit Trust
of India or a unit of a Mutual Fund or a zero coupon bond, the period of
holding required for qualifying as a long-term capital asset is more
than twelve months.
AFTER
AMENDMENT
A security (other than a unit) listed in a recognized stock

exchange in India, a unit of UTI or a unit of an equity oriented fund or a
zero coupon bond will be treated as short term capital asset if it is held
for not more than 12 months immediately preceding the date of its
transfer.
REASON
Encouraging investment in stock market, where prices of the

securities are market determined, accordingly
3. Benefit of concessional rate of tax@10% on long-term capital gains (without

indexation) not to be available in respect of units of debt-oriented fund and unlisted
securities [Section 112]
BEFORE
AMENDMENT
Capital gains on transfer of listed securities, Government

securities, units of mutual fund, bonds or zero coupon bonds shall be
chargeable to tax @10% computed without the benefit of indexation or
@20% availing the benefit of indexation, whichever is more beneficial to
the assessee.
AFTER
AMENDMENT
Income Tax
12
Capital gains on transfer of listed securities (other than units) or

zero coupon bonds shall be chargeable to tax @10% computed without
the benefit of indexation or @20% availing the benefit of indexation,
whichever is more beneficial to the assessee.
4. Compensation received in pursuance of an interim order deemed as income

chargeable to tax in the year of final order [Section 45(5)]
BEFORE
AMENDMENT
Uncertainty regarding the year in which the amount of

compensation received in pursuance of an interim order of the court is to
be charged to tax.
AFTER
AMENDMENT
Compensation shall be deemed to be income chargeable under

the head 'Capital gains' in the previous year in which the final order of
such court, Tribunal or other authority is made.
5. Transfer of Government security outside India by a non-resident to another

nonresident not a transfer for charge of capital gains tax [Section 47]
In order to facilitate listing and trading of Government securities outside India, clause
(viib) has been inserted in section 47 to provide that any transfer of a capital asset, (1) being a Government Security carrying a periodic payment of interest,
(2) made outside India through an intermediary dealing in settlement of securities,
(3) by a non-resident to another non-resident
shall not be considered as transfer for the purpose of charging capital gains.
6. Exemption under section 54 and 54F to be available for investment in one residential
house situated in India
BEFORE AMENDMENT
AFTER AMENDMENT
1. As per section 54(1), capital gains, to the

extent invested in a residential house
2. section 54F, capital gains, in proportion to
the net consideration invested in a new
residential house
sections 54 and 54F have been amended to

provide for exemption thereunder in respect of
investment made in one residential house
situated in India.
REASON
1. There have been controversial judicial views interpreting a residential house to mean
more than one residential house on the reasoning that singular includes plural
under the General Clauses Act.
2. Further, another issue which emerged before the Courts was whether investment in a
residential house situated outside India would qualify for exemption under these
sections.
3. Since the real intent of law was to allow capital gains exemption for investment in one
residential house situated in India
Income Tax
13
7. Maximum investment in bonds of NHAI & RECL, out of capital gains arising from
transfer of one or more capital assets during a financial year, restricted to Rs50
lakhs, irrespective of whether the investment is made in the same financial year or
in the subsequent financial year or both [Section 54EC]
BEFORE AMENDMENT
AFTER AMENDMENT
section 54EC(1) restricts the

investment which can be made in the
long-term specified asset (bonds of
NHAI/RECL) during any financial year
to Rs 50 lakh.
Investment made by an assessee in bonds of

NHAI/RECL, out of capital gains arising from transfer of
one or more original assets, during the financial year in
which the original asset or assets are transferred and in
the subsequent financial year does not exceed fifty
lakh rupees.
REASON
The period available for investing in NHAI/RECL bonds is six months from the date of transfer,
and the restriction of Rs 50 lakh is in relation to a financial year, it was possible for assessees
transferring an asset or assets on or after 1st October in a financial year, to invest Rs 50 lakh in
the same financial year and Rs 50 lakh in the next financial year (within six months from the
date of transfer) and claim an exemption of upto Rs 1 crore under section 54EC. This was,
however, not in accordance with the real intent of law to restrict the maximum
exemption to Rs 50 lakh.
Notification of Cost Inflation Index for F.Y.2014-15 [Notification No. 31/2014 dated
11.06.2014] - 1024
Mr. Ram, working as a CEO with ABC Ltd., furnishes the following particulars of assets
transferred by him during the P.Y.2014-15
Type of Vehicle
Date of
transfer
Rs.
1.
A residential house in Bangalore which

he had purchased in February, 2000 at a
cost of Rs. 15,56,000.
13/1/2015
1,45,00,000
2.
Listed shares of Indian companies

purchased in May 2012 at a cost of Rs.
1 lakh.
14/2/2015
2,00,000
3.
Unlisted shares purchased in May 2012

at a cost of Rs. 50,000.
14/2/2015
75,000
4.
Units of equity oriented fund purchased

in May 2012 at a cost of Rs.30,000
14/2/2015
65,000
5.
Units of debt oriented fund purchased in

January 2010 at a cost of Rs.31,600
14/2/2015
75,000
Income Tax
14
Mr. Ram made the following investments, out of the capital gains arising on sale of residential
house Particulars
Rs.
1.
Purchased a residential flat in Pune on 21/5/2015
35,00,000
2.
Purchased a residential flat in Madurai on 14/7/2015
25,00,000
3.
3 year bonds of NHAI on 20/3/2015
40,00,000
4.
3 year bonds of RECL on 15/5/2015
30,00,000
Answer
Compute the total income and tax liability of Mr. Ram for A.Y.2015-16, if his salary income
(computed) is Rs. 24 lakh and interest on fixed deposits with banks is Rs.1 lakh. Assume that
he has contributed Rs.1,50,000 to PPF and paid medical insurance premium of Rs.12,000 to
insure his health.
Cost Inflation Index of F.Y.1999-2000: 389; F.Y.2009-10: 632; F.Y.2012-13: 852; F.Y.2014-15:
1024.
Computation of total income of Mr. Ram for A.Y.2015-16
Particulars
Rs.
Salaries
24,00,000
Capital gains [See Working Note below]
19,52,800
Interest on fixed deposits
1,00,000
Gross Total Income
44,52,800
Less: Deductions under Chapter VI-A

Under section 80C PPF
Under section 80D Mediclaim premium
1,50,000
12,000
Total Income
1,62,000
42,90,800
Tax on total income:
Rs.
Tax on long-term capital gains [20% of Rs.19,27,800]
3,85,560
Tax on other income of Rs.23,63,000 [42,90,800 -19,27,800]
5,33,900
9,19,460
Add: Education cess@2% and SHEC@1%
27,584
9,47,044
Income Tax
15
Working Note Computation of Capital Gains chargeable to tax for A.Y.2015-16

Particulars
(1)
Residential house
Gross Sale consideration
Less: Indexed cost of acquisition [15,56,000 1024/389]
Less: Exemption under section 54
Investment in one residential house (it is more beneficial
to claim exemption in respect of investment in residential
flat at Pune)
Investment in bonds of NHAI/RECL (aggregate
(2) &
(4)
(3)
(5)
investment to be restricted to Rs.50 lakh)

Long-term capital gains taxable@20% u/s 112
Listed equity shares and units of equity oriented fund
Capital gains on sale of listed equity shares and units of equity
oriented fund held for more than 12 months is a long-term
capital gain exempt under section 10(38).
Unlisted shares
Sale consideration
Less: Cost of acquisition
Short-term capital gains taxable at normal rates of tax
[Since held for less than 36 months]
Units of debt-oriented fund
Sale consideration
Less: Indexed cost of acquisition [31,600 1024/632]
Long-term capital gains taxable at 20% u/s 112
[Since held for more than 36 months]
Rs.
1,45,00,000
40,96,000
1,04,04,000
35,00,000
50,00,000
19,04,000
Nil
75,000
50,000
25,000
75,000
51,200
23,800
Taxable Capital Gains:

Long-term capital gains taxable@20% u/s 112 [(1) + (5)]
Short-term capital gains taxable at normal rates [3]
Rs.
19,27,800
25,000
19,52,800
Income Tax
16
Income from other sources

1. Advance forfeited due to failure of negotiations for transfer of a capital asset to be
taxable as Income from other sources [Section 56(2)]
BEFORE
AMENDMENT
Under section 51, any advance retained or received in respect

of a negotiation for transfer which failed to materialise shall be reduced
from the COA of the asset or the WDV or the FMVof the asset, at the
time of its transfer to compute the capital gains arising therefrom. In
case the asset transferred is a long-term capital asset, indexation
benefit would be on the cost so reduced.
AFTER
AMENDMENT
1. section 56(2) to provide for the taxability of any sum of money,

received as an advance or otherwise in the course of
negotiations for transfer of a capital asset.
2. section 2(24), defining income, has been amended to include
such sum forfeited within its scope.
3. Now section 51 deleted and new in section 56(2) inserted.
Ie. In simple terms Advance forfeited is not required to
reduce from COA of the asset or the WDV or the FMV u/s 51
,It is taxable under the head income from other
sources.(u/s 56(2))
REASON
1. Advance forfeited in excess of COA or FMV or WDV if ignored

under existing provisions of income tax.(Now government
want to tax this type of transactions).
2. In case the asset transferred is a long-term capital asset,
indexation benefit would be on the cost so reduced.(it is
illogical).
3. Advance forfeited by previous owner is ignored under existing
provisions of income tax.(Now government want to tax this
type of transactions)
Mr. H has acquired a residential house property in Delhi on 1st April, 2001 for Rs.22,00,000
and decided to sell the same on 3rd May, 2004 to Mrs.P and an advance of Rs.70,000 was
taken from her. The balance money was not paid by Mrs. P and hence, Mr. H has forfeited the
entire advance sum. In April, 2014, he once again entered into negotiations for sale of the said
property to Mr.Y, and received Rs.2 lakh as advance, but the transfer did not materialize and
hence, the advance was forfeited. On 3rd March, 2015, he finally sold this house to Mr. S for
Rs.95,00,000. In the meantime, on 4th February, 2015, he had purchased a residential house
in Faridabad for Rs.28,00,000 and made full payment for the same. However, Mr.H does not
possess any legal title till 31st March, 2015, as such transfer was not registered with the
registration authority.
Mr.H had purchased another old house in Madurai on 14th October, 2014 from Mr. X, an Indian
resident, by paying Rs.25,00,000 and the purchase was registered with the appropriate
authority.
Determine the taxable capital gain arising from above transactions in the hands of Mr.H for
Assessment Year 2015-16.
Cost Inflation Index - 2001-02: 426; 2004-05: 480; 2013-14: 939; 2014-15:1024.
Income Tax
17
Answer
Computation of taxable capital gain of Mr. H for the A.Y.2014-15

Particulars
Sale proceeds
Less: Indexed cost of acquisition (See Notes 1 & 2)
Long Term Capital Gain
Less: Exemption under section 54 in respect of investment in house at
Faridabad (See Notes 3 & 4)
Taxable long-term capital gain
Rs.
95,00,000
51,20,000
43,80,000
28,00,000
15,80,000
Notes:
1. Computation of indexed cost of acquisition
Particulars
Cost of acquisition
Less: Advance taken in the previous year 2004-05 and forfeited __
Rs.
22,00,000
70,000
Cost for the purpose of Indexation
21,30,000
Indexed cost of acquisition (Rs.21,30,000 x 1024/426)
51,20,000
2. Advance of Rs.2 lakh taken by Mr. H in April, 2014, which was forfeited due to the
transaction not materializing, is taxable under section 56(2)(ix). Hence, such amount
would not be reduced to compute the indexed cost of acquisition while computing capital
gains on sale of the property in March, 2015.
3. In order to avail exemption of capital gains under section 54, one residential house should
be purchased within 1 year before or 2 years after the date of transfer or constructed
within a period of 3 years after the date of transfer. In this case, Mr.H has purchased the
residential house in Faridabad within one year before the date of transfer and paid the full
amount as per the purchase agreement, though he does not possess any legal title till
31.3.2015 since the transfer was not registered with the registration authority. However,
for the purpose of claiming exemption under section 54, holding of legal title is not
necessary. If the taxpayer pays the full consideration in terms of the purchase agreement
within the stipulated period, the exemption under section 54 would be available. It was so
held in Balraj v. CIT(2002) 254 ITR 22 (Del.) and CIT v. Shahzada Begum (1988) 173 ITR
397 (A.P.).
4. The Finance (No.2) Act, 2014 has clarified that exemption under section 54 can be availed
only in respect of one residential house. It would be more beneficial for Mr. H toclaim
exemption in respect of the Faridabad house since the cost of the same is higher than the
cost of the Madurai house.
Income Tax
18
Deductions from Gross Total Income

1. Increase in the limit of deduction under section 80C & Related amendment in
section: 80CCE
BEFORE AMENDMENT
AFTER AMENDMENT
Ceiling limit (Rs)

1. 80C 1,00,000
2. 80CCC -1,00,000
3. 80CCD(1) -1,00,000
4. Under section 80CCE,
Aggregate deduction under
sections 80C, 80CCC &
80CCD(1) -1,00,000
Ceiling limit (Rs)

1. 80C 1,50,000
2. 80CCC -1,00,000
3. 80CCD(1) -1,00,000
4. Under section 80CCE, Aggregate deduction
under sections 80C, 80CCC & 80CCD(1) 1,50,000
REASON:
In order to channelize household savings, the limit of deduction allowed under
section 80C has been raised from Rs 1 lakh to Rs 1.50 lakh.
Answer
Mr. A, employed with ABC Ltd., has deposited Rs.1,20,000 in public provident fund. He has
paid life insurance premium of ` 15,000 on the policy taken on 1.5.2012 to insure his life (Sum
assured Rs. 1,20,000). He has deposited ` 30,000 in a five year term deposit with bank. He
has also contributed ` 1,20,000, being 10% of his salary, to the notified pension scheme of the
Central Government. A matching contribution was made by ABC Ltd. Compute the deduction
available to him under Chapter VI-A for A.Y.2015-16.
Deduction available to Mr. A under Chapter VI-A for A.Y.2015-16
Section
Particulars
Rs.
Deposit in public provident fund

1,20,000
Life insurance premium paid Rs.15,000 (deduction
restricted to Rs. 12,000, being 10% of Rs.1,20,000,
being sum assured, since the policy was taken after
31.3.2012)
12,000
Five year term deposit with bank
30,000
1,52,000
Restricted to
80CCD(1) Contribution to notified pension scheme of the Central
Government, Rs. 1,20,000, restricted to
Rs.
80C
80CCE
Aggregate donations under section 80C and
80CCD(1), Rs. 2,50,000, but restricted to
80CCD(2) Employer contribution to notified pension scheme
Aggregate Deduction
1,50,000
1,00,000
2,50,000
1,50,000
1,20,000
2,70,000
Income Tax
19
2. Benefit under section 80CCD extended to private sector employees without

condition regarding date of joining being on or after 1st January, 2004
BEFORE AMENDMENT
AFTER AMENDMENT
condition relating to the date of

condition relating to the date of joining the
joining the service being on or after service being on or after 1.1.2004 is not applicable to
1.1.2004 is applicable to Government private sector employees for the purposes of deduction
and private sector employees for the under this section.
purposes of deduction under section
80CCD.
RESONE
Individuals employed by the Central Government before 1st January, 2004, were
entitled to pension as per the Pension Rules. Therefore, the new pension scheme is relevant
only for employees joining Government service on or after 1st January, 2004. However, this
date of joining is not relevant for private sector employees joining new pension scheme.
Provisions concerning advance tax

and tax deducted at source
1.Tax to be deducted on non-exempt payments made under life insurance policy
[Section 194DA]
BEFORE AMENDMENT
AFTER AMENDMENT
REASON
Section 194DA is not available.

1.
new section 194DA has been inserted to provide for

deduction of tax at the rate of 2% on any sum paid to a resident
under a life insurance policy, including the sum allocated by
way of bonus, which are not exempt under section 10(10D) .
2. However, tax deduction is required only if the payment or
aggregate payment in a financial year to an assessee is Rs
1,00,000 or more. This is for alleviating the compliance
burden on the small tax payers.
For ensuring a proper mechanism for reporting of
transactions and collection of tax in respect of sum paid under life
insurance policies which are not exempt under section 10(10D)
Examine the applicability of the provisions for tax deduction at source under section 194DA in
the above cases (I) Mr.X, a resident, is due to receive Rs.4.50 lakhs on 31.3.2015, towards maturity proceeds
of LIC policy taken on 1.4.2012, for which the sum assured is Rs.4 lakhs and the annual
premium is Rs.1,25,000.
(ii) Mr.Y, a resident, is due to receive Rs.2.20 lakhs on 31.3.2015 on LIC policy taken on
1.4.2010, for which the sum assured is Rs.2 lakhs and the annual premium is Rs.35,000.
(iii) Mr.Z, a resident, is due to receive Rs.95,000 on 1.10.2014 towards maturity proceeds of
LIC policy taken on 1.10.2010 for which the sum assured is Rs.90,000 and the annual
premium was Rs.19,000.
Income Tax
20
Answer
(I)
Since the annual premium exceeds 10% of sum assured in respect of a policy taken on
1.4.2012, the maturity proceeds of Rs.4.50 lakhs are not exempt unde section 10(10D)
in the hands of Mr.X. Therefore, tax is required to be deducted@2% under section
194DA on the maturity proceeds of Rs.4.50 lakhs payable to Mr.X.
(ii) Since the annual premium is less than 20% of sum assured in respect of a policy taken
before 1.4.2012, the sum of Rs.2.20 lakhs due to Mr.Y would be exempt under section
10(10D) in his hands. Hence, no tax is required to be deducted at source under section
194DA on such sum payable to Mr.Y.
(iii) Even though the annual premium exceeds 20% of sum assured in respect of a policy
taken before 1.4.2012, and consequently, the maturity proceeds of Rs.95,000 would not
be exempt under section 10(10D) in the hands of Mr.Z, the tax deduction provisions
under section 194DA are not attracted since the maturity proceeds are less than Rs.1
lakh.
2. Enabling provision for deductor to file correction statement and for processing of
correction statement so filed [Sections 200 & 200A
BEFORE
AMENDMENT
Currently, a deductor is allowed to file correction statement for

rectification/updation of the information furnished in the original TDS
statement as per the Centralised Processing of Statements of Tax
Deducted at Source Scheme, 2013 notified vide Notification No.03/2013
dated 15th January, 2013. However, at present, the Income-tax Act, 1961
does not contain any express provision to enable a deductor to file
correction statement.
AFTER
AMENDMENT
A proviso has been inserted in section 200(3) to provide that the

deductor may also deliver to the prescribed authority, a correction
statement for
(a) rectification of any mistake; or
(b) to add, delete or update the information furnished in the statement
delivered under section 200(3) in the specified form and manner.
REASON
In order to incorporate an express provision in the statute
Income Tax
21
Revision of time limit for passing an order

under section 201(1) [Section 201(3)]
1. Section 201(1) provides for passing of an order deeming a payer as assessee in default if
he does not deduct or does not pay or after deduction fails to pay the whole or part of the tax
as per the provisions of Chapter XVII-B.
BEFORE
AMENDMENT
Clause (i) of section 201(3) provides that no order under section

201(1) shall be passed after expiry of two years from the end of the
financial year in which the TDS statement referred to in section 200 has
been filed.
AFTER
AMENDMENT
Clause (i) of section 201(3) which provides time limit of two years
for passing order under section 201(1) for cases in which TDS statement
have been filed, has been omitted.
REASON
Processing of TDS statement is done in a computerized

environment and primarily focuses on the transactions reported in the TDS
statement filed by the deductor, there is no rationale for not treating the
deductor who has filed a TDS statement as an assessee in default after
two years, where the TDS default arises as a consequence of transactions
not reported in the TDS statement.
BEFORE AMENDMENT
AFTER AMENDMENT
Under clause (ii) of section

201(3), a time limit of six years from
the end of the financial year in which
payment is made or credit is given for
passing of order under section 201(1)
has been provided for cases in
respect of which TDS statement has
not been filed.
Under clause (ii) of section 201(3), a time

limit of seven years from the end of the financial year in
which payment is made or credit is given for passing of
order under section 201(1) has been provided for
cases in respect of which TDS statement has not been
filed.
RESONE
1. Notice under section 148 may be issued for reassessment up to six years from the end
of the relevant assessment year for which the income has escaped assessment.
2. Therefore, section 148 allows reopening of cases of one more preceding previous year
than specified under section 201(3)(ii).
3. On account of this difference in time limit, an order under section 201(1) cannot be
passed in respect of defaults relating to TDS which comes to the notice during
search/reassessment proceeding in respect of previous year which is not covered
under section 201(3)(ii) but covered under section 148.
4. Therefore, in order to align the time limit provided under section 201(3)(ii) and section
148, the time limit provided under section 201(3)(ii) for passing order under section
201(1) has been extended by one more year.
Income Tax
22
PROVISIONS FOR FILING RETURN OF INCOME

1. Return of income of mutual funds, securitization trusts, venture capital
companies/funds to be filed mandatorily [Section 139(4C)]
BEFORE
AMENDMENT
There was no obligation requiring the Mutual Fund or securitization trust or

VCC or VCF to furnish their return of income under section 139.
AFTER
AMENDMENT
Section 139(4C) has now been amended to require

1. a Mutual Fund referred to in section 10(23D),
2. a securitization trust referred to in section 10(23DA); and
3. a VCC/VCF referred to in section 10(23FB)
to furnish a return of such income of the previous year in the prescribed
form and verified in the prescribed manner and setting forth such other
particulars as may be prescribed, if the total income in respect of which
such mutual fund or securitisation trust or VCC/VCF is assessable,
without giving effect to the provisions of section 10, exceeds
the basic exemption limit.
2. Verification of return of income [Section 140]

BEFORE
AMENDMENT
Section 140 provides that the return under section 139 shall be signed
and verified in the manner specified therein for different categories of
persons.
AFTER
AMENDMENT
1. section 140 has been amended to provide that the return shall be
verified by the persons specified therein.
2. Consequently, the words sign and verify, wherever they have
been used in section 140, have been substituted by the word
verify.
3. Further, the words sign or signing, wherever they have been
used in section 140, have been replaced by verify or verifying.
REASON
In order to enable the verification of returns either by a sign in manuscript

or by an electronic mode.
Indirect Tax
Central Excise Duty
E-payment of excise duty mandatory for all assessees irrespective of the duty paid
during previous year
BEFORE AMENDMENT
AFTER AMENDMENT
where an assessee had paid an excise 1. Every assessee shall electronically pay the
duty of Rs 1 lakh or more including the
duty through internet banking.
amount paid by utilization of CENVAT 2. However, the Assistant/Deputy Commissioner
credit, in the preceding financial year, he
of Central Excise may for reasons to be
was required to deposit the excise duty
recorded in writing, allow the assessee to
liable to be paid by him electronically
deposit excise duty by any mode other than
through internet banking.
internet banking.
2. Importer issuing CENVATable invoices now required to obtain registration
BEFORE AMENDMENT
Not required to obtain
registration
AFTER AMENDMENT
An importer who issues an invoice on which
CENVAT credit can be taken is also required to obtain such
registration.
Thus, such importer will have to obtain registration
as a 'registered importer' with the central excise authorities
to pass on the credit on the imported goods.
Customs Duty
1.
Relevant date for determination of rate of duty and tariff valuation for imports
through a vehicle to be the date of arrival of vehicle where bill of entry is filed prior
to the arrival of the vehicle [Section 15(1)]
Particulars
Relevant date
BEFORE AMENDMENT
Goods entered for home
consumption under section
46
In case of imports by vessel or aircraft

Date of presentation of bill of entry
OR
Date of entry inwards of the vessel/arrival of the
aircraft
whichever is later
In case of imports by vehicle
23
Indirect Tax
Particulars
24
Relevant date
AFTER AMENDMENT
Goods entered for home
consumption under section 46

OR
Date of entry inwards of the vessel/arrival of the
aircraft or vehicle
whichever is later
2. Relevant date for determination of rate of duty and tariff valuation for imports
through a vehicle to be the date of arrival of vehicle where bill of entry is filed prior
to the arrival of the vehicle [Section 15(1)]
BEFORE AMENDMENT
AFTER AMENDMENT
Section 8B of Customs Tariff Act,

1975 which provides for imposition of
safeguard duty lays down that the
articles imported by a 100% EOU or units
in a Free Trade Zone or Special
Economic Zone shall not be liable to
safeguard duty unless specifically made
applicable in the notification imposing
such duty.
Section 8B has now been amended to

provide for levy of safeguard duty on articles
imported by an 100% EOU/unit in a SEZ that are
cleared as such into DTA or are used in the
manufacture of goods that are cleared into DTA. In
such cases safeguard duty shall be levied on that
portion of the article so cleared or so used as was
leviable when it was imported into India.
3.
Bill of entry to be filed prior to the delivery of import report if the vehicle in which
the goods have been imported is expected to arrive within 30 days [Section 46(3)]
BEFORE AMENDMENT
AFTER AMENDMENT
A bill of entry may be presented

before the delivery of import manifest (in
case of import through vessel or
aircraft) if the vessel/aircraft by which
the goods have been shipped for
importation into India is expected to
arrive within 30 days from the date of
such presentation.
A bill of entry may be presented before the

delivery of import manifest (import through vessel or
aircraft) or import report (import through land route)
if the vessel/aircraft/vehicle by which the goods
have been shipped for importation into India is
expected to arrive within 30 days from the date of
such presentation.
Indirect Tax
25
SERVICE TAX
1.
Service tax to be levied on sale of space or time for advertisements in all media
except print media [Section 66D(g)]
BEFORE
AMENDMENT
Selling of space or time slots for advertisements other than

advertisements broadcast by radio or television were covered in negative
list of services
AFTER
AMENDMENT
Selling of space for advertisements in print media will be covered in

negative list of services.
Print media means,
(i) book as defined in sub-section (1) of section 1 of the Press and
Registration of Books Act, 1867, but does not include business
directories, yellow pages and trade catalogues which are primarily
meant for commercial purposes;
(ii) newspaper as defined in sub-section (1) of section 1 of the Press and
Registration of Books Act, 1867.
2.
Omission of radio taxis from the purview of negative list
BEFORE
AMENDMENT
Services of transportation by:

(i) to (v)
(vi) metered cabs, radio taxis or auto rickshaws
AFTER
AMENDMENT
Services of transportation by:

(i) to (v)
(vi) Metered cabs and auto rickshaws
Radio Taxis Deleted
3.
Clarification as to whether agricultural produce includes rice and benefits

available in respect of rice under mega exemption notification.
BEFORE
AMENDMENT
AFTER
AMENDMENT
1. Definition of agricultural produce under section 65(5) of the

Finance Act, 1994 covers 'paddy'; but excludes 'rice'.
2. It implies that benefits available to agricultural produce in the
negative list [Section 66D(d)] are not available to rice.
However, many such benefits have been extended to rice by way of
appropriate entries in the mega exemption notification as follows:(i) Services by way of transportation of food stuff by rail/vessel/goods
transport agency is exempt from service tax. Food stuff includes rice.
(ii) Services by way of loading, unloading, packing, storage or
warehousing of rice are exempt from service tax.
(iii) Carrying out an intermediate production process as job work in
relation to agriculture is exempt from service tax. It is clarified that
paddy milled into rice, on job work basis is also exempt from service
tax since such milling of paddy is an intermediate production process
in relation to agriculture.
Indirect Tax
4.
26
Rate of exchange under section 67A to be determined as per GAAP [Section 67A]
BEFORE
AMENDMENT
Explanation to section 67A of Finance Act, 1994 linked the rate of

exchange under section 67A to the rate of exchange referred to in section
14 of the Customs Act, 1962.
AFTER
AMENDMENT
The new rule 11 lays down that the rate of exchange would be the
rate applicable as per the generally accepted accounting principles on the
date when point of taxation arises in terms of Point of Taxation Rules,
2011.
5.
Rule 7 to override the provisions of rules 3, 4 & 8 only [Rule 7]
BEFORE
AMENDMENT
Earlier, rule 7 overrided the provisions of all other rules of POTR. It

started with a non-obstanate clause notwithstanding anything contained
in these rules.
AFTER
AMENDMENT
Rule 7 has been amended to provide that it will override the

provisions of only the Rule 3 , Rule 4, Rule 8.
Thus, provisions of other rules like rule 2, 2A, 5 or 8A may also
apply, as the case may be, for determination of point of taxation when
service tax is payable under reverse charge.
6.
Point of taxation under reverse charge to be the payment date or the first day
occurring immediately after three months from the date of invoice, whichever is
earlier
BEFORE
AMENDMENT
The first proviso to rule 7 laid down that if the payment is not made within 6
months of the date of invoice, point of taxation will be determined as if rule
7 does not exist.
AFTER
AMENDMENT
Point of taxation in respect of reverse charge will be the payment date or

the first day that occurs immediately after a period of 3 months from the
date of invoice, whichever is earlier.
With reference to the position of service tax law as applicable on or after 01.10.2014, what
would be the point of taxation and due date of payment of service tax in each of the following
independent cases:
S. No.
Date of invoice
Date of payment
(i)
15.10.2014
10.11.2014
(ii)
20.10.2014
15.02.2015
Note: In both the above cases, service tax has been paid by the service recipient (a private
limited company) under section 68(2) of the Finance Act, 1994.
Indirect Tax
27
Answer
Rule 7 of Point of Taxation Rules, 2011 provides that point of taxation in respect of
persons required to pay tax as recipients of service in respect of services notified under section
68(2) of the Finance Act is the date of payment. However, with effect from 01.10.2014, first
proviso to rule 7 has been substituted to lay down that where the payment is not made within a
period of 3 months of the date of invoice, point of taxation will be the date immediately following
the said period of 3 months.
Further, in case of a corporate assessee, due date of e-payment of service tax payable
for a month is the 6th day of the month immediately following the said month. With effect from
01.10.2014, e-payment has been mandatory for all assessees. Thus, in the light of aforesaid
provisions, point of taxation and due dates in the following cases will be:
S.
No.
Date of
invoice
Date of payment
Point of
taxation
Due date of
payment
(i)
15.10.2014 10.11.2014 (within three months of

the date of invoice)
10.11.2014
06.12.2014
(ii)
20.10.2014 15.02.2015 (beyond three months

from the date of invoice)
20.01.2015
06.02.2015
7.
Retrospective exemption for services provided by ESIC [New section 100]
Services provided by Employees State Insurance Corporation (ESIC) to persons

governed under the Employees Insurance Act, 1948 have been exempted from service tax
from 01.7.2012 vide Sl. No. 36 of Mega Exemption Notification No. 25/2012 ST dated
20.06.2012 when negative list provisions were introduced. Retrospective exemption from
service tax has now been granted to services provided by ESIC for the period prior to
01.07.2012.
8. Mega Exemption Notification amended
New exemptions
1. Services provided by common bio-medical waste treatment facility operators to

clinical establishments exempted.
2. Transport of organic manure by vessel, rail or road (by GTA) exempted.
3. IRDA approved life micro-insurance schemes with sum assured not exceeding `
50,000 exempted.
4. Loading, unloading, packing, storage or warehousing, transport by vessel, rail or
road (GTA), of cotton - ginned or baled exempted.
The following services have been exempted in relation to cotton, ginned or baled:
(a) Loading, unloading, packing, storage or warehousing Entry 40 has been amended
to give effect to this amendment.
(b) Transportation by rail or a vessel Entry 20 has been amended to give effect to this
amendment.
(c) Transportation by road (Goods Transport Agency) Entry 21 has been amended to
give effect to this amendment.
5. Services received by RBI from outside India in relation to management of foreign
exchange reserves exempted. e.g., external asset management, custodial services,
securities lending services, etc. have been exempted.
6. Services provided by Indian tour operators to foreign tourists in relation to a tour
wholly conducted outside India exempted.
Indirect Tax
28
Exemptions rationalized
9.
Limited exemptions in respect of services provided to Government or local

authority or governmental authority
BEFORE
AMENDMENT
Services provided to Government or local authority or a

governmental authority by way of carrying out any activity in relation to any
function ordinarily entrusted to a municipality in relation to water supply,
public health, sanitation conservancy, solid waste management or slum
improvement and upgradation were exempted
AFTER
AMENDMENT
Services provided to Government or local authority or a

governmental authority by way of water supply, public health, sanitation
conservancy, solid waste management or slum improvement and
upgradation;
EFFECT
Services by way of water supply, public health, sanitation

conservancy, solid waste management or slum improvement and upgradation will continue toremain exempted but the exemption would not be
extendable to other services such as consultancy, designing, etc., not
directly connected with these specified services.
10. Concept of auxiliary education services done away with and exemption restricted
to only few specific services
BEFORE
AMENDMENT
Services provided to an educational institution in respect of

education exempted from service tax [i.e., education specified in negative
list] by way of auxiliary educational services. Auxiliary educational service
was defined in the notification.
AFTER
AMENDMENT
(a) Services provided BY an educational institution to its students,

faculty and staff;
(b) Services provided TO an educational institution, by way of,(i) transportation of students, faculty and staff;
(ii) catering, including any mid-day meals scheme sponsored by
the Government;
(iii) security or cleaning or house-keeping services performed in
such educational institution;
(iv) services relating to admission to, or conduct of examination
by, such institution.
Indirect Tax
29
Exemptions withdrawn
1.
Transport of passengers in air-conditioned contract carriages taxable
BEFORE
AMENDMENT
Service of passenger transportation, with or without accompanied

belongings, by a contract carriage other than for the purposes of tourism,
conducted tour, charter or hire was exempt from service tax under entry
23(b) of the notification.
AFTER
AMENDMENT
Transport of passengers, with or without accompanied belongings, by

non air conditioned contract carriage other than radio taxi, for
transportation of passengers, excluding tourism, conducted tour, charter
or hire;
Thus, following types of passenger transport in a contract carriage would
be liable to service tax:
a. transport by air-conditioned contract carriages
b. transport by non- air-conditioned contract carriages for purposes of
tourism, conducted tour, charter or hire
c. transport by radio taxi whether or not air conditioned.
2. Clinical research on human participants chargeable to service tax
Answer
With reference to the position of service tax law as applicable on or after 01.08.2014,
determine the applicability of service tax in each of the following independent cases:
(i) External asset management services received by Reserve Bank of India from overseas
financial institutions.
(ii) Service provided by an Indian tour operator to Mr. B, a Japanese National, for a tour
conducted in Europe.
(iii) Services provided to a Higher Secondary School affiliated to CBSE Board by an IT
company in relation to development of a software to be used for enhancing the quality of
classroom teaching.
(i)
Exempt. With effect from 11.07.2014, services received by Reserve Bank of India from
outside India in relation to management of foreign exchange reserves have been
exempted from service tax. External asset management services received by Reserve
Bank of India from overseas financial institutions is a specialized financial service in the
course of management of foreign exchange reserves [Mega Exemption Notification No.
25/2012 ST dated 20.06.2012 amended].
(ii) Exempt. With effect from 11.07.2014, services provided by an Indian tour operator to a
foreign tourist in relation to a tour wholly conducted outside India have been exempted
from service tax [Mega Exemption Notification No. 25/2012 ST dated 20.06.2012
amended].
(iii) Taxable. With effect from 11.07.2014, only the following specific services provided TO an
educational institution (which provides education covered under negative list of services)
have been exempted from service tax:
(i) transportation of students, faculty and staff;
(ii) catering, including any mid-day meals scheme sponsored by the Government;
(iii) security or cleaning or house-keeping services performed in such educational
institution;
Indirect Tax
30
(iv) Services relating to admission to, or conduct of examination by, such institution.
Services by way of education up to higher secondary or equivalent fall within the
purview of negative list of services. Thus, the education provided by the Higher
Secondary School is not liable to tax. However, the services of a development of
software provided to it are not covered under any of the specific services given
above. Thus, the same will be liable to service tax [Mega Exemption Notification
No. 25/2012 ST dated 20.06.2012 amended].
Abatement Notification amended
1. Only service providers need to satisfy the condition of non- availment of credit for
availing abatement in case of GTA service
BEFORE
AMENDMENT
Abatement of 75% could be availed in case of transportation of

goods by a goods transport agency if CENVAT credit on inputs, capital
goods and input services, used for providing the taxable service, has not
been taken under the provisions of CENVAT Credit Rules, 2004.
AFTER
AMENDMENT
CENVAT credit on inputs, capital goods and input services, used

for providing the taxable service, has not been taken by the service
provider under the provisions of CENVAT Credit Rules, 2004.
2.
Credit allowed on input service received by a person providing services of renting

of motorcab from a sub-contractor engaged in the similar line of business
BEFORE
AMENDMENT
1. The abatement provided for renting of any motor vehicle designed

to carry passengers
2. CENVAT credit on inputs, capital goods and input services, used
for providing the taxable service, has not been taken .
AFTER
AMENDMENT
1. The abatement would now be provided for renting of motorcab.

2. CENVAT credit of input service of renting of a motorcab would be
allowed.
3. credit of input service of only renting of motorcab can be availed and
not of any other input service.
4. Credit of input service of renting of motorcab can be availed in the
following manner:
(i) Full CENVAT credit of such input service received
from a
person who is paying service tax on 40% of the value; or
(ii) Up to 40% CENVAT credit of such input service received from a
person who is paying service tax on full value i.e., no abatement
is availed.
Indirect Tax
3.
31
60% abatement prescribed for transport of passengers by a contract carriage

(other than motorcab) and a radio taxi
BEFORE
AMENDMENT
Transport of passengers by a contract carriage (other than motor cab) is

covered in mega exemption notification.
AFTER
AMENDMENT
1. transport of passengers, with or without accompanied belongings, by

a contract carriage other than motor cab.
2. service tax would be leviable at 40% of the value of service.
3. The abatement would be available if CENVAT credit on inputs, capital
goods and input services, used for providing the taxable service, has
not been taken.
4.
Abatement in respect of transport of goods in a vessel increased from 50% 4o 60%
BEFORE AMENDMENT
service tax was leviable at 50% of the value of taxable
AFTER AMENDMENT
service tax at 40% of the value of taxable service.
5.
Credit allowed on input service received by a tour operator from a subcontractor
BEFORE
AMENDMENT
CENVAT credit on inputs, capital goods and input services, used for
providing the taxable service, has not been taken under the provisions of
CENVAT Credit Rules, 2004.
AFTER
AMENDMENT
Allow CENVAT credit on input service of another tour operator, which are
used for providing the taxable service.
6.
Service tax to be payable by the recipient of service in case of services provided by

recovery agents to banks, financial institutions and NBFC
BEFORE
AMENDMENT
Service provider is liable to pay service tax
AFTER
AMENDMENT
Service provided or agreed to be provided by a recovery agent to a

banking company or a financial institution or a non-banking financial
company, the recipient of the service would be the person liable for paying
service tax.
7.
Service tax to be payable by the recipient of service in case of service provided by

a director to a body corporate
BEFORE
AMENDMENT
In case of services provided by directors, service tax was payable under

reverse charge only when the service was provided by a director of a
company to the said company.
AFTER
AMENDMENT
Service provided or agreed to be provided by a director of a company or a

body corporate to the said company or the body corporate, the recipient of
such service would be the person liable for paying service tax.
Indirect Tax
8.
32
E-payment of service tax mandatory for all assessees irrespective of the tax paid
during previous year
BEFORE
AMENDMENT
Where an assessee had paid a service tax of Rs 1 lakh or more including

the amount paid by utilization of CENVAT credit, in the preceding financial
year, he was required to deposit the service tax liable to be paid by him
electronically through internet banking.
AFTER
AMENDMENT
Every assessee shall electronically pay the service tax payable by him,
through internet banking. However, the jurisdictional Assistant / Deputy
Commissioner of Central Excise may for reasons to be recorded in writing,
allow the assessee to deposit service tax by any mode other than internet
banking.
9.
Service receiver and provider to pay equal service tax on non-abated value in case
of renting of motor vehicle
BEFORE
AMENDMENT
In respect of services provided or agreed to be provided by way of renting

of a motor vehicle designed to carry passengers on non abated value to
any person who is not engaged in the similar line of business, 60% of
service tax was payable by the person providing the service and
remaining 40% by the service receiver.
AFTER
AMENDMENT
Percentages of service tax payable by the service provider and the service
receiver from 60%:40% to 50% each.
Answer
XY Travels Pvt. Ltd., located in New Delhi, is engaged in providing services of renting of
motorcab and discharges its service tax liability by availing abatement granted under
Notification No. 26/2012 ST dated 20.06.2012. Value of services rendered by the company
during the month of October, 2014 is Rs.5,50,000 (before availing abatement).
The company has sub-contracted part of its services to YZ Cabs Pvt. Ltd., which is also
engaged in providing services of renting of motorcab. Total value of such sub-contracted
services is Rs.50,000 and service tax payable thereon is Rs.6,180.
Determine the net service tax liability of XY Travels Pvt. Ltd. (to be paid in cash) for the
month of October, 2014.
Computation of net service tax liability (to be paid in cash) of XY Travels Pvt. Ltd. for
October, 2014
Particulars
Rs.
Value of services
5,50,000
Less: Abatement @ 60% [Note 1]
3,30,000
Value of taxable service
2,20,000
Service tax @ 12.36%
27,192
Less: CENVAT credit [Note 2]
2,472
Net service tax liability to be paid in cash
24,720
Indirect Tax
33
Notes
1. Notification No. 26/2012 ST grants abatement of 60% in respect of services of renting of
motorcab.
2. With effect from 01.10.2014, Notification No. 26/2012 ST has been amended to provide
that up to 40% CENVAT credit of input service of renting of a motorcab provided by a subcontractor to the main contractor (providing service of renting of motorcab) could be
availed by the main contractor if the sub-contractor is paying service tax on full value i.e.,
no abatement is being availed by sub-contractor. This credit will be available even if the
main contractor pays the service tax on abated value. Since YZ Cabs Pvt. Ltd. has paid
service tax on full value (Rs.50,000 x 12.36% = Rs. 6,180), XY Travels Pvt. Ltd. can avail
credit upto Rs.2,472 (40% of Rs. 6,180).
3. Since XY Travels Pvt. Ltd. is a company, reverse charge provisions will not apply in its
case. Further, provisions of partial reverse charge will not apply in case of YZ Cabs Pvt.
Ltd. also, as in its case services are provided in similar line of business.
With reference to the position of service tax law as applicable on or after 01.10.2014,
determine the net service tax liability to be paid in cash in each of the following independent
cases:
(I) Value of services provided by a radio taxi operator is Rs.1,00,000. The operator does not
avail CENVAT credit on inputs, capital goods and input services used for providing the
said service. It intends to avail abatement, if any, granted for such service.
(ii) Value of services provided by a Company running air-conditioned buses for point to point
travel is Rs.5,00,000. The buses do not stop to pick or drop the passengers
during the journey. The Company does not avail CENVAT credit on inputs, capital goods
and input services used for providing the said service. It intends to avail abatement, if
any, granted for such service. The Company has sub-contracted part of its services to
another Company running air-conditioned buses for point to point travel. Total value of
such sub-contracted services is Rs.50,000 and service tax payable thereon is ` 6,180.
(iii) Value of services provided by a Company running non air-conditioned buses for point to
point travel is Rs.1,00,000. The buses do not stop to pick or drop the passengers during
the journey. The Company does not avail CENVAT credit on inputs, capital goods and
input services used for providing the said service. It intends to avail abatement, if any,
granted for such service.
Answer
(I) With effect from 01.10.2014, clause (o) of section 66D has been amended by Finance
(No.) Act, 2014 to remove the service of transportation of passengers by radio taxis from
the ambit of negative list of services. Thus, travel by radio taxis or radio cabs, whether or
not air-conditioned, has been made liable to service tax w.e.f. 01.10.2014. However, an
abatement of 60% has been extended to transport of passengers by a radio taxi from the
same day by inserting a new entry 9A in Notification No. 26/2012 ST dated 20.06.2012.
The abatement would be available if CENVAT credit on inputs, capital goods and input
services, used for providing the taxable service, has not been taken under the provisions
of CENVAT Credit Rues, 2004. Thus, in the given case, since CENVAT credit on inputs,
capital goods and input services is not being availed by the radio taxi operator, he can
claim the abatement of 60% which will make the effective rate of service tax as 4.944% [40
x 12.36%]. Thus, service tax liability to be paid in cash will be ` 4,944 [` 1,00,000 x
4.944%]. In this case, entire service tax liability will have to be paid in cash as benefit of
CENVAT credit cannot be availed.
Indirect Tax
34
(ii) With effect from 11.07.2014, Mega Exemption Notification No. 25/2012 ST dated
20.06.2012 has been amended to restrict the exemption available to transport of
passengers by contract carriages for purposes other than tourism, conducted tour,
charter or hire to transport of passengers by non air-conditioned contract carriages only.
Thus, transport of passengers by air-conditioned contract carriages has been made liable
to service tax with effect from 11.07.2014. However, an abatement of 60% has been
extended to transport of passengers, with or without accompanied belongings, by a
contract carriage other than motorcab from the same day by inserting a new entry 9A in
Notification No. 26/2012 ST dated 20.06.2012. The aforesaid abatement would be
available if CENVAT credit on inputs, capital goods and input services, used for providing
the taxable service, has not been taken under the provisions of CENVAT Credit Rues,
2004.
In the given case, the buses are contract carriages since they are used for point to point
travel and they do not stop to pick or drop the passengers during the journey. Thus, the
passenger transportation services provided in air-conditioned buses (contract carriages)
by the Company would be liable to service tax. Further, since the Company does not avail
CENVAT credit on inputs, capital goods and input services, it can claim the abatement of
60% which will make the effective rate of service tax as 4.944% [40 x 12.36%]. Thus,
service tax liability to be paid in cash will be Rs.24,720 [Rs.5,00,000 x 4.944%].
It is to be noted that whereas credit of input service received by a person engaged in
providing services of renting of motorcab from a sub-contractor has been allowed with
effect from 01.10.2014 under entry 9 of Notification No. 26/2012 ST dated 20.06.2012, the
same is not allowed for contract carriages other than motorcab under entry 9A. Therefore,
entire service tax liability of Rs.24,720 will have to be paid in cash.
10. Slab rate of interest introduced for delayed payment of service tax
BEFORE
AMENDMENT
failure to pay service tax by the prescribed due date attracted simple
interest @ 18% p.a. for the period by which such crediting of tax or any part
thereof was delayed.
AFTER
AMENDMENT
prescribe slab rates of interest which would vary with the extent of delay.
The new rates of interest for delayed payment of service tax are as follows:
Extent of delay
Simple interest rate per annum
Up to 6 months
18%
More than 6 months & upto 1 year
18% for first 6 months, and 24% for the period of

delay beyond 6 months
More than 1 year
18% for first 6 months, 24% for second 6 months,

and 30% for the period of delay beyond 1 year
Indirect Tax
35
Determine the interest payable under section 75 of Finance Act, 1994 on delayed payment of
service tax from the following particulars:
Service tax payable
Rs.60,500
Due date of payment
06.11.2014
Date of payment
06.01.2016
Answer
Note: Turnover of services in the preceding financial year was Rs.80 lakh.
Section 75 of Finance Act, 1994 levies simple interest on failure to pay service tax by the
prescribed due date for the period by which such crediting of tax or any part thereof is delayed.
With effect from 01.10.2014, Notification No. 12/2014 ST dated 11.07.2014 has been issued to
prescribe new slab rates of interest for delayed payment of service tax.
Therefore, the interest payable under section 75 will be computed as under:
Computation of interest payable under section 75
Particulars
Delay from 06.11.2014
- 05.05.2015
Interest (Rs.)
Rate of interest per annum

18% for first six months
5,445 [Rs.60,500 x 18% x 6/12]
Delay from 06.05.2015 24% for next six months

- 05.11.2015
7,260 [ Rs.60,500 x 24% x 6/12]
Delay from 06.11.2015

- 06.01.2016
3,083 [ Rs.60,500 x 30% x 62/365]
30% for period beyond

one year
Total Interest
15,730
Since the turnover of the services in the preceding financial year is more than Rs.60 lakh
concession of 3% on applicable rate of interest cannot be availed.
CENVAT CREDIT
1. Credit on inputs and input services to be availed within 6 months of the date of
invoice.
2. Availability of Credit of Input Service in Reverse Charge
Full Reverse Charge
After payment of Service tax to the
Government
Partial Reverse Charge

After payment of(i) Value of input service AND
(ii) Service tax
3. Condition of reversal of credit on failing to pay value of input service and service tax
within 3 months of the date of invoice not to apply in case of full reverse charge.
4. Credit reversed on account of non-receipt of export proceeds within the specified or
extended period can be re-availed if export proceeds are received within one year
from the specified or extended period [Rule 6(8)]

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AMENDMENTS

Amendments made by the Finance Act, 2014

Rs.1,25,000 plus 30% of the amount by which

Basic exemption limit increased from 2,00,000 to 2,50,000

10% of the amount by which the total income

where the total income exceeds Rs.5,00,000 but

Rs.20,000 plus 20% of the amount by which the

where the total income exceeds Rs.10,00,000

Rs.1,20,000 plus 30% of the amount by which the

Basic exemption limit increased from 2,50,000 to 3,00,000

GURUKUL FOR CA & CMA

Rs.1,00,000 plus 30% of the amount by which the

GURUKUL FOR CA & CMA

On the whole of the total income

(3) Local authority

On the whole of the total income

(4) Co-operative Society

Where the total income does not exceed Rs.

10% of the total income

Where the total income exceeds Rs.10,000 but

Rs.1,000 plus 20% of the amount by which the

Where the total income exceeds Rs.20,000

Rs.3,000 plus 30% of the amount by which the

In the case of a domestic company

30% of the total income

In the case of a company other than a domestic

40% on the total income

Income from house property

Maximum amount of deduction on account of

Maximum amount of deduction on account of

GURUKUL FOR CA & CMA

Deduction under section 24(b) Rs.2,20,000

Deduction under section 80EE (Rs.2,20,000

Deduction under section 24(b) Rs.2,64,000 [Rs.

Deduction under section 80EE (Rs.1,00,000

Profits and gains of business or profession

Manufacturing companies investing more than Rs 25 crore in new plant and

Manufacturing companies investing more than Rs100 crore in

Manufacturing companies investing more than Rs 25 crore in new

GURUKUL FOR CA & CMA

1. This year, considering that growth of the manufacturing sector is

Companies which are eligible to claim deduction under the

Investment in new plant and machinery

Investment in new plant and

Deduction under section 32AC

GURUKUL FOR CA & CMA

2. Expansion of scope of specified business eligible for investment linked

Specified businesses are eligible for availing the investment-linked

The Finance Act, 2014 has included two new businesses as

to promote investment in these sectors

1. Section 35AD(7A) provides that any asset in respect of which a

GURUKUL FOR CA & CMA

1. In order to ensure that the capital asset on which investment linked

Deduction allowed under section 35AD for A.Y.2014-15

Less: Depreciation allowable u/s 32 for A.Y.2014-15 [10% of Rs. 50 lacs]

Deemed income under section 35AD(7B)

Where any assessee has claimed investment linked deduction

Where any assessee has claimed investment linked deduction

GURUKUL FOR CA & CMA

Section 10AA also provides for profit linked deduction in

Disallowance of CSR expenditure under section 37

Under section 37(1) of the Income-tax Act, 1961, only