SUMMARY OF MAJOR CHANGES IN INCOME TAX BY UNION BUDGET-2014

The Finance Minister has announced the Union Budget 2014 on 10-7-2014. There are various changes in Law related to Income Tax.

I have tried to compile the major amendment in the following lines.

Amendments Related to Capital Gain

1-Bayana Forfeiture u/s 51 will now be treated as income from other sources u/s 56(2)(ix)

2-Controversy u/s 54 and 54F relating to purchase of one or more residential property to save capital gain tax has now come to end. The Legislature has changed both the section by amending the word “A PROPERTY” to “ONE PROPERTY”

3-Now Deduction u/s 54EC will be allowed only upto 50 Lac whether invested in the same Financial year and / or in the subsequent Financial year.

4-Now Any transaction done by a Foreign Institutional Investor (FII) in any security will be treated as transaction liable to be taxed as capital gain tax. Whether the security held by FII as stock in trade, it will be treated as capital assets in the hands of FII.

5-Units of a Mutual Fund, Other than Equity oriented Mutual Fund unit, will be treated as Short term capital assets upto 36 month holding. (Earlier this period was 12 month)

Amendments Related to Trust

6-Controversy in case of trust registered u/s 12AA, related to application of income by way of claiming depreciation on assets for which the utilization has already been claimed, has come to an end. The law has inserted section 11(6) denying specifically depreciation as application of Income.

Amendments Related to Business and Profession

7-To give boost to the Small Manufacturing Sector, an additional deduction u/s 32AC has been allowed for capital investment of more than 25 Crores

8-Expenditure incurred by the Companies on CSR (Corporate Social Responsibility) will not be treated as expenses incurred for the purpose of business or profession (Explanation 2 inserted to section 37.)

9-Disallowance u/s 40(a)(ia) has been restricted to 30% of the sum payable to a resident. But the Scope has been enlarged by application of the section to any type of payments on which TDS to be deducted.

10-Now the Survey powers has been extended to the Income tax authority for the purpose of verification of whether or not the TDS provisions are being complied with in accordance with chapter XVII-B, XVII-BB. (Section 133A)

Other Misc. Amendments

11-New Section 133C has been inserted to give authority to Income tax authority to call any person to verify any information in its possession relating to any person.

12-The word Accounting standards u/s 145 has been replaced with Income Computation and disclosure standards.

13-The name of Annual Information return has been replaced with “A statement of financial transaction or reportable account”

14-Section 269SS and 269T has been amended to include the transaction done through ECS as valid transaction.

15- Tax Exemption limit increased from 2 Lac to 2.5 Lac

16- Tax Exemption limit for senior citizens increased from 2.5 Lac to 3 Lac

17- Deduction u/s 80-C Increased from 1 Lac to 1.5 Lac

18- Deduction on Housing loan for self occupied house increased from 1.5 lac to 2 lac

Hope the information will assist you in your Professional endeavors. In case of any query/ information, please do not hesitate to write back to us.

Thanks and Best Regards

CA SOHRABH JINDAL

FCA, DISA(ICAI)

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