Budget 2015: GAAR on hold for two years, DTC abandoned
Finance minister Arun Jaitley said the General Anti-Avoidance Rules (GAAR) will be deferred for two more years and investments made till March 2017 will be exempted when they are implemented.
By Vikas Dhoot, ET Bureau | Updated:
NEW DELHI: Staying true to Prime Minister Narendra Modi's commitment to global investors of fostering a stable and predictable tax regime to replace the era of tax terrorism unleashed by the previous UPA government, finance minister Arun Jaitley said the General Anti-Avoidance Rules ( GAAR) will be deferred for two more years and investments made till March 2017 will be exempted when they are implemented.
Laying another major uncertainty to rest for taxpayers, the finance minister said the Direct Taxes Code, in the making for many years, won’t be pursued any further as most of its ideas have been incorporated in the Income Tax Act.
"There is no great merit in going ahead with the Direct Tax Code as it exists today," he said, citing the well-evolved jurisprudence on existing income tax laws. The finance minister hinted that General Anti-Avoidance Rules wasn’t desirable at a time when reviving the investment cycle is critical.
"There are certain contentious issues relating to GAAR which need to be resolved," the minister said, declaring that it will only apply 'prospectively' from April 1, 2017. GAAR is aimed at curbing tax avoidance. Industry experts appreciated the moves as sensible. Siemens’ managing director and CEO Sunil Mathur said the move to defer GAAR and reduce corporate taxes will boost industry confidence.
"Investors now have time to prepare themselves for General Anti Avoidance Rules. Though we hoped for it to be postponed by five years, this is acceptable if the government cleans up tax administration in the meanwhile," said Daksha Baxi, executive director at law firm Khaitan & Co.
Laying another major uncertainty to rest for taxpayers, the finance minister said the Direct Taxes Code, in the making for many years, won’t be pursued any further as most of its ideas have been incorporated in the Income Tax Act.
"There is no great merit in going ahead with the Direct Tax Code as it exists today," he said, citing the well-evolved jurisprudence on existing income tax laws. The finance minister hinted that General Anti-Avoidance Rules wasn’t desirable at a time when reviving the investment cycle is critical. "There are certain contentious issues relating to GAAR which need to be resolved," the minister said, declaring that it will only apply 'prospectively' from April 1, 2017. GAAR is aimed at curbing tax avoidance. Industry experts appreciated the moves as sensible. Siemens’ managing director and CEO Sunil Mathur said the move to defer GAAR and reduce corporate taxes will boost industry confidence.
"Investors now have time to prepare themselves for General Anti Avoidance Rules. Though we hoped for it to be postponed by five years, this is acceptable if the government cleans up tax administration in the meanwhile," said Daksha Baxi, executive director at law firm Khaitan & Co.
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The limit of reduction of health insurance premium was enhanced from Rs 15,000 to Rs 25,000. For senior citizens this limit has been increased from Rs 20,000 to Rs 30,000.
"For senior citizen above the age of 80 years, not eligible to take health insurance, deduction is allowed for Rs 30,000 toward medical expenditure. Deduction limit of Rs 60,000 on expenditure on account of specified diseases is enhanced to Rs 80,000 in the case of senior citizens," Jaitley said.
Additional deduction of Rs 25,000 is allowed for differently-abled persons, increasing the limit from Rs 50,000 to Rs 75,000. It is also proposed to increase the limit of deduction from Rs 1 lakh to Rs 1.25 lakh in case of severe disability.
Jaitley also proposed to provide that investment in Sukanya Samriddhi Scheme will be eligible for deduction under section 80C of the income-tax and any payment from the scheme shall not be liable to tax.
Limit on deduction on account of contribution to a pension fund and the new pension scheme is proposed to be increased from Rs 1 lakh to Rs 1.5 lakh.
Additional deduction of Rs 50,000 will be allowed for contribution to the new pension scheme u/s 80 CCD increasing from Rs 1 lakh to Rs 1.5 lakh.
"For senior citizen above the age of 80 years, not eligible to take health insurance, deduction is allowed for Rs 30,000 toward medical expenditure. Deduction limit of Rs 60,000 on expenditure on account of specified diseases is enhanced to Rs 80,000 in the case of senior citizens," Jaitley said.
Additional deduction of Rs 25,000 is allowed for differently-abled persons, increasing the limit from Rs 50,000 to Rs 75,000. It is also proposed to increase the limit of deduction from Rs 1 lakh to Rs 1.25 lakh in case of severe disability.
Jaitley also proposed to provide that investment in Sukanya Samriddhi Scheme will be eligible for deduction under section 80C of the income-tax and any payment from the scheme shall not be liable to tax.
Limit on deduction on account of contribution to a pension fund and the new pension scheme is proposed to be increased from Rs 1 lakh to Rs 1.5 lakh.
Additional deduction of Rs 50,000 will be allowed for contribution to the new pension scheme u/s 80 CCD increasing from Rs 1 lakh to Rs 1.5 lakh.
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