A stable and non-adversarial tax regime with focus on change, growth, job creation and skill development seems to be the backbone of the new Government’s first full-fledged Budget.

The Budget has laid a roadmap for the future without many changes to the current regime, including the commitment to introduce Goods and Service Tax from 2016, doing away with the erstwhile DTC and finally abolishing wealth tax. Investor confidence is likely to be boosted, with clarity coming in on indirect transfer taxation, deferment of GAAR, law relating to permanent establishment for fund managers in India, non-applicability of MAT to FIIs, reduction in withholding tax rates on royalty/technical service fee payments and pass-through tax-exempt status for investment trusts.

Corporates need to gear up for removal of exemptions with a phased reduction in tax rate to 25 per cent in the next four years albeit with an immediate 2 per cent increase in surcharge bringing the corporate tax and DDT rate to 34.61 per cent and 17.3 per cent, respectively. Change in rules around tax residency is noteworthy.

Basic slab rates for individuals remain unchanged, albeit a 2 per cent increase in surcharge has been levied on the super-rich. The option of choosing either the National Pension Scheme or PF is a welcome move.

Service tax rate has increased to 14 per cent, however, reduction in basic custom duty rates on parts and components for specified sectors will aid the ‘Make in India’ initiative.

Partner, Tax and Regulatory Services, PwC India

Related Topics