India: Budget 2015-16 – For The Corporates

Last Updated: 9 April 2015
Article by Megha Kapoor

Most Read Contributor in India, September 2016

The Union Budget for the financial year 2015-16, is focused on attracting investors, making India a business hub and reviving the economic growth in general. Apart from the above, it has definitely a lot in store for the corporate sector.

Among the positives for corporate India, here are few important changes which appear to bring predictability and some level of simplicity and transparency in the Government's thinking and proposals:


The rate of corporate tax is proposed to be reduced from 30% to 25% over a period of four year, from next financial year onwards. This reduction will however come along with phasing out of certain exemptions and incentives which the corporate tax payers could avail till now.

The proposal is based on the contention that corporate tax in India @ 30% is higher than the rates in other Asian countries thus making domestic Indian market uncompetitive. Further the effective collection rate is 23%, which is an added loss, due to excessive exemptions and incentives. The exemption regime has given birth to foray of tax litigation along with loss of revenue and a disadvantageous position in global market.

This move can encourage foreign investors to invest in India and also help the government gain some revenue by reducing the exemptions. The effect on India Inc. seems positive right now but the final picture will depend on the final policy regarding exemptions.

Considering the reduction of corporate tax rates, the promoters will tend to reinvest the money into the company which will ultimately enable the company to promote investment and to create more jobs.


Wealth tax is proposed to be abolished completely and be replaced by 2% of additional surcharge on super rich taxpayers having taxable income of more than Rs. 1 crore.

Wealth tax was fixed at 1% of net taxable wealth of a taxpayer including assets like house, car, jewellery etc. which exceeded value of 30 lakh rupees. Due to low amount of tax collection and high cost of collection, the overall wealth collection procedure is very burdensome on the tax department, moreover since it is difficult to track assets like cash and gold. The government believes that the 2% surcharge is likely to bring in Rs. 9000 crores in revenue, contrary to Rs. 1,008 crores which is the wealth tax collected for the year 2013-14. Further, the companies and individuals will be spared from the additional burden of filing wealth tax returns as the information can now be captured in the income tax returns.


Real Estate Investment Trusts (REITs) and Infrastructure Investments Trusts (InviTs) have been incentivized again, by giving them pass through facility on the rental income generated by the assests owned by these funds. In the previous budget REITs had been given a partial pass through on interest income generated by them.

Moreover, it has been proposed to rationalize the capital gains regime for sponsors existing at the time of listing of the units of REIT's and InviT's, subject to payment of Securities Transaction Tax (STT).This has been done to give respite to and revive the construction industry. Freeing the funds stuck in various completed projects is also an issue. Pass through provisions may help avoid double taxation.


The Finance Minister promised in his budget speech that the much awaited Goods and Services Tax (GST) will be implemented by 1st April, 2016. GST will replace multiple indirect state and central taxes and will reduce the cascading effect brought by taxation at multiple stages by various bodies. The government is preparing for this switch by increasing the service tax to 14%.

This uniform method of taxation is set to benefit the Fast Moving Consumer Goods Companies (FMCG) and boost investor confidence.


a) Setting up manufaturing units in backward areas of the state of Andhra Pradesh and Telangana has been incentivized to promote manufacturing industry in India. From 1st April, 2015 to 31st March, 2020 any industrial being set up in backward areas of the given states will be eligible to claim additional depreciation of 15% and additional investment allowance of 15% on cost of new plant and machinery acquired and installed. This deduction will be in addition to existing deduction available under section 32AC of the Income Tax Act.

This is a welcome measure in materializing the government's promise of making India a manufacturing hub and development of indigenous industries.

b) In his speech, Finance Minister said that additional depreciation at 20% is allowed on new plant and machinery installed by a manufacturing unit or a unit engaged in generation and distribution of power. However, if the asset is installed after 30th September, 2014 only 10% of the additional depreciation is allowed. It is proposed to allow the remaining 10% of the additional depreciation in the subsequent previous year.

c) Further section 80JJAA of the Income Tax act is to be amended to provide tax benefit to "'person' deriving profits from manufacture of goods in a factory and paying wages to new regular workmen." Eligibility for this exemption has been set at factories employing 50 workmen.

d) Rate of income tax on royalty and fees for technical services has been reduced from 25% to 10% in order to facilitate technological support to young and small enterprises.


The MAT provisions have been relaxed to the extent that the offshore investors don't have to pay MAT. The objective of MAT provisions was to bring 'zero tax companies' within the tax net. Since the government is focusing on its 'Make in India' drive, this exception will attract more investments from the Foreign Institutional Investors.


a) Now online central excise and service tax registration can be completed in two working days. Further such taxpayers can issue digitally signed invoices and maintain electronic records. Time limit for taking CENVAT credit on inputs and input services is being increased from six months to one year as a measure of business facilitation.

b) The budget speech states that the present taxation structure has an inbuilt incentive for fund managers to operate from offshore locations. To encourage such offshore fund managers to relocate to India, it is proposed to modify the Permanent Establishment (PE) norms to the effect that mere presence of a fund manager in India would not constitute PE of the offshore funds resulting in adverse tax consequences.

c) A high level committee has to be set up by CBDT in order to review cases arising out of retrospective amendment to Income Tax Act regarding indirect transfers and coming to notice of the Assessing officer. Review by the committee will be necessary before any action can be taken in such cases.


With the aim to bring back the wealth which legitimately belongs to the country, it has been proposed to enact a comprehensive new law on black money. Stringent provisions are to be put in place to penalize non disclosure of foreign assets and income. The offence will be made non compoundable and recourse to Settlement Commission will be restricted.. Rigorous imprisonment up to 10 years and levy of 300% of tax as penalty for concealment of income and assets has been proposed. Non filing of return or filing of return with inadequate disclosure of foreign assets is punishable with rigorous imprisonment up to 7 years. Moreover, the definition of 'proceeds of crime' under Prevention of Money Laundering Act has been amended to enable attachment and confiscation of equivalent asset in India in the cases where the asset is located abroad and cannot be forfeited.

Apart from the above, Benami Transactions (Prohibition) Bill will be introduced in the current session of the Parliament as stated in the Budget Speech. This will restrict the benami transactions and holding of benami property.


In case of domestic transfer pricing, the threshold limit has been increased from INR 5crore to INR 20Crore [Section 92B]. This welcome step will benefit the small companies from making unnecessary compliances and hassles apart from easing the administrative burden on revenue authorities.


Yoga is proposed to come under the ambit of charitable purpose under section 2(15) of the Income Tax Act. Accordingly, even if the activity is in the nature of trade, commerce or business, the trust would enjoy exemption on income from activities relating to yoga. This will ease the various opinions on whether the yoga is an activity eligible for tax exemption. Although, the Bombay High Court, in the case of the Rajneesh Foundation, had stated: "The philosophy and teaching of Acharya Rajneesh have become more acceptable to people during the last few years. Admittedly, the main thrust of the respondent is on meditation and nobody can dispute that, in India, meditation has been a very important source for physical, mental and spiritual well-being of human beings... When a large number of people feel (thus)... it must be held to be an activity for the advancement of general public utility."1

In order to mitigate the problem faced by many genuine charitable institutions, it is proposed to amend the ceiling on receipt from activities in the nature of trade, commerce or business to 20% of the total receipts from the existing ceilings of INR 25lakhs.

Further, it is proposed to amend the provisions of the IT Act so as to provide a mechanism to pre-empt the repetitive appeals by the revenue in the same assessee's case as the same question of law year after year.


There is definitely more good news than bad news for India corporate sector in the budget. Overall tax burden and liabilities on companies have been reduced and government support has been extended for setting up of new corporations. An effort has been made by the government in the direction of reducing unnecessary burden on corporations and reducing paper work. The focus is on restoring investor confidence and also by way of increasing the threshold for domestic transfer pricing and promoting yoga activities. But this budget is bound to increase tax litigation due to black money provisions. The final effects of the budget on corporations will be known only when the proposals are implemented but right now the budget is a gift from Modi Government to India Inc.


1. MANU/MH/1048/[2005]

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.