India’s government presented its union budget on 28 February 2015, which includes measures to increase the surcharge on high income earners, abolish the wealth tax, and introduce more stringent rules to curb “black money."
India’s government presented its union budget1 on 28 February 2015, which includes measures to increase the surcharge on high income earners, abolish the wealth tax, and introduce more stringent rules to curb “black money.”2
The higher surcharge to be levied on high income earners and the non-adjustment of individual income tax brackets and cess in line with inflation could mean a heavier tax burden for international assignees subject to tax in India. This could have the result of increasing employers’ international assignment costs.
The tax changes described in this Flash Alert may affect cost projections for future assignees and budgeting for international assignments to India or from India where the assignee will be subject to Indian taxation. Furthermore, any resultant tax differentials may impact tax equalizations. Finally, where appropriate, adjustments by payroll administrators to withholdings should also be made once these rules are enacted.
The Finance Minister has proposed the following amendments in the Budget 2015 that concern individuals -- including those on international assignment -- and their employers.
No change in the income tax brackets, tax rates, and cess for individuals.
The surcharge for taxpayers with income greater than INR 10 million per annum is to be increased from 10 percent to 12 percent.
Currently wealth tax is levied on an individual and Hindu Undivided Families (“HUF”), if the net wealth of such person exceeds INR 3 million on the last day of the prior year. The government is proposing to abolish the wealth tax.
The government aims to recover the loss of revenue from this step by way of a simultaneous increase in the rate of surcharge applied to high income bracket taxpayers. The information regarding a taxpayer’s assets -- currently required to be furnished in the wealth tax return -- will be captured in the income tax returns.
The exemption for transport allowance is to be increased from INR 800 per month to INR 1,600 per month. The allowance is an amount granted to an employee towards his or her expenditures for the purpose of commuting between his/her place of residence and place of work. It can be granted to all employees of the company.
Taxpayers with disabilities and taxpayers with disabled dependents may claim an increased deduction of INR 75,000 (up from INR 50,000) per annum, and in cases of severe disability (as defined by law) from INR 100,000 per annum to INR 125,000 per annum.
A deduction for chronic diseases (as defined by law) for senior citizens (80 years of age or above) is to be available up to INR 80,000 per annum.
New rules are planned regarding the manner and conditions for determining the residency status of Indian citizens who are members of a crew on foreign ships leaving India.
Employers will be required to obtain specified documents from employees with respect to business-related expenses/losses claimed for purposes of computing the tax to be deducted at source from the employee’s salary.
The Finance Bill will go through all its Parliamentary stages in the coming weeks. Once approved by both houses of the parliament and by the President of India, the legislation will immediately come into force immediately.
1 For the budget speech and related budget documents, see the Ministry of Finance Web site at: http://indiabudget.nic.in/.
2 Also see the following videos, Webcasts, and commentary regarding the budget from the KPMG International member firm in India at: http://www.kpmg.com/in/en/services/tax/unionbudget2015/Pages/default.aspx
3 In addition, a surcharge (now proposed to be increased to 12 percent of tax from 10 percent) in cases where total income exceeds INR 10 million per annum and education cess at 3 percent (on the taxes plus surcharge computed) shall be payable.
For additional information or assistance, please contact your local GMS or People Services professional or:
Parizad Sirwalla, Partner KPMG India in Mumbai
tel. +91 (22) 3090 2010
The information contained in this newsletter was submitted by the KPMG International member firm in India.
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