1. Union Budget, 2015 – Direct Taxation Indian Merchants’ Chamber C H Bhabha Memorial Endowment Public Meeting March 2, 2015 Presented by Ketan Dalal

2. Table of Contents Mr. Jaitley speak The BIG Picture - Hits and Misses Impact for individual tax payers Tax rates for corporates – overview Incentives for manufacturing Impact for Corporates Some cross-border tax issues Capital Markets impact Other provisions Move towards cheque economy Slide 2 March 2015

3. Mr. Jaitley speak… March 2015 Slide 3 “We are banking the unbanked” “We are funding the funded” “…the world is predicting that it is India’s chance to fly” “It is quite obvious that incremental change is not going to take us anywhere. WE have to think in terms of a quantum jump.” “Minimum Government and Maximum Governance”

4. The BIG Picture – Hits and Misses General GAAR postponed beyond March 31, 2017 Move towards increased disclosures, curbing black money and building a ‘cheque economy’ Tax Administration Reform Commission (TARC) recommendations to be considered DTC buried Individuals Savings incentivised Abolition of wealth- tax; surcharge increased Corporates Promise to reduce corporate tax rate to 25% over 4 years Reduced tax rate of 10% for certain cross border payments Clarity on Offshore Transfers Silence on implementation of Income Computation and Disclosure Standards Reduction in rate of DDT/ credit for DDT Reduction in rate/abolition of MAT (especially for SEZ ) March 2015 Slide 4

5. Impact for individual tax payers Personal taxes – No change in tax slabs / rates Abolition of wealth- tax Surcharge increased to 12% (from 10%) for income > Rs. 1 crore -Maximum marginal tax rate increased to 34.61% from 33.99% Savings and Investment incentives -NPS, tax free infrastructure bonds etc. March 2015 Slide 5

6. Impact for individual tax payers Non-taxable amount could be upto Rs. 5 lacs (approx.) March 2015 Slide 6 4,94,200 Marginal additional benefits extended, with greater flexibility for investments * Taxable on withdrawal; Exempt-Exempt-Tax regime

7. Tax rates for corporates - overview Particulars Domestic Companies Income > Rs. 1 crore <= 10 crore Income > Rs. 10 crore FY 14-15FY 15-16FY 14-15FY 15-16 Effective Corporate Tax 32.4533.0633.9934.61 Minimum Alternative Tax 20.0120.3920.9621.34 Dividend Distribution Tax 19.9920.3619.9920.36 March 2015 Slide 7 Tax rate for LLP (for income > Rs. 10 crore) increased from 33.99% to 34.61% Basic tax rates unchanged, however change in effective tax rates due to increase in surcharge from 5%/10% to 7%/12%

8. Incentives for manufacturing Additional Investment allowance @ 15% and additional depreciation @ 35% for new units set up in notified backward areas in State of Andhra Pradesh / Telangana (special units) -Available in addition to existing investment allowance provision -Sunset clause – 31 March 2020 March 2015 Slide 8

9. Impact for Corporates Following changes introduced: -Threshold for taxability defined (10 crore and 50%) -Value of assets to be FMV -Proportionate taxation March 2015 Slide 9 Residency test changed from “control and management wholly in India” to “Place of Effective Management” (POEM) -Place where key management and commercial decisions for business of entity as a whole are in substance made Offshore transfersPOEM Part clarity on unintended retrospective amendment consequences Relevance for shell and conduit outbound structures

10. Some cross -border tax issues Royalty and FTS rates reduced to 10% from 25% -Accessing technology becomes easier -Will reduce tax costs for Indian businesses Lower rate of tax on interest on certain cross border borrowings - extended by 2 years March 2015 Slide 10 Increased compliance on reporting requirements for payments to non- residents

11. Capital Markets - impact REITs/InvITs: Sale of units by Sponsor during offer for sale or post listing (subject to STT) - tax treatment now on par with investors Rental/ leasing income - pass through status – investors to be taxed Unfinished agenda: MAT applicability on swap of SPV shares Capital gains tax on transfer of property Slide 11 March 2015 Alternative Investment Funds (AIFs): Categories extended ‘Pass through’ status to AIF category I and II with exceptions Dividend Distribution Tax not to apply on income distributed by the AIFs Mandatory to file return of income REITs, AIFs and other amendments Other amendments: Capital gains of FIIs / FPIs (excluding off-market short-term gains) excluded from MAT Consolidation if certain mutual fund schemes not regarded as transfer

12. Other provisions Deduction (30% of wages) for employment of new workmen - Benefit extended to all assessees - Limit reduced from 100 to 50 workmen GAAR postponed by 2 years -Investments made before 1 April 2017, to be grandfathered -However, judicial GAAR already exists! March 2015 Slide 12

13. Move towards cheque economy Bill for comprehensive new law to deal with black money – far reaching impact! -Evasion of tax on foreign assets – upto 10 years imprisonment, 300% penalty, non-compoundable and no recourse to Settlement Commission -Non-filing of return/filing without adequate disclosures – upto 7 years imprisonment -Prosecution and Penalty exposure for entities, institutions, banks, individuals Increased focus on discouraging cash transactions e.g restricting cash advance for purchase of immovable property >= Rs. 20,000 PAN mandatory for purchase/sale > Rs. 1 lac March 2015 Slide 13 Significant compliance burden; huge issue for expatriates

14. Some aspects addressed… but very much an unfinished agenda! Intent of non-adversarial regime vis-a-vis on ground administration Too much overlapping legislation and compliance burden Dispute resolution etc. is a long haul March 2015 Slide 14

15. Thank You!