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Suvidha Digest
A One Stop Consultancy House

          Issue XIII

Indirect Tax:
Analysis of Service Tax Budget 2014-15
Direct Tax:
Taxation Aspects Proposed For Non-Resident Foreign Nationals In Budget, 2014
Subsidy :
Assistance under National Mission on Food Processing
Mutual fund :
Changes in Debt Mutual Fund Industry

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The much awaited Union Budget 2014-15, introduced on 10th of July, 2014 by the Hon’ble Finance Minister, has received a warm welcome from the public. The Budget has done enough to address concerns over retrospective amendments and introduced various measures to provide stability and predictability in taxation policy.

The Hon’ble Finance Minister has brought about various changes in respect of reverse charge liability, negative list, exemptions and certain other provisions related to service tax. Emphasis has been given to widen the tax base and enhance compliance. The present article brings out an analysis of some of the changes in respect of provisions relating to Service Tax.

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   Characterization of Income in case of Foreign Institutional Investors (FIIs):

It is often observed that the Foreign Portfolio Investors (referred as FIIs in the Act) face difficulty in ascertaining the character of their income. They are in dilemma as to whether their income arising from transactions in securities comes under the head of Capital Gain or Business Income. Also, the fund manager managing the funds of such investor remains outside India under the apprehension that its presence in India may have adverse tax impacts.

In order to end this position of uncertainty and dilemma, the Hon’ble Finance Minister, Mr. Arun Jaitley, has proposed to amend the Finance Act to provide that any security, held by Foreign Institutional Investor, which has invested in such security in accordance with the regulations made under the SEBI Act, 1992 would be treated as capital asset only, so that any income arising from transfer of such security by a FII/FPI would be in the nature of capital gain.

The amendment is proposed to be effective from A.Y. 2015-16 onwards.

Deemed International Transaction in case of Prior Arrangement

Section 92B (2) extends the scope of international transaction by providing that a transaction entered into with an unrelated person shall be deemed to be a transaction with an associated enterprise, if there exists a prior agreement in relation to the transaction between such other person and the associated enterprise, or the terms of the relevant transaction are determined in substance between the other person and the associated enterprise.

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•   Assistance under National Mission on Food Processing

Guidelines for implementation of scheme of Technology Upgradation, Establishment, Modernization of Food Processing Industries during 12th Plan (2013-17) under National Mission on food Processing (NMFP). Introduction

Ministry of Food Processing Industries (MFPI) has launched a new Centrally Sponsored Scheme (CSS) – National Mission on Food Processing (NMFP) during the 12th Plan (2013-17) for implementation through States/ UTs. NMFP is likely to improve the Ministry’s outreach in terms of planning, supervision and monitoring of various schemes.


To increase the level of processing, reduction of wastage, value addition, enhance income of farmers as well as increase exports resulting in overall development of food processing sector. The scheme envisages extending the financial assistance for setting up of new food processing units as well as Technical Up gradation and Expansion of existing units.

Eligible Sectors & Eligible Organizations

Sectors in food processing such as fruits & vegetables, milk products, meat, poultry, fishery, cereal/ other consumer food products, oilseeds products, rice milling, flour milling, pulse processing and other such agri-horticultural sectors including food flavors and colors, oleoresins, spices, coconut, mushrooms and hops will be covered for financial assistance under the scheme.
All organizations such as Govt. / PSUs / Joint sector / NGOs / Cooperatives / Private Sector / individual engaged in setting up / expansion / modernization of food processing units would be eligible.

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   The Budget 2014-15 has bought in some changes in the calculation process of the Debt Mutual Fund Industry:

The Debt Mutual Fund Industry is actually very big in India? The pie- chart below will explain the % of AUM spread across asset classes according to the AMFI data as on 30th June, 2014, meaning these tax changes will have a huge impact on financial planning in India:


Holding Period

Until the 10th of July, 2014, the holding period for Long Term Capital Gain [LTCG] for Debt funds was 1 year. So if we would redeem our investments within a year then it was considered as Short Term Capital Gain [STCG] and if for more than a year then it was considered as Long Term Capital Gain [LTCG].

But now this has been changed to 3 years [effective from 11th July, 2014] meaning according to current taxation rules, holding period of less than 3 years is considered as STCG and more than 3 years is LTCG.

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