Budget Highlights In a Nut-Shell :
§ Growth of Economy accelerated to 7.6% in 2015-16
§ India hailed as a ‘bright spot’ amidst a slowing global economy by IMF
§ Robust growth achieved despite very unfavourable global conditions and two consecutive years shortfall in monsoon by 13%
§ Foreign exchange reserves touched highest ever level of about 350 billion US dollars.
CHALLENGES IN 2016-17 :
§ Risks of further global slowdown and turbulence.
§ Additional fiscal burden due to 7th Central Pay Commission recommendations and OROP.
JOB CREATION :
§ GoI will pay contribution of 8.33% for of all new employees enrolling in EPFO for the first three years of their employment. Deduction under Section 80JJAA of the Income Tax Act will be available to all assesses who are subject to statutory audit under the Act
GOVERNANCE AND EASE OF DOING BUSINESS :
§ Amendments in Companies Act to improve enabling environment for start-ups.
FISCAL DISCIPLINE :
§ Fiscal deficit in RE 2015-16 and BE 2016-17 retained at3.9% and 3.5%.
§ Revenue Deficit target from 2.8% to 2.5% in RE 2015-16
§ Special emphasis to sectors such as agriculture, irrigation, social sector including health, women and child development, welfare of Scheduled Castes and Scheduled Tribes,
§ Every new scheme sanctioned will have a sunset date and outcome review.
RELIEF TO SMALL TAX PAYERS :
§ Raise the ceiling of tax rebate under section 87A from 2000 to 5000 to lessen tax burden on individuals with income upto 5 lacs.
§ Increase the limit of deduction of rent paid under section 80GG from 24000 per annum to 60000, to provide relief to those who live in rented houses.
BOOST EMPLOYMENT AND GROWTH :
§ Increase the turnover limit under Presumptive taxation scheme under section 44AD of the Income Tax Act to 2 crores to bring big relief to a large number of assesses in the MSME
§ Extend the presumptive taxation scheme with profit deemed to be 50%, to professionals with gross receipts up to 50 lakh.
Corporate Tax rate proposals:
o New manufacturing companies incorporated on or after 1.3.2016 to be given an option to be taxed at 25% + surcharge and cess provided they do not claim profit linked or investment linked deductions and do not avail of investment allowance and accelerated depreciation.
o Lower the corporate tax rate for the next financial year for relatively small enterprises i.e. companies with turnover not exceeding 5 crore (in the financial year ending March 2015), to 29% plus surcharge and cess.
o 100% deduction of profits for 3 out of 5 years for startups setup during April, 2016 to March, 2019. MAT will apply in such cases.
§ 10% rate of tax on income from worldwide exploitation of patents developed and registered
§ Complete pass through of income-tax to securitization trusts including trusts of ARCs.
Securitisation trusts required to deduct tax at source.
§ Period for getting benefit of long term capital gain regime in case of unlisted companies is proposed to be reduced from three to two years.
§ Non-banking financial companies shall be eligible for deduction to the extent of 5% of its income in respect of provision for bad and doubtful debts.
MOVING TOWARDS A PENSIONED SOCIETY :
§ Withdrawal up to 40% of the corpus at the time of retirement to be tax exempt in the case of National Pension Scheme (NPS). Annuity fund which goes to legal heir will not be taxable.
§ In case of superannuation funds and recognized provident funds, including EPF, the same norm of 40% of corpus to be tax free will apply in respect of corpus created out of contributions made on or from 1.4.2016.
§ Limit for contribution of employer in recognized Provident and Superannuation Fund of 1.5 lakh per annum for taking tax benefit. Exemption from service tax for Annuity services provided by NPS and Services provided by EPFO to employees.
§ Reduce service tax on Single premium Annuity (Insurance) Policies from 3.5% to 1.4% of the premium paid in certain cases.
PROMOTING AFFORDABLE HOUSING :
§ Deduction for additional interest of 50,000 per annum for loans up to 35 lakh sanctioned in 2016-17 for first time home buyers, where house cost does not exceed 50 lakh.
§ Distribution made out of income of SPV to the REITs and INVITs having specified
shareholding will not be subjected to Dividend Distribution Tax, in respect of dividend distributed after the specified date.
RESOURCE MOBILIZATION FOR AGRICULTURE, RURAL ECONOMY AND CLEAN ENVIRONMENT :
§ Additional tax at the rate of 10% of gross amount of dividend will be payable by the recipients receiving dividend in excess of 10 lakh per annum.
§ Surcharge to be raised from 12% to 15% on persons, other than companies, firms and cooperative societies having income above 1 crore.
§ Tax to be deducted at source at the rate of 1 % on purchase of luxury cars exceeding value of ten lakh and purchase of goods and services in cash exceeding two lakh.
§ Securities Transaction tax in case of ‘Options’ is proposed to be increased from .017% to .05%.
§ Equalization levy of 6% of gross amount for payment made to non-residents exceeding 1 lakh a year in case of B2B transactions.
§ Krishi Kalyan Cess, @ 0.5% on all taxable services, w.e.f. 1 June 2016. Proceeds would be exclusively used for financing initiatives for improvement of agriculture and welfare of farmers. Input tax credit of this cess will be available for payment of this cess.
§ Infrastructure cess, of 1% on small petrol, LPG, CNG cars, 2.5% on diesel cars of certain capacity and 4% on other higher engine capacity vehicles and SUVs. No credit of this cess will be available nor credit of any other tax or duty be utilized for paying this cess.
PROVIDING CERTAINITY IN TAXATION :
§ Committed to providing a stable and predictable taxation regime and reduce black money.
§ Domestic taxpayers can declare undisclosed income or such income represented in the form of any asset by paying tax at 30%, and surcharge at 7.5% and penalty at 7.5%, which is a total of 45% of the undisclosed income. Declarants will have immunity from prosecution.
§ New Dispute Resolution Scheme to be introduced. No penalty in respect of cases with disputed tax up to 10 lakh. Cases with disputed tax exceeding 10 lakh to be subjected to 25% of the minimum of the imposable penalty. Any pending appeal against a penalty order can also be settled by paying 25% of the minimum of the imposable penalty and tax interest on quantum addition.
§ Penalty rates to be 50% of tax in case of underreporting of income and 200% of tax where there is misreporting of facts.
§ Disallowance will be limited to 1% of the average monthly value of investments yielding exempt income, but not exceeding the actual expenditure claimed under rule 8D of Section 14A of Income Tax Act.
§ Mandatory for the assessing officer to grant stay of demand once the assesse pays 15% of the disputed demand, while the appeal is pending before Commissioner of Income-tax (Appeals).
SIMPLIFICATION AND RATIONALIZATION OF TAXES :
§ 13 cesses, levied by various Ministries in which revenue collection is less than 50 crore in a
§ For non-residents providing alternative documents to PAN card, higher TDS not to apply.
TECHNOLOGY FOR ACCOUNTABILITY :
§ Expansion in the scope of e-assessments to all assessees in 7 mega cities in the coming years.
§ Interest at the rate of 9% p.a against normal rate of 6% p.a for delay in giving effect to Appellate order beyond ninety days.
Source: Asset Managers
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