Last modified : 29/02/2015

Budget 2016-17 Highlights of Tax proposals

  • Tax Rates and Slabs remain unchanged.
  • The available deduction limit enhanced from Rs. 2,000/- to Rs. 5,000/- under section 87A for individuals having taxable income upto Rs. 5 lacs,
  • For individuals living in rented houses, the deuction available under Section 80GG increased from Rs. 24,000/- to Rs. 60,000/-
  • The surcharge increase from 12% to 15% for assessess having taxable income over Rs. 1 crore other than firms, companies and Co-operative societies.
  • 40% of the corpus at the time of retirement tax exempt in the case of National Pension Scheme (NPS). 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 after 1.4.2016.
  • The annuity fund which goes to the legal heir after the death of pensioner will not be taxable in all three cases.
  • Monetary limit of Rs 1.5 lakh per annum is proposed for contribution of employer in recognized Provident and Superannuation Fund for taking tax benefit.
  • Dividend Distribution tax at the rate of 10% of gross amount of dividend will be payable by individuals, HUFs and firms receiving dividend in excess of Rs. 10 lakh per annum.
  • Presumptive taxation scheme under section 44AD available for small and medium enterprises - the gross receipts limit increased from Rs. 1 crore to Rs. 2 crore.
  • Presumptive taxation scheme under section 44AD extended to professionals with gross receipts up to Rs 50 lakh with the presumption of profit being 50% of the gross receipts.
  • The new manufacturing companies which are incorporated on or after 1.3.2016 are proposed 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.
  • The corporate income tax rate for the next financial year for relatively small enterprises i.e companies with turnover not exceeding Rs 5 crore (in the financial year ending March 2015) is proposed as 29% plus surcharge and cess
  • Service tax on services provided under Deen Dayal Upadhyay Grameen Kaushalya Yojana and services provided by Assessing Bodies empanelled by Ministry of Skill Development & Entrepreneurship exempted.
  • Service tax on general insurance services provided under 'Niramaya' Health Insurance Scheme launched by National Trust for the Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disability exempted.
  • The basic custom and excise duty on refrigerated containers reduced to 5% and 6% respectively.
  • Braile paaper exempted from Customs duty.
  • Annuity services provided by National Pension System (NPS) and EPFO to employees exempted from Service Tax.
  • Service tax on Single premium Annuity (Insurance) Policies reduced from 3.5% to 1.4% of the premium paid in certain cases.
  • 100% deduction for profits to an undertaking from a housing project for flats upto 30 sq. metres in four metro cities and 60 sq. metres in other cities, approved during June 2016 to March 2019, and is completed within three years of the approval. Minimum Alternate Tax will, however, apply to these undertakings.
  • Deduction for additional interest of Rs 50,000 per annum for loans up to Rs 35 lakh sanctioned during the next financial year, provided the value of the house does not exceed Rs 50 lakh in case of first home buyers.
  • It is proposed to exempt service tax on construction of affordable houses up to 60 square metres under any scheme of the Central or State Government including PPP Schemes.
  • It is proposed to extend excise duty exemption, presently available to Concrete Mix manufactured at site for use in construction work at such site to Ready Mix Concrete. Additional resource mobilization for agriculture, rural economy and clean environment.
  • Ii is proposed to collect tax at source at the rate of 1% on purchase of luxury cars exceeding value of Rs. ten lakh and purchase of goods and services in cash exceeding Rs. two lakh. Farmers and notified class of persons will have an option of giving a form by which TCS will not be charged.
  • Rate of Securities Transaction tax in case of 'Options' is proposed to be increased from .017% to .05%.
  • It is proposed to impose a Cess, called the Krishi Kalyan Cess, @ 0.5% on all taxable services, proceeds of which would be exclusively used for financing initiatives relating to improvement of agriculture and welfare of farmers. The Cess will come into force with effect from 1st June 2016. Input Tax credit of this cess will be available for payment of this cess.
  • It is proposed to levy an 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.
  • It is proposed to impose an excise duty of '1% without input tax credit or 12.5% with input tax credit' on articles of jewellery [excluding silver jewellery, other than studded with diamonds and some other precious stones], with a higher exemption and eligibility limits of Rs 6 crores and Rs 12 crores respectively. Necessary steps will also be taken to enable the new taxpayers to comply with this levy without any difficulty.
  • It is proposed to change the excise duty on branded readymade garments and made up articles of textiles with a retail sale price of Rs 1,000 and above from 'Nil without input tax credit or 6%/12.5% with input tax credit' to '2% without input tax credit or 12.5% with input tax credit'.
  • It is proposed to rename the 'Clean Energy Cess' levied on coal, lignite and peat as 'Clean Environment Cess' and simultaneously increase its rate from Rs. 200 per tonne to Rs. 400 per tonne.
  • It is proposed to increase the excise duties on various tobacco products other than beedi by about 10 to 15%.
  • A limited period Compliance Window is proposed for domestic taxpayers to declare undisclosed income or income represented in the form of any asset and clear up their past tax transgressions 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. There will be no scrutiny or enquiry regarding income declared in these declarations under the Income Tax Act or the Wealth Tax Act and the declarants will have immunity from prosecution. Immunity from Benami Transaction (Prohibition) Act, 1988 is also proposed subject to certain conditions. The surcharge levied at 7.5% of undisclosed income will be called Krishi Kalyan surcharge to be used for agriculture and rural economy. We plan to open the window under this Income Disclosure Scheme from 1st June to 30th September, 2016 with an option to pay amount due within two months of declaration.
  • A taxpayer who has an appeal pending as of today before the Commissioner (Appeals) can settle his case by paying the disputed tax and interest up to the date of assessment. No penalty in respect of Income-tax cases with disputed tax up to Rs 10 lakh will be levied. Cases with disputed tax exceeding Rs 10 lakh will be subjected to only 25% of the minimum of the imposable penalty for both direct and indirect taxes. Any pending appeal against a penalty order can also be settled by paying 25% of the minimum of the imposable penalty. Certain categories of persons including those who are charged with criminal offences under specific Acts are proposed to be barred from availing this scheme.
  • At present the Income-tax Officer has discretion to levy penalty at the rate of 100% to 300% of tax sought to be evaded. It is proposed to modify the entire scheme of penalty by providing different categories of misdemeanor with graded penalty and thereby substantially reducing the discretionary power of the tax officers. The penalty rates will now be 50% of tax in case of underreporting of income and 200% of tax where there is misreporting of facts. Remission of penalty is also proposed in certain circumstances where taxes are paid and appeal is not filed.
  • It is proposed to provide a time limit of one year for disposing petitions of the tax payers seeking waiver of interest and penalty.
  • Non-residents without PAN are currently subjected to a higher rate of TDS. It is proposed to amend the relevant provision to provide that on furnishing of alternative documents, the higher rate will not apply.
  • The facility for revision of return, hitherto available to a service tax assessee only, is being extended to Central Excise assessees also.
  • It is proposed that in matters pertaining to Income-tax Act, Government will pay interest at the rate of 9% p.a against normal rate of 6% p.a in case there is delay in giving effect to Appellate order beyond ninety days. The officers who delay it, will be accountable for this loss to Government.

Popular Content