HIGHLIGHTS OF UNION BUDGET 2016-17

PERSENTED BY :

Vikas Dhiman

INTRODUCTIONDIRECT TAX PROPOSALINDIRECT TAX PROPOSALGENRAL POLICY

CONTANT

The Budget is document that states expenditure and income of the Government for the current financial year and which reflects the direction of government policies and

INTRODUCTION

on the last working day of February by the Finance Minister of India in Parliament. The Budget have to pass by the house before it can come into effect on April 1,the start of India's financial

priorities. the Union Budget of India ,referred to as the annual financial statement in article 11 The Union Budget of India ,referred to as the annual financial statement in article 112of the constitution of India Presenting each year

DIRECT TAX

PROPOSAL

S.No Income slab Residentindividualless than 60years

Resident individualmore than 60 years but less than 80 years

Residentindividual of80 years orabove

1. Up to 2,50,000

Nil Nil Nil

2. 2,50,000 to 3,00,000

10% Nil Nil

3. 3,00,001 to 5,00,000

10% 10% NIL

4. 5,00,000 TO 10,00,000

20% 20% 20%

5. Above 10,00,001

30% 30% 30%

RATE OF INCOME TAXNo Change in Individual Tax Rate (Other than Companies)

Raise the ceiling of tax rebate under section 87A from `2000 to `5000 to lessen tax burden on individuals with income upto `5 lakh.

The existing provisions of Section 80GG provide for a deduction of any expenditure incurred by an individual in excess of 10% of his total income towards payment of rent in respect of any furnished or unfurnished accommodation occupied by him for the purposes of his own residence if he is not granted house rent allowance by his employer, to the extent such excess expenditure does not exceed Rs. 2000 per month or 25% of his total income for the year, whichever is less, subject to other conditions as prescribed therein. The limit for deduction for rent paid under Section 80GG has been increased from Rs. 2000 per month to Rs. 5000 per month, to provide relief to those who live in rented houses and do not get House Rent Allowence from the employers.

RELIEF TO SMALL TAX PAYERS

SurchargeParticulars Present

Surcharge Rate

ProposedSurcharge Rate

1. Other than Company -

Income exceeding Rs. 1 crore

12% 15%

2. Domestic Company- Income exceeding Rs. 1 crore but less than Rs. 10 crore

5% 7%

Income exceeding Rs. 10 crore

10% 12%

3. Foreign Company‑ Income exceeding Rs. 1 crore but less than Rs. 10 crore

2% 2%

Income exceeding Rs. 10 crore

5% 5%

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 Rs. 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.

.

WITHDRAWALS FROM FRESH CONTRIBUTIONS TO RPF / PENSION FUNDS AND NPS PARTIALLY TAXABLE

100% deduction for profits to an undertaking in 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 completed in three years. MAT to apply

Deduction for additional interest of Rs.50,000 per annum for loans up to Rs.35 lakh sanctioned in 2016-17 for first time home buyers, where house cost does not exceed Rs. 50 lakh.

Exemption from service tax on construction of affordable houses up to 60 square metres under any scheme of the Central or State Government including PPP Schemes.

Extend excise duty exemption, presently available to Concrete Mix manufactured at site for use in construction work to Ready Mix Concrete.

PROMOTING AFFORDABLE HOUSING

It is proposed that the interest paid on capital borrowed for acquisition or construction of a self-occupied house property shall be available if the acquisition or construction is completed within five years from the end of the financial year in which capital was borrowed. The earlier time

limit was Three years.

INCREASE IN TIME LIMIT OF COMPLETION OF CONSTRUCTION OF A SELF-OCCUPIED HOUSE PROPERTY

Increase the turnover limit under Presumptive taxation scheme other then companies/LLP having income from business under section 44AD of the Income Tax Act to ` Two crores to bring big relief to a large number of assessees in the Micro Small Medium Enterprises (MSME) category from One crore.

PRESUMPTIVE TAXATION SCHEME

2015-16

2016-17 0

5000000

10000000

15000000

20000000

25000000

LimitTurnover%age of Profit

Under the existing provisions of section 44AB of the Act every person carrying on a profession is required to get his accounts audited if the total gross receipts in a previous year exceed twenty five lakh rupees.

In order to reduce the compliance burden, it is proposed to increase the threshold limit of total gross receipts, specified under section 44AB for getting accounts audited, from twenty five lakh rupees to fifty lakh rupees in the case of persons carrying on profession.

These amendments will take effect from 1st April, 2017 and will, accordingly, apply to the assessment year 2017-18 and subsequent assessment years.

Section 44ADA :- The income any person making use to this section would be assumed to be 50%of the total gross receipts for the year.

INCREASE IN THRESHOLD LIMIT FOR AUDIT FOR PERSONS HAVING INCOME FROM PROFESSION

WEIGHTED DEDUCTIONS.No Section Particulars Incentive

currently available in the Act

Proposed phase out measures/Amendment

1. 35(1)(ii) Expenditure on scientific research 175 150

2. 35(1)(iia) Expenditure on scientific research 125 100

3. 35(1)(iii) Expenditure on scientific research 125 100

4. 35(2AA) Expenditure on scientific research

200 150

5. 35(2AB) Expenditure on scientific research 200 150

6. 35AD Deduction in respect of specifiedbusiness.

150 100

7. 35CCC Expenditure on notified agriculturalextension project

150 100

Deduction shall be restricted from 01.04.2017 to 31.03.2020 (i.e. from previous year 2017-18 to previous year 2019-20)`

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.

MOVING TOWARDS A PENSIONED SOCIETY

Corporate tax rate was proposed to be reduce from 30% to 25% over a period accompanied by rationalization and remove various tax exemptions and incentives.

Accelerated deprecation will be limite to 40% From 01/04/2017. weighted deduction U/s 35CCD For Skill deployment will continue up to 01/04/2020. 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.

Lower the corporate 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 201 5the rate of corporate tax reduced from 30% to 29% plus surcharge and cess.

CORPORATE TAX RATE PROPOSALS

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.

Securities Transaction tax in case of ‘Options’ is proposed to be increased from .017% to .05%.

ADDITONAL TAX

Present HeadsSection

Heads Existing ThresholdLimit (Rs.)

Proposed Threshod Limit(Rs.)

192A Payment of accumulated balance due to an employee

30,000 50,000

194BB Winnings from Horse Race 5,000 10,000194C Payments to Contractors Aggregate

Annual limit of75,000

Aggregate Annual limit of 1,00,000

194LA Payment of Compensation on acquisition of certain Immovable Property

2,00,000 2,50,000

194D Insurance commission 20,000 15,000194G Commission on sale of lottery

tickets1,000 15,000

194H Commission or brokerage 5,000 15,000

INCREASE IN THRESHOLD LIMIT OF DEDUCTION OF TAX AT SOURCE ON VARIOUS PAYMENTS

Present Section

Heads Existing Rateof TDS (%)

Proposed Rate ofTDS (%)

194DA Payment in respect of Life Insurance Policy

2% 1%

194EE Payments in respect of NSS Deposits

20% 10%

194D Insurance commission Rate in force(10%)

5%

194G Commission on sale of lottery tickets

10% 5%

194H Commission or brokerage 10% 5%

REVISION IN RATES OF DEDUCTION OF TAX AT SOURCE ON VARIOUS PAYMENTS

These amendments will take effect from 1st June, 2016.

New Dispute Resolution Scheme to be introduced. No penalty in respect of cases with disputed tax up to Rs. 10 lakh. Cases with disputed tax exceeding Rs. 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.

One-time scheme of Dispute Resolution for ongoing cases under retrospective amendment.

Penalty rates to be 50% of tax in case of underreporting of income and 200% of tax where there is misreporting of facts.

Time limit of one year for disposing petitions of the tax payers seeking waiver of interest and penalty.

NEW DISPUTE RESOLUTION SCHEME 2016

(a) Scope for e-assessment proposed to be expanded: Expansion in the scope of e-assessments to all assesses in 7 mega cities in the coming years, reducing face to face contact with the assesses.

(b) Rate of interest on refunds to be increased: The rate of interest on the refunds to be increased from 6% p.a. to 9% p.a., in case there is delay in giving effect to Appellate order beyond ninety days.

(c) E-sahyog project to be expanded: Income-tax Department (ITD) will fully expand the pilot initiative of ‘e-Sahyog’ with a view to reduce compliance cost, especially for small tax payers. The e-Sahyog’ pilot project is to provide an online mechanism to resolve mismatches in income-tax returns without requiring taxpayers to attend the Income-tax office.

USE OF TECHNOLOGY FOR CREATING ACCOUNTABILITY

For non-residents providing alternative documents to PAN card, higher TDS not to apply

Revision of return extended to Central Excise assesses.Additional options to banking companies and financial

institutions, including NBFCs, for reversal of input tax credits with respect to non- taxable services.

Customs Act to provide for deferred payment of customs duties for importers and exporters with proven track record.

Customs Single Window Project to be implemented at major ports and airports starting from beginning of next financial year.

Increase in free baggage allowance for international passengers. Filing of baggage only for those carrying dutiable goods.

SIMPLIFICATION AND RATIONALIZATION OF TAXES

INDIRECT TAX

PROPOSAL

, wherein a scheme in respect of cases pending before Commissioner (Appeals), in certain specified type of cases. The Assesse under above scheme may deposit the disputed tax alongwith interest and 25% penalty. The designated authority under such scheme shall within 15 days of the receipt of proof of payment, pass an order of discharge.  However, this scheme will not apply in certain specified type of cases.

INDIRECT TAX DISPUTE RESOLUTION SCHEME, 2016

Service tax rate hike from 14.5% to 15%  due to “krishi kalyan cess-0.5%” levy.

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.

SERVICE TAX RATE HIKE

Section 73:- As per proposed changes Show Cause Notice can be issued within a period of 30 months from the date of filing of return instead of 18 months.

Section 75 :- Interest rate of 24% is chargeable on the amount of service tax collected but not deposited to the government on or before the due date. However, for other situations Interest Rate will be 15%.

 Section 89 :-prosecution / imprisonment provisions are attracted where the default amount exceeds Rs. Fifty lakhs. As per proposed amendment, such amount of Rs. Fifty lakhs has been increased to Rs. Two Crores.

 Section 90 and 91 :-The power to arrest in service tax law is proposed to be restricted only to situations where the tax payer has collected the tax but not deposited it with the exchequer, and amount of such tax collected but not paid is above the threshold of Rs 2 crore. Big step !

AMENDMENTS IN SERVICE TAX

Rule 7 of the Service Tax Rules A new sub-rule 3A has been inserted. As per inserted rule, an Annual Return is required to be filed by 30th Nov of the succeeding financial year in the form and manner as may be specified by the government.

 Rule 7B Annual return as stated above (Rule 7(3A) may be

revised within one month from the date of filing returnRule 7C If the Annual return as stated above (Rule 7(3A) is

filed late, a late filing fee of Rs. 100/- subject to maximum of Rs. 20,000/- is payable.

 Interest rate of 15% has been prescribed under Section 73B. As per Section 73B, if excess amount of Service Tax is collected by an Assesse, such amount is payable with interest @ 15% to the department.

CHANGES / AMENDMENTS IN VARIOUS RULES / NOTIFICATIONS

Exemption of 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

Exemption of 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.

EXEMPTION OF SERVICE TAX

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.

Excise on readymade garments with retail price of Rs. 1000 or more raised to 2% without input tax credit or 12.5% with input tax credit

Excise duties on various tobacco products other than beedi raised by about 10 to 15%.

EXCISE & CUSTOM

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.

INFRASTRUCTURE CESS• infrastructure cess, of 1% on small petrol, LPG, CNG cars engine capacity not exceeding 1200cc, 2.5% on diesel cars of engine capacity not exceeding 1500cc 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.

‘Clean Energy Cess’ evied on coal, lignite and peat renamed to ‘Clean Environment Cess’ and rate increased from Rs.200 per tonne to Rs.400 per tone

CLEAN ENERGY CESS

Section 5A of the Central Excise Act, 1944 (“the Excise Act”) has been amended to omit the requirement of publishing and offering for sale any notification issued, by the Directorate of Publicity and Public Relations of CBEC.

Section 11A of the Excise Act has been amended to increase the period of limitation from one year to two years in cases not involving fraud, suppression of facts, willful mis-statement, etc.

Section 37B of the Excise Act has been amended to empower the Board for implementation of any other provision of the said Act in addition to the power to issue orders, instructions and directions.

The Third Schedule has been amended to: a) make some editorial changes, consequent to 2017

Harmonized System of Nomenclature . b) include therein: 1)    All goods falling under heading 3401 and 3402; 2)    Aluminium foils of a thickness not exceeding 0.2 mm; 3)    Wrist wearable devices (commonly known as „smart

watches‟); and 4)    Accessories of motor vehicle. However, the amendment at b) will come into effect immediately

owing to a declaration under the Provisional Collection of Taxes Act, 1931.

Amendment in the Central Excise Act, 1944

Finance Minister Arun Jaitley announced a budget with the objective to improve quality of life and to pass benefits to commonman.

GENRAL POLICIES