INTRODUCTION
1) Growth of Economy accelerated
to 7.6% in 2015-16.
2) India hailed as a ‘bright spot’ amidst a slowing global economy by IMF.
3) Robust growth achieved despite very unfavourable global conditions
and two consecutive years shortfall in monsoon by 13%.
4) Foreign exchange reserves touched highest ever level
of about 350 billion US dollars.
5) Fiscal deficit in
RE
2015-16 and BE 2016-17 retained at 3.9%
and 3.5%.
6) Total expenditure projected at INR ` 19.78 lakh crore.
CHALLENGES IN 2016-17
Risks of further global slowdown and turbulence in global economy.
Additional fiscal burden due to
7th Central
Pay
Commission recommendations and One Rank
One Pension to defense personnel.
JOB CREATION
Government
of India will pay contribution of 8.33% for of all new employees enrolling in EPFO for the first three years of their employment. Budget provision
of INR 1000 crores for this scheme.
100 Model Career Centres to
be operational by the end of 2016-17 under
National Career Service.
I.
Direct Tax
For
Individuals
1) Tax Rebate: Raised the
ceiling of tax rebate under section 87A from `2000 to `5000 to lessen tax
burden on individuals with income upto `5 lacks for the
F.Y.2016-17.
2) Additional
deduction of interest to “first home buyers”: In furtherance of the goal of the
Government of providing 'housing for all, it is proposed to incentivize
first-home buyers availing home loans, by providing additional deduction of Rs.
50,000 in respect of interest on loan taken for residential house property from
any financial institution. This incentive is proposed to be available to a
house property of a value less than Rs. 50 lakhs in respect of which a loan of
an amount not exceeding Rs. 35 lakh has been sanctioned during the Financial
Year 2016-17. Further, this benefit proposed to be extended till the repayment
of loan continues.
3) Recognized
provident fund and superannuation fund: In order to bring greater parity in tax
treatment on different types of pension plans, it is proposed to provide in
respect of the contributions made on or after 1st April 2016 by an employee
participating in a recognized provident fund and superannuation fund, upto 40%
of the accumulated balance attributable to such contribution on withdrawal
shall be exempt from tax. In effect, the 100% exemption has been reduced to
40%.
4) Monetary
limit for employer contribution to EPF: Also, a monetary limit for contribution
of employer in recognized provident fund and superannuation fund of Rs 1.5 lakh
per annum for taking tax benefit is proposed.
5) Rate
of surcharge increased from 12% to 15%: The surcharge rate to be raised from
12% to 15% on persons, other than companies, firms and cooperative societies
having income above Rs. 1 crore.
Corporate
Tax proposal
1) The
Corporate Tax rate was proposed to be reduced from 30% to 25% over a period,
accompanied by rationalization and removal of various tax exemptions and
incentives. The following are some of the tax exemptions and incentives which
are proposed to be withdrawn in phased manner.
2) The
accelerated depreciation under Income-tax Act will be limited to 40% from
01.04.2017.
3) The
benefits of deductions for Research would be limited to 150% from 01.04.2017
and 100% from 01.04.2020.
4) New
Manufacturing companies incorporated on or after 1.03.2016 are proposed to be
given an option to be taxed at 25% plus surcharge and cess provided they do not
claim profit linked or investment linked deductions and do not avail of
investment allowance and accelerated depreciation.
5) 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.
6) The
Direct Tax Dispute Resolution Scheme, 2016 : In order to reduce the huge
backlog of cases and to enable the Government to realise its dues
expeditiously, the Direct Tax Dispute Resolution Scheme, 2016 proposed to be
introduced in relation to tax arrears and specified tax. Under this scheme, the
declarant would
be required to pay tax at the
applicable rate plus interest upto the date of assessment and no penalty would
be leviable for disputed tax upto Rs. 10 lakhs. However, in case of disputed
tax exceeding Rs. 10 lakhs, 25% of the minimum penalty leviable shall also be
required to be paid.
7 7) 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.
Simplification
and rationalization of taxation
(a)
Exemption from requirement of furnishing PAN under section 206AA to certain
non-resident: In order to reduce compliance burden, section 206AA proposed to
be amended so as to provide that the provisions of this section shall not apply
to a non-resident - No higher
withholding tax if non‐resident
does not have PAN but furnishes an alternative document subject to such
conditions as may be prescribed. This amendment will take effect from 1st June,
2016.
(b)
Rationalization of tax deduction at Source (TDS) provisions: In order to rationalize
the rates and base for TDS provisions, the existing threshold limit for
deduction of tax at source and the rates of deduction of tax at source are
proposed to be revised in the case of Winnings from Horse Race, Payments to
Contractors, Insurance commission, Commission on sale of lottery tickets etc.
This would improve cash flow of small tax payers.
(c)
Scope of Tax Collection at Sources (TCS) expanded to include sale of luxury
cars and other goods and services: In order to reduce the quantum of cash
transaction in sale of any goods and services and for curbing the flow of
unaccounted money in the trading system and to bring high value transactions
within the tax net, it is proposed to provide that the seller shall collect the
tax @1% from the purchaser on sale of motor vehicle of the value exceeding Rs.
10 lakhs and sale in cash of any goods (other than bullion and jewellery), or
providing of any services (other than payments on which tax is deducted at
source under Chapter XVII-B) exceeding Rs. 2 lakhs.
Deferment
of POEM
The
determination of residency of foreign company on the basis of place of
effective management (POEM) is proposed to be deferred by one year. .
Implementation of POEM based residence rule deferred for 1 year and applicable
from AY 2017‐18.
It is also proposed to provide a transition mechanism for a company which is
incorporated outside India and has not earlier been assessed to tax in India.
II.
Indirect
Taxes
CENTRAL EXCISE
Amendments
made effective immediately (w.e.f.01.03.2016)
Infrastructure
cess is to be levied on motor vehicles under heading 8703 subject to certain
exceptions. Further, this cess is not CENVATable and CENVAT credit cannot be
utilized for its payment.
Amendments
effective from 01.04.2016
The
Central Excise Rules, 2002 are proposed to be amended as follows:
(a)
Reduction of the number of returns to be filed by a central excise assessee
above a specified threshold to 13, that is, 1 annual return and 12 monthly
returns. The said annual return is also required to be filed by the service
tax assessees above a specified threshold. Thus, now three service tax returns
need to be filed instead of two.
(b) Like under service tax, the facility of
revision of return to be available under central excise also.
(c)
Manual attestation of copy of invoice, meant for transporter, is not required
in cases where invoices are digitally signed.
(d)
In case of finalization of provisional assessment, the interest will be
chargeable from the original date of payment of duty.
SERVICE TAX
Amendments
effective from 01.03.2016
Following
services have been exempted:
Low
cost houses up to a carpet area of 60 m2 in a housing project under any housing
scheme of the State Government.
CENVAT
credit is being allowed to service providers providing services by way of
transportation of goods by a vessel from India to abroad.
Amendments
effective from 01.04.2016
With effect
from 01.04.2016, any service (and not only support services) provided by
Government or local authorities to business entities are leviable to service
tax. Consequently, service tax would be payable on any (and not only support
services) service by the service recipient on reverse charge basis from said
date.
Amendments
to be effective from the date on which Finance Bill, 2015 receives the assent
of the President
The
time-limit for issuance of show cause notice under section 73, for recovery of
service tax not levied/paid/short- levied/short paid/erroneously refunded, for no
fraud cases is proposed to be enhanced by 1 year, i.e. from 18 months to 30
months.
Interest
rates on delayed payment of duty/tax across all indirect taxes are proposed to
be made uniform at 15% p.a. However, under service tax, in case where any
amount is collected as service tax but amount so collected is not paid to the
credit of the Central Government on/before the date on which such payment
becomes due, proposed interest rate is 24% p.a.
Amendments
to be effective from 01.06.2016
Krishi
Kalyan Cess - It is proposed to levy a Krishi Kalyan Cess on
ANY OR ALL the taxable services at the rate of 0.5% of the value of taxable
services. It is important to note here that unlike Swachh Bharat Cess, service
provider shall be allowed to utilize the CENVAT credit of Krishi Kalyan Cess
paid on input services for payment of such cess on the output service provided
by it.
CUSTOMS
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. New Simplified Baggage
Rules, 2016 has been notified which would be effective from 1st April, 2016.
The
rate of interest on delayed payment of duty has been revised to 15% from
earlier rate of 18%.
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