THEME OF BUDGET 2015-16
Theme of Budget 2016-17:Relief to small tax payers
Measures to boost growth and employment generation.
Incentivizing domestic value addition to help Make in India.
Measures for moving towards a pensioned society.
Measures for promoting affordable housing.
Additional resource mobilization for agriculture, rural economy and clean
environment.
Reducing litigation and providing certainty in taxation.
Simplification and rationalization of taxation
Use of technology for creating accountability.
BUDGET 2016-17
RELIEF TO SMALL TAX PAYERS
•Section 87A has been amended to raise the ceiling of tax rebate from Rs. 2000 to
Rs. 5000 to reduce the tax burden of the individuals having income not exceeding
Rs. 5 lakhs.
•Section 80GG has been amended to provide the relief to the tenants of the
residential houses not receiving any house rent allowances from the employer by
increasing the deduction from Rs. 24, 000 /- to Rs. 60, 000 /-.
MEASURES TO BOOST GROWTH & EMPLOYMENT GENERATION
•The redemption by an individual of Sovereign Gold Bonds issued by Reserve Bank
will not be liable to Capital Gain Tax. Also the benefit of indexation will be available
in the cases of long term capital gains.
•Section 115JB has been amended to provide that the Minimum Alternate Tax (MAT)
shall not be applicable to a foreign company, w.e.f. 01/04/2001 if the foreign
company does not have as a permanent establishment under relevant DTAA or a
place of business.
•New concept of International Financial Service Centre (IFSC) has been launched
with the following benefits :•No DDT on the companies located in IFSC.
•MAT will be applicable @ 9% on units located in IFSC.
•No Securities Transaction Tax (STT) will be applicable on sale of equity
share or units of equity oriented funds or units of a business trust taking
place on the recognised stock exchange located in IFSC in foreign currency.
LTCG will also be exempt from tax.
•No Commodity Transacion Tax on sale of commodity derivatives taking
place on the recognised stock exchange located in IFSC in foreign currency.
INCENTIVISING DOMESTIC VALUE ADDITION TO HELP MAKE IN INDIA
• Changes
in customs and excise duty rates on certain inputs to reduce costs and
improve competitiveness of domestic industry in sectors like Information technology
hardware, capital goods, defence production, textiles, mineral fuels & mineral oils,
chemicals & petrochemicals, paper, paperboard & newsprint, Maintenance repair
and overhauling [MRO] of aircrafts and ship repair.
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.
• 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.
•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.
MEASURES FOR PROMOTING AFFORDABLE HOUSING
•For computing the capital gains in the transfer of immovable property having
consideration in any mode other than cash is made in consequence of
agreement, the date of agreement fixing the amount of consideration will be
considered in place of date of registration.
•Standard deduction of 30% shall be allowed on unrealized rent while
computing the house property income.
• 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 `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.
RESOURCE MOBILISATION FOR AGRICULTU RE, RURAL ECONOMY & CLEAN
ENVIRONMENT
• A tax of 10% of the gross amount of dividend on the recipients i.e. individuals,
HUF and firms receiving dividend in excess of Rs. 10 lakhs in addition to the
Dividend Distribution Tax (DDT) paid by the companies.
• Surcharge has been raised from 12% to 15% on persons other than companies,
firms, cooperative societies having income above Rs. 1 crore.
• A Tax collection at source at the rate of 1% on purchase of luxury cars
exceeding value of Rs. 10 lakhs and purchase of goods and services in cash
exceeding Rs. 2 lakhs.
• A Krishi Kalyan Cess @ 0.5% on all taxable services has been imposed with
effect from 01/06/2015 and the proceeds of which to be excluisively used for
financing initiatives relating to improvement of agriculture and welfare of
farmers. This can be paid from the ITC of cess.
•An Infrastructure cess of 1% on small petrol, LPG & CNG Cars, 2.5% on Diesel
Cars of certain capacity and 4% on other high engine capacity vehicles and
SUV’s.
• Section 43B has been amended to provide that certain specified payments
payable to Railways shall be allowed as deduction as business income only
if the same has been paid on or before the due date of filing return for the
relevant year.
• A neutral treatment to conversion of a company to LLP, if , among the
other existing conditions, the total value of the assets in the books of
accounts of the company in any of the three preceding years from the
year in which conversion takes place doesnot exceed 2 crore rupees.
REDUCING LITIGATION AND PROVIDING CERTAINITY IN TAXATION
•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. Surcharge levied at 7.5% of undisclosed income will be
called Krishi Kalyan surcharge to be used for agriculture and rural economy.
•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.
•Penalty rates to be 50% of tax in case of underreporting of income and 200% of tax
where there is misreporting of facts
•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).
•
Monetary limit for deciding an appeal by a single member Bench of ITAT
enhanced from Rs 15 lakhs to Rs 50 lakhs.
•
Section 44AB has been amended to enhance the threshold limit of audit of
accounts from Rs. 25 Lakhs to Rs. 10 lakhs for persons having income from
profession.
• Section 44AD has been amended as follows :• Presumptive Taxation Scheme has been made applicable to the
professionals with gross receipts up to Rs. 50 Lakhs with presumption of
profit being 50% of gross receipts.
• Benefit to MSME category assessee ( Micro Small & Medium Enterprises)
has been given by increasing the turnover limit under this scheme to Rs. 2
crores. It is also provided that if taxpayer opts for the presumptive taxation
scheme, he has to remain in that scheme for 5 years. Further, if he failed to
offer income as per the said scheme, he shall not be eligible to claim
benefit under scheme for the next 5 years.
•
It has been amended that if any person has not furnished a return of the
previous year by due date, he can file the return before the end of relevant
assessment year or completion of assessment, whichever earlier. The revision of
such belated return can also be done before the expiry of 1 year from the end
of relevant assessment year or completion of assessment, whichever earlier.
• A return filed in response to notice issued under section 142(1) cannot be
revised.
• A valid return will not be treated as defective return merely because self
assessment tax and interest payable in accordance with the provisions of
section 140A has not been paid on or before the date of furnishing return.
• Section 211 has been amended to the taxpayer eligible for the
presumptive taxation scheme under section 44ADof The Income Tax Act
shall pay whole amount of advance tax in one installment on or before
15th March of Financial Year.
SIMPLIFICATION AND RATIONALIZATION OF TAXATION
•Reduction in the allowance of deductions :•Changes in TDS :Section
Heads
192A
Payment of accumulated balance due
to an employee in EPF
194BB
Winning from Horse Races
194C
Payment to contractors
194LA
Payment of compensation on
acquisition of immoveable property
194D
Insurance Commission
194G
194H
Present limit
Proposed Limit
30, 000
50, 000
5, 000
10, 000
Aggregate
annual limit
of 75, 000
Aggregate
annual limit of
1, 00, 000
2, 00, 000
2, 50, 000
20, 000
15, 000
Commission on sale of lottery ticket
1, 000
15, 000
Commission or brokerage
5, 000
15, 000
Section
Heads
Present Rate
Proposed
Rate
194DA
Payment in respect of Life
Insurance Policy
2%
1%
194EE
Payments in respect of NSS
Deposits
20%
10%
194D
Insurance Commission
10%
5%
194G
Commission on sale of lottery
tickets
10%
5%
194H
Commission or brokerage
10%
5%
194K
Income in respect of units
To be omitted w.e.f.
01.06.2016
194L
Payment on compensation on
acquisition of capital asset
To be omitted w.e.f.
01.06.2016
• Sunset date for the exemption u/s 10AA to SEZ unit is 31.03.2020.
• Accelerated depreciation wherever provided in IT Act will be limited to
maximum 40% from 1.4.2017.
• Section 206AA of The Income Tax Act has been made providing that the TDS
shall not be deducted at a higher rate in case of non residents not having Pan,
subject to prescribed condition.
• 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
• For non-residents providing alternative documents to PAN card, higher TDS not
to apply.
USE OF TECHNOLOGY FOR CREATING ACCOUNTABILITY
•Expansion in the scope of e-assessments to all assesses 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.
•‘e-Sahyog’ to be expanded to reduce compliance cost, especially for small
taxpayers.
KEY DIRECT TAX PROPOSALS
KEY DIRECT
TAX PROPOSALS
FOR NON CORPORATE ASSESSEE
Personal Taxes ( For Individuals, HUF,AOP/BOI ) :There has been no change in the basic exemption limit and Tax Rates. The tax slab rats for the year are :i) For individuals other than mentioned below in ii. And iii :Upto Rs.2,50,000
Nil.
Rs. 2,50,001 to Rs. 5,00,000
10 per cent.
Rs. 5,00,001 to Rs. 10,00,000
20 per cent.
Above Rs. 10,00,000
30 per cent.
ii) For resident individual 60 years or more less than 80 years :Upto Rs.3,00,000
Nil.
Rs. 3,00,001 to Rs. 5,00,000
10 per cent.
Rs. 5,00,001 to Rs.10,00,000
20 per cent.
Above Rs. 10,00,000
30 per cent.
iii) For individuals more than 80 years of age :Upto Rs. 5,00,000
Nil.
Rs. 5,00,001 to Rs. 10,00,000
20 per cent.
Above Rs. 10,00,000
30 per cent.
Surcharge : 15% of the Income Tax, where taxable income is more than Rs. 1 crore. (Marginal Relief in
Surcharge, if applicable)
Education Cess : 3% of the total of Income Tax and Surcharge.
Taxes on Firms :There has been no changes in the tax rates of the firm and the income of the firms are continued to be
taxed at the rate of 30%.
Surcharge : 12% of the Income Tax, where taxable income is more than Rs. 1 crore. (Marginal Relief in
Surcharge, if applicable)
CORPORATION TAXES
Company
Rate of
Tax
In case of domestic company (turnover exceeding Rs. 5 crore)
30%
In case of domestic company (turnover below or equal to Rs. 5 crore)
29%
Domestic company registered after 01.03.2016 engages in manufacturing and
fulfilling prescribed conditions
25%
In case of foreign Company
-Royalty received from Government or an Indian Concern in pursuance of an
50
agreement made by it with the Indian concern after March 31, but
before April 1, 1976, or fees for rendering technical services in pursuance of an
agreement made by it after February 29, 1964 but before April
1, 1976 and where such agreement has, in either case, been approved by central
Government
-Other Income
40%
Notes:
Note 1: - Add Surcharge - Surcharge is 7% of income-tax, in case of
domestic companies and 2% in case of foreign companies if net
income exceeds Rs.1 crore but not exceeding Rs. 10 Crore in either
case. Rate of Surcharge will be 12% of income-tax in case of domestic
companies and 5% in case of foreign companies if net income
exceeds Rs.10 Crore in either case. Surcharge is subject to marginal
Relief.
Note 2: - Add Education Cess - Education Cess is 2% of Income Tax plus
surcharge
Note 3: - Add Secondary and Higher Education Cess - SHE. Cess is 1% of
Income Tax plus surcharge.
OTHER HIGHLIGHTS
•Deduction for additional interest of Rs. 50, 000 /- per annum for loans upto Rs. 35
lakhs sanctioned in 2016-17 for the first time home buyers where house cost
doesnot exceed Rs. 50 lakhs.
•3 years time limit for completion of construction under section 24(b) extended to
5 years.
•Taxation of non compete fees under section 28(va) in respect of business
extended to profession.
•Employer’s contribution to an approved superannuation fund in excess of Rs. 1,
50, 000 (existing limit 1 lakh) will be taxable as perquisite.
•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.
FINANCIAL CHART OF THE GOVERNMENT
REVENUE CHART OF THE GOVERNMENT
Budget – 2016-17
Budget – 2015-16
Increase in Govt spending for Rural development
45000
40000
2%
12%
35000
11%
29422
3%
30000
25000
20000
9%
15000
31%
10%
8885
10000
32%
5000
0
2012-13
2013-14
Amount spent on MGNREGA (in Rs. Cr)
2014-15
2015-16
2016-17 (BE)
Amount spent on PMGSY (in Rs. Cr)
SELECTION OF INCOME TAX CASES FOR ASSESSMENT
•
In supersession of earlier Instructions on the above subject, the Board hereby lays
down the following procedure and criteria for manual selection of returns/cases
for scrutiny during the financial year 2015-2016:– Cases involving addition in an earlier assessment year in excess of Rs. 10 lakhs on a
substantial and recurring question of law or fact which is either confirmed in appeal or is
pending before an appellate authority.
– Cases involving addition in an earlier assessment year on the issue of transfer pricing in
excess of Rs. 10 crore or more on a substantial and recurring question of law or fact
which is either confirmed in appeal or is pending before an appellate authority.
– All assessments pertaining to Survey under section 133A of the Income-tax Act, 1961
(‘Act’) excluding those cases where books of accounts, documents etc. were not
impounded and returned income (excluding any disclosure made during the Survey) is
not less than returned income of preceding assessment year. However, where assessee
retracts the disclosure made during the Survey, such cases will not be covered by this
exclusion.
– Assessments in search and seizure cases to be made under section(s) 158B, 158BC,
158BD, 153A & 153C read with section 143(3) of the Act and also for the returns filed for
the assessment year relevant to the previous year in which authorization for search and
seizure was executed u/s 132 or 132A of the Act.
– Returns filed in response to notice under section 148 of the Act.
–
–
–
•
•
Cases where registration u/s 12AA of the IT Act has not been granted or has been cancelled by the
CIT/DIT concerned, yet the assessee has been found to be claiming tax-exemption under section 11
of the Act. However, where such orders of the CIT/DIT have been reversed/set-aside in appellate
proceedings, those cases will not be selected under this clause.
Cases where the approval already granted u/s 10(23C)/35(1)(ii)/35(1)(iii)/10(46) of the Act has been
withdrawn by the Competent Authority, yet the assessee has been found claiming taxexemption/benefit under the aforesaid provisions.
Cases in respect of which specific and verifiable information pointing out tax-evasion is given by
Government Departments/Authorities. The Assessing Officer shall record reasons and take prior
approval from jurisdictional Pr. CCIT/CCIT/Pr. DGIT/DGIT concerned before selecting such a case for
scrutiny.
Computer Aided Scrutiny Selection (CASS): Cases are also being selected under CASS on the
basis of broad based selection filters. List of such cases shall be separately intimated in due
course by the Pr.DGIT(Systems) to the jurisdictional authorities concerned
It is reiterated that the targets for completion of scrutiny assessments and strategy of framing
quality assessments as contained in Central Action Plan document for Financial-Year 20152016 have to be complied with and it must be ensured that all scrutiny assessment orders
including the cases selected under the manual criterion are completed through the AST
system software only. Further, in order to ensure the quality of assessments being framed, Pr.
CCsiT/CCsiT/Pr. DsGIT/DsGIT should evolve a suitable monitoring mechanism and by 30th
April, 2016, such authorities shall send a report to the respective Zonal Member with a copy
to Member (IT) containing details of at least 50 quality assessment orders from their
respective charges. In this regard, IT Authorities concerned must ensure that cases selected
for publication in ‘Let us Share’ are picked up only from the quality assessments as reported.