Budget 2016 Key Highlights

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 laks.
• 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 assessees in the MSME category.
• Extend the presumptive taxation scheme with profit deemed to be 50%, to professionals with gross receipts up to `50 lakh.

Corporate Tax rate proposals

• New manufacturing companies incorporated on or after 1.3.2016 to be given an option to be taxed at 25% + surcharge and cess
• 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.
• 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.

• 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

PROMOTING AFFORDABLE HOUSING

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

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.
• 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 ` 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.
• Time limit of one year for disposing petitions of the tax payers seeking waiver of interest and penalty.
• 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 ` 15 lakhs to ` 50 lakhs.
• 11 new benches of Customs, Excise and Service Tax Appellate Tribunal (CESTAT).

SIMPLIFICATION AND RATIONALIZATION OF TAXES

• For non-residents providing alternative documents to PAN card, higher TDS not to apply.
• Revision of return extended to Central Excise assesses.
• 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.

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.

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.
• ‘e-Sahyog’ to be expanded to reduce compliance cost, especially for small taxpayers.