Highlights – Budget 2016
Major Highlights of Budget 2016 from individual, business and startup point of view.
- No Change in personal tax slabs
- Rebate in Income Tax u/s 87A proposed to be increased from Rs. 2,000 to Rs. 5,000 for individuals having income upto Rs. 5 Lakh
- Increase in limit of deduction of rent paid u/s 80GG from Rs. 24000 to Rs. 60000 (effectively Rs. 5000 per month) for self employed and individuals not getting HRA from employer.
- Additional interest deduction of Rs. 50,000 per annum for loans upto Rs. 35 Lakh where home house cost does not exceed Rs. 50 Lakh for first time home buyers
- Limit for contribution of employer in recognized Provident and Superannuation Fund of Rs. 1.5 lakh per annum for taking tax benefit.
- 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.
- Surcharge increased to 15% from 12% for persons (other than companies, firms and co-operative societies) having income above Rs. 1 Crore.
- Increased limit for presumptive taxation scheme u/s 44AD
- Turnover limit increased from Rs. 1 Crore to Rs. 2 Crore with deemed profit @ 8%
- For professionals, gross receipt limit increased from Rs. 25 Lkah to Rs. 50 Lakh with deemed profit @ 50%
- Corporate tax rate for the next financial year for companies with turnover not exceeding Rs. 5 crore (in the financial year ending March 2015), to 29% plus surcharge and cess.
- Non-banking financial companies shall be eligible for deduction to the extent of 5% of its income in respect of provision for bad and doubtful debts.
- 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 will be applicable.
- 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.
INCOME TAX – phasing out deductions
- Accelerated depreciation wherever provided in IT Act will be limited to maximum 40% from 1.4.2017
- Benefit of deductions for Research would be limited to 150% from 1.4.2017 and 100% from 1.4.2020
- Benefit of section 10AA to new SEZ units will be available to those units which commence activity before 31.3.2020.
- The weighted deduction under section 35CCD for skill development will continue up to 1.4.2020.
TAX REFORMS for mobilization of resources
- Equalization levy of 6% of gross amount for payment made to non-residents exceeding Rs 1 lakh a year in case of B2B transactions.
- 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. 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 levied on coal, lignite and peat renamed to ‘Clean Environment Cess’ and rate increased from Rs. 200 per tonne to Rs. 400 per tonne.
- Additional tax at the rate of 10% of gross amount of dividend will be payable by the recipients receiving dividend in excess of Rs. 10 Lakh per annum.
- Tax to be deducted at source at the rate of 1 % on purchase of luxury cars exceeding value of Rs. 10 Lakh and purchase of goods and services in cash exceeding Rs. 2 Lakh.
- 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%
- 0.5% Krishi Kalyan Cess on all taxable services, w.e.f. 1 June 2016 to boost financing initiatives for improvement of agriculture and welfare of farmers. Input tax credit of this cess will be available for payment of this cess.
- 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.
- 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 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.
STARTUPINDIA and MAKEININDIA
- 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.
- 100% deduction of profits for 3 out of 5 years for startups setup during April, 2016 to March, 2019. MAT will be applicable.
- 10% rate of tax on income from worldwide exploitation of patents developed and registered in India by a resident.
- Amendments in Companies Act to improve enabling environment for startups.
- 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.
- Capital gain exemption proposed for investment in Startups under certain conditions.
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.